Indian Retail after the Lock down and Corona Virus scare in 2020

In the mid 1990s when Modern Trade started off in India, everyone started saying that Kirana or small stand alone stores are doomed. After a few years later when online retail started, physical stores were expected to be badly hit. Although there has been some impact with regard to a few categories by online retail on physical stores, it is nowhere as widespread as prophesied. Kirana stores have always marched on stoically. 

Fast forward to 2020 and the Covid-19 scare which has led to lock downs in most countries including India.

Interestingly, the small stores or Kiranas are managing quite well and many shoppers are dependent on these stores for their essentials. Many physical stores are catering to the shopper’s essential purchases. In spite of the lock down situation and home quarantine, online which had a good opportunity especially in the food space is grappling with delivery and stock challenges.

How will shopper behavior be after the Lock down? Which format will be preferred by shoppers? What might happen to the consumption patterns? Will there be a dramatic change after the Corona Virus scare goes away or at least reduces?

Most importantly, what will happen to Indian Retail and its various segments?

All these points have been detailed in this article published in Business Line’s BLoC. Click on this link to read the article and share your comments - What will shopping look like after Covid-19?

Inside Retail; Long way to go for omni channel retail

I have been remiss in sharing thoughts and insights about Retail in the blog due to lot of travelling and extensive engagements. Let me resume by sharing some articles I had written for my new column in the Business Line on Campus (BLoC) titled “Inside Retail” .

A full page advertisement by a retailer claiming to be an omni channel operator piqued my curiosity. Omni channel is easier to claim than do and this article explains the reasons for the same.

The full can be read by clicking on this link - “Long way to go for seamless omni channel shopping experience”. Please do share your views and feedback in the comments section.

Is E-tail retailing or not?

E-Tail is a subset of retail and is largely about purchase of products (goods) online. However, the term e-commerce continues to be used for this segment. Apart from being misleading, this clearly is giving rise to policy approaches which disregards the aspects of a retail business which defines such e-tail operators.

If there is a defined FDI policy with regard to retail in India, there is no need for a separate policy and guidelines for e-tailing.

Yet, policy guidelines pertaining to e-tailing, wrongly described as e-commerce, keeps getting notified. The recent guidelines which came into effect from 1st February 2019, is a case in point.

Some points with regard to the dissonance created by guidelines pertaining to online shopping but defined as e-commerce have been explained in this article published in “The Hindu Business Line”. Click on this link to read the article titled, “The sting in the e-tail”.

The larger issue which is being conveniently ignored is industry status for the Retail Sector in India. Notifying this would not only help to streamline policy with regard to the various constituents of this sector but also enable the sector to growth.

Will this happen?

Policy Clarity required to enable Indian Retail

Trade in India is centuries old and historically the stories of our spices, etc., reaching many foreign shores, abound. From a historical perspective, it was these riches that attracted traders from overseas and the subsequent developments led to East India Company establishing a trading base first and then making India into its colony. This historical turn of events might have left a deep and long lasting imprint on the collective psyche which might be manifesting itself in the form of the vigorous and violent opposition to FDI in multi brand retail, today. 

Over the years we have largely seen shop keepers with a few exceptions where businesses managed a chain of stores. It is only from the mid 90s that Retail as a concept emerged in India. Understanding the differentiation between "Shop Keeping" and Retailing is very important. Their approach to business and priorities are completely different. Similarly clubbing eTail (Online Shopping) with eCommerce with regard to policy is incorrect.

As a start, Indian Retail needs Industry status and a cohesive approach with regard to policy-making and governance. My thoughts towards enabling the sector has been published as a Retail Report titled as "Six steps to redefining retail rules" in The Hindu Business Line. (Click on the link to read the article)

Price and Value Perception; of products as also businesses!

I recently read an interesting article in Times of India (Click here to read the article) about physical retail offering competitive and lower prices. This is from a report published recently by Goldman Sachs and compares the prices of few categories and some examples are in the visual below. 

