The Indian Retail sector is undergoing massive disruption that calls for innovation as a strategic response at all levels of retail enterprises. Several of the world’s largest retail companies led by Amazon and Walmart have made emphatic entries in the market and are ready to fight it out for market share, revenues and profits in the world’s fastest growing market. This will continue to challenge conventional models of retail marketing and distribution in India.
Innovative transformation of conventional processes in the retail business value chain, starting from sourcing to delivery and services to the end customer is critical. Continuous innovations are disrupting sectors such as transportation and logistics across the world, creating new niche markets, fueling changes in individual attitudes, behaviors and market expectations.
THE BIG PICTURE
In an interconnected world with markets without boundaries, India is the fastest growing and the most untapped retail market in the world, boasting a current size of USD 672 billion and growing at 12% per annum. It is also one of the world’s lowest cost source of groceries and apparel for the world’s major retailers. But it is also the most diverse, heterogeneous market that requires well-crafted innovative strategies across the value chain.
Retailers led by Reliance, Walmart–Flipkart and Amazon will continue to disrupt the market in India across all sectors. This will be done by securing a superior advantage in supply chain and logistics and opening new touch points that include fibre to home (FTH) enabled virtual reality shopping experiences. The Indian retail sector will witness application of block chain technology and artificial intelligence for sustainable marketing, expansion of products and service offers beyond the conventional categories of groceries and consumer durables.
Indian Retailers must turn the spotlight on supply chain, logistics and customer engagement on a war footing and seek partnerships for superior outcomes. Continuous efficiency gains in supply chains and logistics to get the products from the producer to the end customer will define the margins and profitability as opposed to driving down the cost of products and services from the producer on arbitrage play. Margins and profitability comes from increasing the wallet share from a household by offering multiple services, ranging from infotainment to virtual shopping malls enabled by high speed internet connections.
THREATS AND OPPORTUNITIES
For an innovative retailer, every threat is an opportunity to transform and grow the business. Threats and opportunities in Indian retail are opening up on three fronts.
- Removal of the middlemen or the farm product source price fixers in mandi (vendors’ market). New generation retailers will enter into contracts with farmers and other producers of consumer durables, both in India and overseas. It will lead to seamless execution of contracts and delivery. The wins will be decided on the basis of efficiency gains and cost savings through the application of technologies like warehouse and sourcing automation, block chain and artificial intelligence.
- Battle for the Indian customer. The retail war will be fought both off-line and on-line as both battle fronts are equally important for retailers. Here too, innovative methods for customer engagement and efficiency gains in the last mile connect (LMC) will determine winners and losers.
- Battle for the eye balls. The conventional battle of branded products jockeying for vantage positions on supermarket shelves to grab customer attention will take on new dimensions as telecom services, home entertainment and online shopping enabled by FTH high speed internet will change shopping behavior of consumers. Branded product suppliers will expand their partnerships with retailers and fight for vantage positions in the virtual shopping aisles assisted by Virtual Reality (VR) and Augmented Reality (AR). ln a connected world, where social media driven internet content fiercely competes for customer’s share of eyeballs, retailers that innovatively navigate customer to their respective virtual shopping malls will have an edge.
Research by Institute of Management at CHRIST found that there is a critical gap in applying innovative strategies on the three battle fronts discussed above. Viewing the market through the prism of disruptions, one sees opportunities for retailers to fast track growth and develop exclusive value-added partnerships with major brand owners. History shows that well-crafted and well-executed guerrilla battle strategies of underdogs have delivered strategic wins against mighty opponents.
Building customer stickiness, loyalty and relationship between retailers and customers requires the development of sustainable marketing models. As innovations drive the expansion of the market in addition to organic growth, niche markets will sprout, making target marketing critical. The dynamics of the market requirements will fuel innovations and consequent transformation in the supply chain, logistics and contracts with producers and farmers.
With access to information, products and services easier than ever before, Indian retail sector presents threats to conventional retail enterprises resisting changes and offers great opportunities for innovative enterprises that would ride on the waves of disruptions unleashed in the market.
Based on research undertaken by the Institute of Management of CHRlST (Deemed to be University).
Rajeev Sunu is a visiting faculty at the Institute of Management in CHRIST (Deemed to be University). He has worked in several global markets for brands like Mitsubishi Motors, Trust Power, Vodafone, France Telecom and Tata group of companies.