With a growing middle class and rapidly increasing consumer spending, India is placed at the number one slot in the latest Global Retail Development Index (GRDI) Survey, conducted by AT Kearney, leading Strategy Consultants. India has overtaken China as the most promising global retail market.
Retail is the lifeline of Indian economy. We have the largest number of retail outlets per person in the world, but nearly 90% of them are mom-and-pop stores in the informal sector. Indian retail space per capita at 2 sq. ft/person is the lowest in the world. As in most sectors of the economy, the Indian retail story is also one of outdated and fragmented infrastructure, dominated by too many informal players and heavily dependent on cash-economy. We are still in the early days of transition to a formal, structured, transparent and healthily funded retail model that would facilitate scaling up of investment, employment and income generation. Under pressure to find avenues of productive employment of our largely unprepared youth, retail sector deserves to be looked at more seriously as an area with exponential growth potential.
Indian retail sector is like the proverbial sleeping giant - lost in slumber, but once woken up and energized, the sector has all the potential to be a dominant provider of jobs, from unskilled all the way to those at the cutting edge of emerging technologies. The potential for growth of retail business is indeed mind boggling. India's retail market is expected to reach US$ 1.1 trillion by 2020, on the back of rising income levels and lifestyle changes of the middle class. By 2021, traditional retails’ share is likely to come down from 90% to 75%, organized retail is expected to rise to 18% and e-commerce would grow to 8% of the retail pie, according to estimates by ASSOCHAM. Online retail sales are slated to grow at over 30 per cent year-on-year for the next decade.
One of the outcomes of the digital connectivity is the dismantling of the silo mentality. Gone are the days when offline and online retailing were treated as distinct. Today, globally there is a convergence of retailing and e-tailing to offer the customer a seamless shopping experience. While established retailers are increasingly opting for online business as an extension to physical retailing, big names in online sales are establishing physical presence by setting up or taking over brick-and-mortar shops. Like in most fields of our day-to-day life, digital technologies are triggering disruptive innovations in retailing. Digital applications are likely to transform the shopping experience of customers in ways not imaginable till a few years back.
Creating a variety of shopping experiences and providing flexibility in ordering, pick up and payment are the customer-centric strategies that retailers are employing; technology helps them to do this effectively, economically and promptly. Omni-channel retailing is becoming popular as a natural evolution of brick and mortar shopping to e-commerce and further on to blended shopping experience. In omnichannel options, the customer gets the freedom to order online, pay cashless and pick-up (or get delivered) from a range of convenient pick up points operated by channel partners. Customers are being incentivized to opt for pick-up model as against delivery-to-home due to the operational ease and cost saving for the retailer.
Walmart, the US retailer has transformed into a hybrid model with both e-commerce and traditional shopping complementing their business growth. They have introduced online pick-up service apart from online delivery service and customers are lapping it up with voracious appetite. It is cheaper and more flexible to opt for pick up from outlets anywhere once you confirm the order on the online portal. Payment options also have flexibility, either online or at the point-of-sale (PoS).
Amazon has successfully forayed into digitally enabled physical retailing by establishing world-class outlets under the brand name “Amazon Go”. Commercially launched in January 2018, Amazon Go shops have already been opened in several locations in the US. The store concept uses several technologies, including computer vision, deep learning algorithms, and sensor fusion to automate much of the purchase, checkout, and payment steps associated with a retail transaction. In the Amazon Go store, customers can enter, pick-up items, and leave without queuing up for check out. As they pick up items, the item gets billed and payment is automatically made through the Amazon Go app. For entry and exit they can use their personalized QR Codes assigned while registering as a customer.
Apart from the example of Amazon Go outlets mentioned above, there are many more instances globally of smart shopping experiences offered. It is perhaps an irony that many of the experimentations in digital shopping are taking place in China. Hema Store opened in 2016 by Alibaba, the immensely successful Chinese e-commerce giant, combines elements of online and offline shopping to enrich customer experience. It shows the proactive market response and global perspectives of Alibaba that Hema was launched ahead of Amazon Go’s launch in the US.
JIngdong.com, popularly known as JD, which is the e-commerce rival to Alibaba in China (and going by annual revenue, larger than Alibaba by as much as US$ 15 Billion), opened its high-tech supermarket, 7-Fresh, in 2018 with many digital experiences offered to shoppers, one interesting feature being its smart shopping carts, which follow customers around the store (instead of having to be pushed). The stores also include ‘magic mirrors’ that sense when an item is picked up and then display a range of information about it to facilitate the customers to make informed shopping decisions.
Reliance is now giving finishing touches to the roll-out its integrated retail model in India where mobile shopping will be seamlessly combined with retail shopping experience and millions of corner shops becoming delivery partners in the value chain. This model would convert the potentially adversarial relations between organized and traditional retailing to a collaborative win-win model. In the process, thousands of small-time retailers will be encouraged to upgrade their infrastructure, skills and operations and join a mobile phone enabled and cashless smart shopping platform.
The PoS machine, or the card swipe terminal, is integral to Reliance Jo’s plan to create an ecosystem around small merchants. Mobile wallet operators like Paytm, Mobikwik, PhonePe and GooglePay are also expected to step up their game plan to create a web of services covering both B2B and B2C retail process including payments, supply chain and working capital financing. This initiative would enable over 15 million kirana stores across India to be migrated to a cashless (or less cash) shopping culture in India. If successfully implemented, this would be truly transformational in changing the retail landscape of India- both the way retailers operate and how customers shop.
Mall Shopping is spreading across India and malls and mini malls are coming up even in Tier 2 and 3 cities. In extensively urbanized states like Kerala, Tamil Nadu and Punjab, mini and micro malls are opening in semi-urban areas. With a combination of leisure, food-and-beverages, entertainment and shopping all under one-roof, these shopping plazas virtually serve as the high street of the locality. Malls offer great scope for digital technology deployment including IoT and analytics applications.
Digital technology is impacting every aspect of the retail value chain enhancing the nature and impact of shopping experience. Social media strongly influences customer opinion, and shopping choices. The most common application of digital technology in retail business is the leveraging of social media to gauge customer preferences and customer service quality. Security automation through intelligent video surveillance offers a reliable solution for monitoring crowded public places like malls. Digital signs in the mall can be used to communicate common messages, triggered automatically, based on emergency conditions across the premises. A connected mall can develop a set of evolved smart analytics that can create personalized deals and offers for the customers. The data generated will effectively offer a profile of customer preferences across a range of products and services. With connectivity and visibility augmented through sensors, HD videos, robots and smart touch screens, the retail environment transforms into a hybrid network of people and devices enhancing the quality of the shopping experience.
In the Indian context, the importance of retail sector in creating jobs cannot be overstated. When retail gets organized, structured and upgraded, millions of jobs will be created across India. With the growth of organized retail, there will be a cascading effect in creating innumerable job opportunities in a range of areas from manufacturing and logistics to sales and customer service. With a burgeoning middle class with ever rising aspirations, the demand for retail talent is bound to increase significantly in the days to come.
The Government needs to provide policy impetus to promote investment and infrastructure, physical and functional, to ensure that retail attains its potential. Along with logistics, agriculture-based value addition and leisure and wellness services, retail is a pivotal sector for the much-needed job push in India. With a caveat that we need to develop the sector-specific skill sets on war footing.
*Ravi Kumar Pillai is CEO and Principal Consultant at Cherrypick India, Trivandrum and can be reached at email@example.com