My long held view is that online is not going to destroy physical shopping. At the very least, this is not going to happen in the short or even medium term. I have seen concerns similar to this from the mid 90s and more recently in the context of FDI in Retail. When supermarkets and then hypermarkets came into India, everyone was predicting the demise of the local grocer (Kirana store), This has definitely not happened. In fact after almost two decades the modern trade segment is just about 10% of the total Retail sector in India. This is in spite of the fact that the retail sector has grown from approximately USD 200 Billion in 2000 to close to 600 Billion in 2015. This clearly indicates that the conventional outlets are growing and growing significantly. The share of modern trade (Organised Sector) is expected to increase to 13% by 2019 – 2020.

These percentages might vary depending on the report you read. However, the macro picture remains the same. Modern trade is still a small contributor to the overall retail sector in India. This share might drop much lower if food & grocery alone is considered.

Online retail is roughly 10% of modern trade or 1% of the total retail sector in India as of now. This article states that Goldman Sachs estimates that online retail would grow to be 22% of the modern trade in the next five years.

Seems to be extremely optimistic!

The widely varying, but always optimistic projections regarding online retail is best captured a detailed article in Livemint (Click here to read the article).

The variance between the lowest and highest estimate of online retail in 2020 USD 70 Billion. To put that in context, The modern trade contribution to the overall retail sector in India would be in the range of $ 60 Billion TODAY! 

In summary I can only hope that the investors pouring money into the online space do two things –

• Physical retail is an important segment and investing there might be worthwhile.
• Put someone to work to cross tally and tabulate all the various percentages and figures being quoted in the various reports about retail in India. The variances across all these forecasts and projections might be a wake-up call.

Image courtesy - Times of India

Think like an Omni Channel Retailer

Omni channel retail is being touted as the way forward and the future of retail. Hence the high interest levels as also the aspiration to move in that direction. However the road is not an easy one and there are multiple challenges. While a few are manageable, there are some challenges which would require a paradigm shift in thinking and that is where any such initiative might fail.

The first and foremost challenge is the integrated organizational approach that Omni Channel requires. Offline and online cannot be separate business units with independent deliverables. The challenge to managing this shift lies in being able to balance such an integration while not diluting the accountability and focus on each of these lines of businesses. Take the simple case of credit for sales. In the case of an online order and an offline pick up, who gets the credit for sales? This is important in the context of incentivizing the staff based on sales, which is the norm. 

Similar is the ownership of mistakes and the related costs. If the shopper has picked up products offline and opts for an online based delivery to their home, will the store deliver the purchases or will it go out from a central distribution center. In case of any mistakes with regard to the delivery, who will be responsible and accountable for the same? There are multiple such questions which need to be addressed in the context of Omni Channel and they can be done effectively only if a single unified perspective is adopted.

One possible solution is to adopt a shopper centric model where shoppers from specific geographic areas are assigned to a particular physical store. This could be basis the catchment or trade area defined for that store. Any online activity is treated as a value added service to the shopper and that cost can be apportioned to the respective store. In such a scenario the ownership of sales and other aspects will continue to rest with the store. 

A similar model can be flipped to link a set of shoppers to a designated Sales or Retail manager in the offline operations. In such a case that designated person gets to own the costs and the benefit of sales from that shopper group. They would be similar to a store manager and would operate in a similar manner.

These alternatives are assuming that every shopper opts for Omni Channel purchase which might be a reality in the future but it is not so now. In such a case an interim strategy is required to handle three sets of shoppers; offline, online and Omni Channel.

The biggest challenge would be to manage the shift in the mind set of the front line service staff. Even assuming that the management team buys into the need for change that Omni Channel requires, driving this change in mind set down the line will not be an easy task.

Lifestyle stores can at least adopt a relationship manager model where shoppers get assigned and linked to specific store staff. This would enable a higher level of personalized service as also ownership at an individual level. This would be possible for lifestyle formats because of the relatively lower number of shoppers that frequent such stores. How can such a model be applied for value formats like hypermarkets where thousands of shoppers come in every day and the number of front line staff are also relatively lesser than in lifestyle stores. There does exist a possible solution to this also and the answer might require some unconventional thinking.

