Indian retail has an exciting potential of 1.2 billion consumers, but is constrained by its relatively inadequate and expensive customer connection points in the form of physical stores. The Federation of Indian Chambers of Commerce and Industry (FICCI) through its recently held event “Massmerize” in Mumbai stressed the need for multi-channel retailing.
The emergence of digital channels (laptop, smartphone, and flat panel TV) can augment the retailer’s physical stores in India for not only increasing customer reach but also engaging them through channels that are relevant during their shopping journey. A shift of small percentage of the business to digital channels can bring in the much needed efficiency in the retailer’s business leading to significant improvement in profitability. For a retailer to make this happen, it needs to collaborate very closely with its suppliers and synchronise its operations with their FMCG partners.
According to a white paper on “Driving Indian Consumption Through Integrated Multichannel Retailing” released by FICCI and TCS, Indian retail is poised to become a 1.3 tn dollar opportunity by 2020. Modern retailers in the past have tried to capitalise this opportunity by increasing their store presence across major cities in India. On the other hand, FMCG companies have tried to enhance their distribution reach. FICCI believes that this opportunity, however, cannot be solely addressed by the conventional brick and mortar retail channel. This is because the opportunity is dispersed across the country, where a billion-plus customers need million sales and service touch points. Retailers’ current operating models are not geared up to cater to such unique and ubiquitous customer demand across these million touch points. According to FICCI and TCS, modern retailers have the potential to reach US$ 10 bn of sales through digital, mobile and other non-conventional channels by 2020. The knowledge paper recommends multi-channel retailing as an inevitable choice for Indian retailers for enhanced customer experience and business sustainability.
Making a case for multi-channel retailing, the paper cited expensive real estate costs that have already played a spoilsport for Indian retailers. It would be impossible for most retail categories to reach breakeven at such high rentals of 10-15 percent of the revenue. Logically the scenario will always remain the same or deteriorate further as India occupies only 2.4 percent of the world’s land area and it supports over 15 percent of the world’s population. This disparity will always give rise to scenarios where rentals in metros and high streets are bound to be expensive. Another reason for retailer to shift to multi-channel retailing is to offer the consumers more width and depth in assortment. As consumers are increasingly becoming channel-agnostic, retailers can provide a wider assortment by moving a large section of merchandise to digital mediums.
According to Bijou Kurien, President and CEO, Reliance Retail and FICCI Retail Committee, digital technology will be an enabler and a game changer. “Those who leverage its capability will differentiate themselves from the rest. And for that, retailers will have to futurescape these technologies and understand its impact on their business models and customers, and re-engineer their efforts to adapt to the significant changes you should expect,” he added.
The key discussion themes at Massmerize were opportunities for collaborative action to connect and engage with customers, increase consumption levels and remain abreast with the rapidly changing consumers. “In the midst of the economic slowdown, Indian retail has an opportunity to react on the lessons of the past while focussing on the ever changing consumer and retail technologies of the future. There are increasing opportunities for collaboration between manufacturers and retailers to increase consumption and create a trillion dollar consumer market,” stressed Kurien.
Some retail and FMCG majors who attended the conference were Bijou Kurien, President and CEO Reliance Retail; Shantanu Khosla, MD, P&G; Kurush Grant, Executive Director, ITC; Saugata Gupta, CEO, Marico; Devendra Chawla, President – Food & FMCG, Future Group; Rakesh Pandey, President – Retail and Business Development, Raymond; Rakshit Hargave, MD, Nivea India; Harkirat Singh, MD, Woodland India; William Pinckney, MD, Amway India; and Kaushika Madhavan, Partner, AT Kearney.
-Nivedita Jayaram Pawar
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