Do you remember having to head out to the grocery store for a quick stop on your way back home from work on a Wednesday evening? Well that is going to change. No longer are you going to dread making a run to the grocery on a workday simply to cook up some dinner for yourself. Zomato and Swiggy have already established themselves as leading players in this task of easing accessibility to hot food at your doorstep as and when you want it. What is next is the integration of mom and pop stores onto platforms like amazon pantry and the much awaited JioMart that has already launched in several cities as of today with a successful test run in Navi Mumbai over the last few months. It’s WhatsApp business account for placing orders is still restricted to a few select cities but JioMart.com is ready for customers to start shopping from the comfort of their sofas while working from home. So, that quick home-made dinner that you had to replace for a meal outside? You no longer need to compromise on that. Every small ingredient you need is now available right at your doorstep. The best part? They’re sourced right from your store next door.
This is just one of the many changes that is taking place in the retail sector. The entire retail sector has witnessed a cumulative loss of more than 5.50 lakh crores since lockdown 1.0 on 25th March 2020. Only 5% of apparel retailers will have enough funds to pay salaries to their work force in the month of June 2020. The retail sector has witnessed a sharp drop in spending by the 250 million households that were the source of revenue for the sector. This loss and drop in spending by the customers can be very easily explained by the most prominent macro-economic factors that affect consumer spending during any global crisis. Rising unemployment, decreasing salaries, negative consumer sentiment and increase in consumers’ propensity to save during a crisis.
This scenario can be put into perspective by looking at a simple financial metric: the Indian retail sector’s annual sales turnover.
The sales turnover for the year 2020 is predicted to be at least 20% lesser than the sales turnover of $74B in 2019. CARE ratings in August 2019 had forecasted that Indian retail industry would grow at 12%-14% and would be worth $1,150B by 2021. This however is not going to be the case now due to the demand-side macro-economic factors mentioned above. This can be explained by a depiction of the decline in private consumption rates in Q1 2019 vs Q1 2020 (results released just 2 days ago).
On the supply side too, there are key changes that are taking place which will likely affect the sector’s performance in the upcoming days, hopefully in a positive manner. The major shift is in terms of companies’ business models which are now moving from brick and mortar to click and mortar. The lockdown has shown how consumers have displayed preference for spending on only essential goods and non-essential goods have been side-lined mainly because of the average Indian customer preference for ‘touch and feel’ of goods before they invest money in them; as visiting stores and malls had been prohibited under the national lockdown. Even today shopping for any event or occasion will witness a higher face to face (F2F) spending rate by Indian consumers than online spending, even though the product options are relatively the same. As per a study conducted by Visa in 2018, Indians’ F2F spending during Diwali and Dhanteras in the top 5 cities (Delhi NCR, Mumbai, Bengaluru, Hyderabad, and Chennai) contributed to 46% of the total F2F spending that year.
So, why are companies shifting to well-known e-commerce platforms or opening their own online stores? Simply because of the lack of options for consumers. Social distancing, which is the buzzword not only in our lives, is also bringing waves of change in various businesses in the way they think of their business in the future. Businesses like Lifestyle which sells premium niche products in the fashion retail business has formed a strategic partnership with e-commerce giant Flipkart that has a 70% share in the online fashion market. Fashion retail in India is a $100B business and only 6% of this business is done by e-commerce so there is huge potential in the space that is yet to witness Reliance’s e-commerce entry into the domain as well. On the online pantry front, JioMart as mentioned previously is all set to compete for head to head with Amazon Pantry and perhaps even fare better than Amazon Pantry given the Indian consumers’ long history of trust in Reliance brands and products.
The next big change in India’s retail playbook could potentially be livestream shopping. This has already begun if we take a close look at our day to day e-commerce platforms like Myntra and Amazon wherein particularly for fashion apparel, we have models donning clothes of various brands and doing a ramp walk for customers to see in 30 second short video clips so that the customer gets a more in depth look at the product he or she wishes to purchase. On Instagram, many local saree brands and artificial jewellery pages post 20-30 second short videos covering the length and breadth of every piece of apparel or jewellery with an explanation of the product’s make, design, though etc. What this does is, it creates a curiosity in the minds of the consumer about the product when they first see the images and the video then comes as a solution for the customers to better trust the product quality and then make a purchase. This is one of the trends that is definitely going to spread more and more in the upcoming days as non-essential product businesses move online to resume their sales.
Another wave of change expected to shift the retail paradigm further is the “try and buy” model which has already been profitably practiced by Lenskart who has been offering this feature to customers for more than 4 years now. The company has witnessed a 50% drop in average return rates of their glasses to 7% as compared to 13% earlier, ever since this model has been implemented. Companies like Myntra have only as of 2019. Myntra is another big example that has rolled out this feature since 2016 to its customers and has had a similar success story like Lenkart.
This feature is expected to dominate retail trends more now due to offline businesses selling high value goods shifting online. These businesses have customer bases that are used to visiting stores, taking advice form consultants present in store and then making a purchase decision. Now, with this feature companies like Ratan Tata backed BlueStone is making huge money from this model as jewellery purchases generally require a conversation and a convincing push of assurance from the sales team to induce a customer to buy a product, so BlueStone sends a sales representative along with items ordered on their website to the customer’s house who offers consultancy on the jewellery purchase made by the customer which has reduced their product return rates to 0. Normally it costs around Rs. 70 to return a product back to its warehouse and around Rs. 70 – Rs. 100 to send a salesperson to the customer’s house but since products of high value like BlueStone have price points that run upto Rs.20,000, this cost is more than recovered ensuring both customer satisfaction and 100% delivery rate of its products.
Lastly but certainly the most predominant trend that encompasses and enables all other retail trends: omni-channel retailing. Hubspot defines this as “the ability to deliver a seamless and consistent experience across channels, while factoring in the different devices that consumers are using to interact with your business.” This is basically the business model or retail strategy that has been adopted by businesses in the retail sector off late. No longer is an average Indian family waiting for the weekend to go to the mall and purchase a product. A housewife while having breakfast at home is ordering a product over call while a busy dad at work is ordering books for his kids online to save time.
Customer touch points have increased rapidly and businesses that can collect data across these touch points and curate unique customer experiences across multiple platforms are the ones that are directly winning customer loyalty and routine buying behaviour. A great example here would be Pepperfry. The brand is not only an established furniture brick and mortar store for customers to walk in and buy its premium range offerings but is also available online for bachelors or young professionals who are renting homes to rent furniture on a monthly basis as well. It has unique offers and discounts online and provides an in-store shopping experience with a consultant to aid your shopping decision at the same time. What seals the deal for this brand is that every piece of furniture can be customized as per the customer’s preference and they can choose a piece at the store and then place the order online giving them enough flexibility in making purchase or rental decisions of durable items like furniture which usually requires relatively high investment.
All in all, this global pandemic has proved to be yet another testing time for the retail industry along with other sectors of the economy but what we have already begun seeing is the conversion of this crisis into an opportunity by agile modern day retail companies. It’s clear that companies willing to shift gears and change how they reach customers and tailor their experiences are the ones that are going to emerge victorious in this long race to sustain.
It’s just as much about out-doing your competitor as it is about out-winning your customer.