However I have saved the biggest challenge for the last which is the temptation to spin off these business segments into separate units for the sake of valuation and funding. Some of the private banks which offered demat and online trading services through their subsidiary were soon tempted to separate this business from banking and also offer online investments on their banking platform. As a customer of such a bank, this has been most frustrating because two relationship managers now pressurize me to do the same thing on two different sites of the same parent bank!

What stops an Omni Channel retailer from spinning off their offline or online business for the sake of valuation and then try to reinvent the wheel by trying to make each of these into Omni Channel again.

The only thing which would deter such a move is a very strong shopper orientation and a constant reminder that the whole Omni Channel evolution is from a shopper perspective and not otherwise.

CLICK Here to read an earlier post about Omni Channel Retail

So, you want to become an Omni Channel Retailer!

The latest buzz word that I am asked about in various forums is Omni Channel and how a retailer can become one. In many cases the understanding of what Omni Channel Retailing is very hazy. In a few cases this is considered to represent a seamless shopper experience across the physical, online and mobile access points of any retailer.

Some of the successful examples of Omni Channel retailing being showcased is more about such a seamless experience. For example, Apple has linked their mobile app to their store and vice versa. The app can be used to book service appointments, order products, etc., and the integration helps the shopper get alerts when they are near a store, receive targeted messages, etc. Carrefour has simplified this by enabling the shoppers to place online orders by voice or scan. Once the order is complete, the same can be delivered or picked up from a store. Several other retailers are experimenting with technology such as electronic tags, Near Field Communication (NFC), etc.

However I feel that all these are more about a superior multi channel approach to retailing. Multi channel retailing is when both online and offline options can be accessed by the shoppers and there is some extent of integration between the two. Omni Channel would ideally be the next step forward where such integration between offline and online access becomes seamless. 

The key word in this context is - seamless and that cannot be limited to only the information gathering/ sharing or shopper interface. Shopping is after all about purchasing physical products and unless the physical dimension of shopping becomes seamlessly integrated across physical, online and mobile.

Omni channel retail should be defined by the acronym BAFARA. This stands for Buy Anywhere, Fulfill Anywhere and Return/ Replace Anywhere.

Most of the current examples tend to focus on the “BAFA” part whereas this is an incomplete value proposition from a shopper’s perceptive. One point of view is that the extensive analytics and shopper profiling that is done would enable retailers to deliver the exact requirements of any shopper. The logic is that, therefore the need for return or replacement would not exist. Hence the focus on “BAFA” is good enough for creating a Omni Channel offering. 

As someone who understands shopper behavior and expectations I do not think that this would be acceptable to shoppers. Whether they actually return or replace any product purchased or not, they would like to have that option available to them at any given time.

An ideal Omni Channel experience offering BAFARA would play out somewhat like this;

I am leaving office and suddenly remember that I was supposed to purchase a few items as guests are expected at home in the evening. Thankful for having remembered I place an order for these items on the mobile app and select the option for a store pick up. Since I have paid for the same, these are available for immediate pick up and I don’t even have to park my car. I reach home with the purchases only to find that a few products need to be returned. Since I am logged into my home computer, I access my shopping history online and place a request for the return of these products. Since I am travelling the next day, I select the pickup from home option for the return. 

I bought the items on my mobile, picked it up from the store and would be returning it from my home. BAFARA essentially means the convenience of being able to shop in this manner with various permutation and combinations. That would truly be Omni Channel retail.

Sounds simple enough but it is not so and the challenges start mounting if one were to truly deliver the BAFARA value proposition. 

The primary challenge and to some extent becomes a constraint is with regard to the organizational structure and management mindset. In a scenario where offline and online channels are treated as separate business units with independent deliverables as also responsibilities, they become competitors. This is a significant bottleneck in the journey to becoming an Omni Channel retailer.

There are several other strategic as also operational challenges which have constrained most of the Omni Channel initiatives to remain restricted to BAFA instead of offering BAFARA. I shall detail the key challenge with some ideas with regard to the same in another post.

