Transforming Retail Habits - is There a Clear Direction to The End State

Landscape of retail in India has been very dynamic in the past decade. While e-commerce players are trying to pull out all stops to make break-throughs, offline retail players too have now warmed up to the fact that they are competing against a different breed of competitors, one that uses the power of technology to its fullest, to enable newer forms of commerce.

How dynamic the Industry is can be gauged by how many new initiatives and trends that have come up in the near past. A few of the below are starting to emerge as trends that might define how retail looks in the near future.

Subscription Commerce

Retailers are using the fact that milk/eggs are a daily necessity, and making a digital repeat order out of the same to increase brand engagement. While just selling daily groceries (which have very low margin)  isn’t very business friendly, idea is to use the daily FaceTime and brand recollection to sell other products also via the same channel over time. Of-course, one of the biggest hurdles here is optimising delivery cost, and companies are approaching this problem in different ways - Either targeting gated complexes/apartments or enabling this service only in a radius around stores.

Lightning fast fulfillment options

Players such as Dunzo and very recently Swiggy (Swiggy Stores) via its services can get groceries or the like fulfilled in less than 30 mins. Idea is to see if they can achieve higher delivery efficiency by using the fleet across domains like grocery/food etc which have high retention.  This competes with the likes of Flipkart and Amazon since none of them can get products delivered currently in less than a day. They also compete against the likes of BigBasket etc. which take longer to deliver. Premise of this service being instant delivery from your nearby store whom you have a connect with. Again delivery costs are one of their biggest hurdles and they seem to be trying to achieve reduction via economies of scale.

Membership/Prime options

While Amazon and Flipkart have launched their Prime and First options specifically to make customers stick and give them additional convenience, brick and mortar stores too have warmed up to membership options. One of the best ones in recent times is the EasyDay Club Membership across EasyDay and Niligiris stores. 10% off on all shopping at these stores if you are a member along with home delivery options has surely got it a good number of fans. This is surely a good way to increase customer retention.

Cashbacks instead of Discounts

Another trend that has shown up first in the online world is the movement to cashbacks from discount e.g. PayTM Mall Online. The idea is simple, so long as you can offer more cash back than discount and the customer does not mind it since he/she would shop again, you can make some margin of the next purchase. Offline retailers have also started using a similar tactic - Spencers Wallet and Future Pay Wallet cashbacks are an example from 2 large brick and mortar retailers. One of the shifts that's happening is cashbacks now can happen at an individual item level instead of just at total order amount constraint. This brings a lot more flexibility to influence customers and is something retail is moving to.

Big Days/Great Indian Festival

Very high budget marketing driven shopping festivals for a few consecutive days with massive discounts - This has been another tactic used by both offline and online retailers to get new users on-boarded. While the above-listed points primarily aimed at increasing retention, this is to bring new users onboard on to the ecosystem. Marketing at this scale is needed to get new and inactive users back to shop with you, and this is the gateway for it.

Customer Service

While E-commerce players understand the importance of this (especially Amazon) in retaining and keeping customers happy, others are still far behind. This is one area that offline retail very clearly fails primarily because they do not have reliable engagement mechanisms outside of the stores. Neither are their in-store support equipped for this, unlike online support of others e-tailers. As customers evolve, more of them are starting to expect and appreciate a level of support that makes them feel preferred, and technology is the sure-shot enabler for this.

Private In-house Brands

Flipkart with its Billion brand and Amazon with its AmazonEssentials brand have both been moderately successful in creating their own labels that allow them to make larger margins on product sale. Offline retailers too have done their bit: RPSG group with its Too Yumm brand and Future Group with its Tasty Treats and Golden Harvest brands for e.g. Done right, this can add a new dimension to revenue using existing distribution channels, however not everyone has the wherewithal to be able to pull off something that is not fully their core business. Another beautiful example is Swiggy using its channels to sell food from its private brands like Bowl Company and Homely that has surely seen a promising start.

Omni-channel commerce

The offline and online commerce channels are blending, also because retailers on both sides are starting to realize that the game is in owning multiple channels and delivering a superior and consistent experience across them. Amazon acquiring MORE and a stake in Shoppers Stop is an example of this. Similarly, lot of offline players are opening up online channels and vice-versa. Technology that has been powering large brick and mortal enterprise retail until now, however, hasn’t been built with such a use case in mind, leading to a lot of them looking for either a complete change in technology or a large effort at their end to be able to support this.

Jio type new commerce

Another interesting take on how to make available large catalogs even to Tier 2 and 3 cities is how Jio is looking at it. They are using their Jio distribution centres to double up as assisted E-commerce enablers via kiosks primarily at non-metro cities. A few other startups/companies are also tying up with stores in Tier 2/3 cities to do a similar type of commerce, bridging the logistic gap between warehouses in cities and other remote areas.

Focus on operational efficiency

Amazon/Walmart and the likes have very large warehouses supporting their e-commerce arm. They have used technology to automate and manage their inventory end to end, enabling them to have data in near real-time to optimise operations and improve. The biggest enabler here being data availability at the minute levels when required to drive these efficiencies. This again is one other area where offline retail lags. Most large retailers even now struggle with having a metric as key as sales available intra-day to the HO. A technology company if driving physical retail would have had data as minute as what key stroke the cashier is pressing, with the hopes of learning and assisting cashiers to improve their efficiency at checkout. Data granularity and availability in near real time to enable operational efficiencies hence becomes even more important as they race to achieve profitability, since newer ways of looking at the same problem emerge bringing more optimal solutions to the fore.

Faster and better checkout

While this is more of a problem unique to offline retail that is being solved, it is however very important to mention it. Any poll to understand what is disliked about offline retail usually has checkout queues at the top of the list. Amazon Go is one example targeting to solve this problem in a unique way. Self-checkout - either via customer mobile or via kiosks is another way retailers have aimed to solve this problem. Customers over time are warming up to checkout modes that reduce dependency on others and save time. The millennial customer not only wants a large catalog to browse, but also wants to save time - either via self-checkout or via home delivery, and the retail players need to respect that and cater to every type of customer walking into their stores.

While some of these above trends and techniques have already been absorbed by brick and mortar retail, there is still a vast gap in offerings between offline and online. Experiences that are but second nature to e-Commerce are still in the pipeline for offline retail, and the only reason is probably since technology which has been the enabler for online commerce has not yet done that for offline.

In a dynamic retail environment like the above, being agile in terms of adapting to trends and riding on the wave become all the more important, else you would be left behind. From kirana outlets to large retail enterprises, everyone will need to embrace these trends since reach and price are no longer the only factors enabling commerce.

The world is moving on, and if they don’t move with the customer expectations, others will.  As retail evolves, technology partners too are not far behind. More and more platforms that can enable this sort of agility and experiences both in offline and online are emerging. As retail becomes more and more driven by technology, partnering with someone whose core expertise is technology starts making much more sense so that one can focus on business.

By Saketh BSV, CTO and Co-Founder, Perpule