March 14, 2023
The pandemic period has been a time of recovery for many retailers, and customers have rewarded businesses with increased sales. In today’s competitive retail landscape, businesses are vying for attention from customers across multiple channels, including offline and online retail, apps, and mobile commerce. Although initially, there has been growth in e-commerce, it is now slowing down, and sustainable business models are what will survive. Physical retail stores are important for customers and can offer a better shopping experience than online.
Let us look at some key challenges and trends that will shape the future of retail in India. Some of our observations were also echoed at the Retail Leadership Summit organized by Retailer’s Association India that we attended recently in Mumbai.
Over the last few years, retailers have recognized the value of data and have invested in enabling technologies to process data faster, better, and more efficiently. Personalized offers, one of the critical advantages of data analytics, have been around for years, but it was mostly a decentralized process driven by individuals. The change in the industry will be how retailers will build knowledge capabilities centrally and execute them in a decentralized manner.
It is estimated that by 2025, approximately 150 to 175 zettabytes of data will be generated. While the human mind cannot process this amount of information, it is fascinating how enabling technologies like AI can process it. Retailers are already harnessing the power of data analytics and AI to improve their business processes and customer experience and increase sales.
“For instance, a leading retail company in India uses data analytics to identify customer preferences and behaviour patterns. They analyse data from various sources, such as customer transactions, social media, and mobile devices, to create a unified view of the customer. This information helps them personalize offers to customers and enhance their shopping experience.”
“Another leading retailer in India uses AI and machine learning to optimize its supply chain management. They use AI algorithms to analyse data from various sources, such as weather patterns, shipping routes, and warehouse inventory levels, to predict demand and optimize inventory levels. This optimization helps reduce costs, improve efficiency, and increase customer satisfaction.”
However, retailers are cautious about the unintended consequences of their actions. The “do it for me” stage, where AI takes over the decision-making process, can lead to unintended consequences. Therefore, it is vital to strike a balance between data-driven decision-making and human intervention.
Indian Retail businesses face a primary challenge in keeping up with evolving customer expectations in a world that values instant gratification and real-time engagement. To give customers back control of their experiences, retail must adapt to changing customer expectations by investing in technologies and resources that enable real-time engagement and personalization. This includes using messaging apps like WhatsApp, chatbots, automation, and self-service options. Retailers also need to focus on providing personalized and relevant experiences that meet their specific needs and preferences, which requires a deep understanding of customer data and investing in data analytics and other technologies to collect, store, and analyse customer data effectively.
Finally, empowering customers with self-service options that enable them to manage their experiences on their terms is an essential element of giving customers back control of their experiences. By doing this, Retailers can build trust and loyalty, creating a competitive advantage in an increasingly dynamic and evolving market.
Another challenge often faced by retailers is to provide customers with a product and brand that they desire, delivered in the most convenient way possible. However, achieving this convenience while also maintaining profitability can be quite a task. There shall be ways to deliver online orders from stores, reduce delivery lead times, and integrate inventory across channels. Additionally, it must be ensured retailers have a single view of their audience across all touchpoints, whether it be a physical store or a mobile shopping app, and provide relevant information to meet their needs.
The importance of retailers understanding their customers’ needs and focusing on their convenience. While retailers often focus on making their operations efficient, it is important to also focus on making the shopping experience easy and personalized for the customer. Making the customer feel special is a key aspect of retail.
The concept of hyper-personalization will pick up, where retailers would want to make each customer feel important and distinct, especially in a large-scale retail environment. Using data to personalize the shopping experience is a desired outcome, though some privacy implications must be considered.
Secondly, digitizing stores to create a seamless online-offline experience for customers will go a long way for the business. Many tech companies are working to create an extension of the online world within the physical stores of retailers.
E-tailers must not only focus on making a sale but also on understanding the customer’s needs and interests. Companies like Puma and Nike want to be a part of their customers’ lifestyles and hence, create events that their customers would be interested in.
Retailers in India are shifting their focus towards back-end technology investments to improve their operational efficiencies, which will ultimately enhance the overall customer experience. This shift in focus is driven by the fact that customers prefer to interact directly with humans in the post-Covid world rather than deal with technology and other artificial intelligence-led interfaces.
To adapt to this trend, retailers are investing heavily in integrating their technology stacks for different functions, such as warehouse management with customer relationship management (CRM) tools or inventory management with human resource management systems (HRMS). This integration helps retailers turn data into information, which in turn becomes the basis for informed decision-making.
However, Retailers are still focused on using technology to better understand their customers, their needs, preferences, and behaviour. This understanding is essential for retailers to personalize their offerings and provide a better customer experience.
“For example, retailers are using customer data and artificial intelligence to understand their customers’ tastes and preferences and localize products accordingly. They are also segmenting customers based on their behaviour and targeting communication to them accordingly.”
To attract retail customers, the focus should be on the basics of retail marketing, such as having the right product at the right price and place. Processes and presentation are vital, but ultimately, the focus should be on the main P’s and not just promotions to liquidate inventory.
Subscription models, loyalty programs, and the omnichannel strategy are all essential for seamless customer experience from online to offline and vice versa.
In addition to using AI, AR, ML, IoT, and voice assistants in marketing, and to create a virtual try-on experience for products, tracking of metrics such as ROI, clickstream analysis, promotion efficiency, conversion rates, and online-offline customer journeys to improve business performance will continue to be of prime importance.
In the context of the apparel category of retail, physical stores will always be essential for selling aspirational and emotional brand experiences, although technologies such as AR/VR have the potential to enhance the in-store experience further.
Luxury brands are beginning to adopt the metaverse, but there is not yet widespread adoption in more accessible price points. However, it is important to remain open-minded about technology adoption and experiment, pilot, and adopt quickly when these technologies become more relevant.
Retailers today follow the idea of “adopt fast, test, stress, trial, and move on”. The critical thing is to ensure that the use case that tech companies are solving for does not require very complicated change management upfront. Retailers that are more tech-oriented have a different digital team, not the enterprise tech team, which is business-focused tech and not transaction-focused tech.
The struggle is to identify the few use cases that give the biggest bang for the buck without too much of an adoption curve risk. It is a tough thing to get adopted by big retailers because of the willingness to pay for technology in India, which is low compared to other developed markets.
Finally, the transition between a new technology and an existing retailer must be smooth, and existing retailers are not normally willing to adopt new technology for a costly process and then find it falling flat.