In summary all I would say is that Omni Channel is not about technology and data alone. It is equally about physical products and owning the shopper experience, end to end. This holistic experience cannot be restricted to BAFA and must encompass BAFARA. Till that is clearly and very well defined as also executed, experiments in the Omni Channel space would remain just experiments.

Replacement Guaranteed!

The recent spate of messaging by the online Retail majors hinges on reassuring the shopper that it is very easy to return or replace what has been purchased.

This is a core shopper expectation which is catered to very efficiently by the stand-alone, neighborhood store.  Interestingly modern retail formats including eTailers  are still struggling to establish trust on this front.  This is a very critical shopper behavior aspect and some of my earlier posts on this topic can be viewed by Clicking HERE

I had a flashback to the late 90s, when the RPG Foodworld chain of supermarkets was trying to redefine the grocery and food shopping behavior. This involved addressing several key mind blocks and shopper resistance aspects; hassle free replacement being one of the most important amongst them.

“Replacement Guarantee” was an initiative to address this important issue and it involved a holistic approach which included messaging, internal processes as well as staff education and training. This had a very positive impact which was reflected in the sales increase as also the basket penetration of several core categories of products.

Coming to the present times the two recent advertisements by Amazon and Flipkart are focusing on the ease of return and replacement. These two advertisements drive home the message effectively.

It is interesting to note some subtle and sublimal messaging in both these advertisements and they do raise two important questions in my mind as a retailer.

1. Both the advertisements show an elderly person expressing concern about return and replacement. They are both reassured by someone who is much younger. Is easy return/ replacement a concern only for Gen X / older shoppers? The counter point could be that this a concern for the Gen Y and Gen Z but the advertisement is trying to drive home a message that their Gen Y and Gen Z customers do not face this problem. In that context are reference groups such a large influence for these shoppers?
2. Retail brand building is built on trust which can happen only during the transactional experience.  Even today, the return/ replacement in most modern formats and eTailers are definitely not up to the mark. In that context will messaging alone work? What process changes have these eTailers instituted to ensure that the real experience lives up to the expectations created through the advertisements?

Future of Retail; Bringing the store to you

Google Glasses coupled with 3D printing opened up a whole new dimension of shopping. I had written about this and a blue sky idea was that people might move away from purchasing products to buying 3D print designs and make their own products at home. This is very much a possibility in the future when the materials and composites required for various kinds of 3D printed products as also 3D printers become main stream and a part of most homes.

In the meantime there is another interesting technology which might merge the physical and online retail worlds to give you the best of both.

Shoppers opt for eTailing because of price, convenience and range. The competitive advantage of convenience is coupled by the fact that online retail is not constrained by physical store size. This enables them to offer a far wider and deeper range, called as a long tail of merchandise.

Shoppers also take the trouble of going to physical stores in order to browse and have a shopping experience which consists of “Touch, Feel and See”.

Imagine a scenario where you want to shop for a new dress and you sit back in your recliner and the store actually comes to you and enables you to shop. Is that not a fantastic combination of physical and online retail? 

Is that possible?

There are emerging technologies which enable visualization which has led to innovations like virtual dressing rooms. However, a new technology when coupled with visualization might actually bring the shop to you in the near future.

Microsoft has been working on a technology called HoloLens. 

Very simply put, this creates a 3 dimensional holographic view for the viewer and they can interact with the same. This video would give you a better idea about HoloLens.

How is this relevant and applicable to retail?

Retailers can leverage this platform to create 3 dimensional stores which can be accessed by the shopper in the comfort of their home. Creating such 3D stores is already possible and being used for a different purpose. Today there are several IT solutions that create a 3 dimensional rendering of the store and make is quite realistic. See the first video to get an idea about how 3D store would look like and the second video to see how Carrefour has used Google Street View to create a virtual shopping experience using kiosks and hand held devices. 

The logical next step would be to project this as a 3D immersive hologram in the coming years.

Combine these technologies and it would be possible to bring home the store. Add on technologies which are being worked on like delivering sensory influences such as smell and a feel of touch. Voila, your store will be as real as it can be and more importantly, exclusive to you.

In such a scenario, if you want to buy a new dress you might sit back and slip on your HoloLens device or some other similar device and the store comes alive before you. You can browse, use visualization to try on dresses, check out accessories, compare prices and much more.

As compared to printing products at home, bringing the store home seems much closer to reality. This is all the more pertinent in the current context where both physical and online retailers realize the need to be present on both platforms. A giant like Amazon has opened physical stores and several physicals stores are in the online space.

Bringing a store home is now possible and a retailer who gets their act together to make this happen might establish a strong competitive advantage, especially in India.

Who is shopping for what and when?

It is becoming common place to see mega sales and promotions being advertised and promoted by online retailers in India. However, what puzzles me is their timing. Most of these promotions are scheduled to start on Mondays and are during weekdays barring a few exceptions. This is in direct contrast to the physical stores. The brick and mortar stores usually gear up for promotions during the weekends namely Friday, Saturday and Sunday. They stock up, plan for adequate manpower and hope for the bumper weekend sale.

The weekend phenomenon is clearly a function of time where shoppers are free. Also, with shopping becoming more of a recreational cum functional outing, this tends to happen on weekends. Obviously online shopping is not time intensive and that is one of its main advantages. However, the timing of holding such promotional sales during weekdays, especially with a start on Monday’s is something worth exploring with regard to who buys from such sales, what is purchased and why on weekdays.

Conventional wisdom says that Monday would be amongst the busiest days for most working people and sparing time to even browse and click might not be possible for most. As clear data with regard to the age of online shoppers is not available easily, the next best reference is the age of internet users. A February 2015 report by PWC estimates that 37% of the users are in the age group of 15 – 24 and 38% are in the 25 – 34 years age group. It is quite possible that the majority of them are students or are in the early stage of their careers. They are also the Gen X whose orientation towards work as also work-life balance is very different from the older generations. Hence a weekday pressure, especially Monday pressure is not such a big factor.

This is validated by the categories that dominate online shopping in India. Another report by by RedSeer consulting dated March 2015 shows that 45% to 50% of online purchases are electronics and this could very well be dominated by mobile phones. Next is fashion with a share of 18% to 20%. Clearly these categories have a correlation with the dominant age groups of internet users and validate the weekday promotions of online retailers versus the weekend focus of physical stores.

In spite of increasing smart phone usage and shopping apps, 2/3rd of the orders are coming from a computer and only 1/3rd is originating from a smart phone. Many organizations especially those employing large numbers of the Gen X do not allow free access to online shopping and social network sites. If the majority of the potential online shoppers do not have access to these sites at work on their computer, they should be purchasing through their mobile. In which case the share of orders from mobiles does not reflect this and should be higher.

So the question remains, who is buying when and what online in India.

Image courtesy - http://lifesacomicstrip.blogspot.in

An Indian & A Retailer’s 20 year old journey

May 9th holds a special place in my heart as it is the day when the first store branded as Foodworld was opened by RPG Retail (now known as Spencer’s Retail). Retail as a sector has been a great teacher and also given a lot to me personally. So this is a day to remember all that and give thanks as also reminisce about the remarkable journey over the past 20 years. The one thing that stands out when I recall the milestones of this journey is that change has always been a constant as also resistance to change has also been a constant.

Success has come to those who embrace change and in some ways anticipate change.

One example of such resistance to change is the back story to my decision to join Foodworld. At the time, all my friends and relatives were shocked and aghast by this and felt that this was a completely stupid and suicidal career move. After all who is going to switch over from the trusted, convenient neighborhood store and shop at supermarkets? For me, this was the challenge; making shoppers switch their buying behavior. Challenges were aplenty and managing this change and many more led to a fundamental shift and today modern trade/ chain stores are approximately 10% of the overall Retail in India. It is still early years and the journey is not over and “Abhi toh picture baki hain” as the dialogue goes in a popular Hindi film.

The journey till date and a snapshot of the changes and challenges that have been milestones have been detailed in an article for ET Retail titled “Disruptions & Consolidations of Indian Retail Sector”. Click Here to read this account of the twenty year Indian Retail journey.

One key thing that stands out as a reason and enabled those in the Indian Retail journey in managing these sweeping changes has been the ability to “Learn, Unlearn and Relearn”. This is a quote by Alvin Toffler and is very pertinent to the context of rapid change. Although this does seem simple enough, it is quite difficult to internalize.

This video about a cycle which had the handle bar turning the opposite way helps drive home the point as also the challenges in “Learning, Unlearning and relearning”. 

The key barrier to this remains our thinking process, conditioning and the bias that we build up over time. Going forward Indian Retail is bound to become more challenging with varied stake holders, demanding customers and changing operating paradigms. Only those who can “Learn, Unlearn and Relearn” will survive and succeed.

Who is the face of your eTailer?

The staff in any physical store plays the role of being the face of any Retailer.  Shoppers can interact with them and address all their queries, concerns, etc., to a “person”. It is an area of focus that the quality of such staff is often not up to the mark and there is tremendous scope for improvement in that front.

In contrast a shopper sees only the person who delivers their products and invariably they are not empowered or trained to be the face of the eTailer. Any issue needs to be raised through an email or a call which has to go through the inevitable IVR (Interactive Voice Response system). The bigger issue is that the same customer call centre person does not attend to the call every time and in many cases the shopper ends up repeating all the details. 

Imagine a situation if one walked into a store and wanted some assistance. They call out to a store staff and an imaginary conversation would go like this.

• Shopper – Excuse me, where can I find this product?
• Store Staff – Thank you for shopping with us and we value your patronage. Please select the following from the options. Say 1 - for product information, 2 - for other service, 3 – for any complaints, 4 – for any suggestions and say 9 - if you wish to speak to a customer service person.
• Shopper – I just want to locate this product
• Store Staff – Sorry, we have not received any input. Please press 5 to repeat the main menu.
• Shopper – Okay (With an angry sigh) 5
• Store Staff – Thank you for shopping with us and we value your patronage. Please select the following from the options. Say 1 - for product information, 2 - for other service, 3 – for any complaints, 4 – for any suggestions and say 9 - if you wish to speak to a customer service person.
• Shopper – Shouts out “1” and is obviously getting irritated.
• Store Staff – Thank you. Please Say 1 for Food products or 2 for Non Food products. 

I am sure that most shoppers would walk out at this stage. 

While I hope that this might never happen in a physical store, this is exactly what happens most of the time when a shopper calls up the customer service number. 

Therefore, it is important to re-look at the role of the delivery person because he/ she will always be the ONLY face of the eTailer that the customer gets to see and interact with.

How this be done has been detailed in my article in ET Retail. Click here to read the article.

This video about an initiative to motivate such delivery persons. This is a good start but definitely not enough. There has to be a paradigm shift in the way front end logistics is perceived and executed. The article talks about what needs to be done and how that can become a game changer.

Buying Sales, Hundred million at a time!

“Buying Sales” is not necessarily a bad thing unless one does it without having a clear idea about why it is being done. So, what is buying sale?

It is a term used to define very deep discounts and/ or killer deals which will by default lead to very high sales which usually also results in a loss of margins. In effect the Retailer then spends a lot of money to generate that sales, hence the term; “Buying Sales”.

This approach will obviously require deep pockets and unless there is a clear agenda for the same, it ends up as being a waste since it is not easily sustainable.

The recent hype about a eTailer’s one day sale and the resultant deluge of shopper angst coupled with the statements by the eTailer expressing happiness and satisfaction from this promotion makes me wonder about the contradiction. What was the reason and logic for this activity? Were they “Buying Sales” and if so, was it done with an objective?

These questions and also what can be the expected impact of this on eTailing and the other players have been captured in an article published in ET Retail. Click here to read the full article.

Picture Courtesy - www.gpxgroup.com