The Retail Industry: A Look Back and a Look Ahead
Retailers operate in a highly dynamic and competitive customer-driven market, that requires constant adaptation to meet the changing expectations of consumers in order to keep them coming back. From, Industrial Age to department stores, today’s multi-channel, existing environments, the retail industry continues to evolve dramatically. But, despite how much the industry changes, retailers who remember that the ‘customer is king’ seem to persist. Now, let’s take a brief look at the past, present, and future focusing on three core areas of the retail industry:
The Shopping Experience, Marketing and Payments.
India is the fifth largest preferred retail destination globally. The country is among the highest in the world in terms of per capita retail store availability. India’s retail sector is experiencing exponential growth, with retail development taking place not just in major cities and metros, but also in Tier-II and Tier-III cities. Healthy economic growth, changing demographic profile, increasing disposable incomes, urbanisation, changing consumer tastes and preferences are the other factors driving growth in the organised retail industry in India. India ranked 77th in World Bank’s Doing Business 2019.
The Shopping Experience
Past: Marketplace driven
Present: Cross Channel
Future: Omnichannel
Retail Marketing + Advertising
Past: Physical Branding
Present: Data-driven Segmentation
Future: A segment of one
Retail Customer Trends
Convenience matters now more than ever. And forward-thinking retailers are setting high expectations for the rest of the industry. In the 2020 retail trends outlook, we explore convenience, what it means today, and how retailers can position themselves to take on the challenge in the year ahead.
Sizing up Retail Industry trends in 2020
Predictably, 2019 was a year in transition. There was stability in the positioning of the top five retailers and a few notable bankruptcies. The emphasis on understanding what consumers really want continued to expand the gap between the leaders and everyone else who followed. For retailers, understanding how consumer expectations are evolving has never been more important, especially with the convergence of supply chain, digital technologies, and other innovations.
But when it comes to how the next 12 months will play out, uncertainty is the name of the game. With a possible recession and potential fallout from tariff tensions looming, retailers should have a strategic plan that can handle adjustments when and as needed. While the overall economy might be losing its shine in 2020, it presents retailers an opportunity to review their playbook for riding out a downturn.
To strengthen their preparedness, retailers should focus on five factors critical to success:
- Determine why they matter
- Build a war chest to invest in growth
- Embrace technology and automation to better leverage growth
- Look outside their four walls to embrace partnerships
- Understanding expectations to navigate uncertainty
The shift in consumer expectations
Given the rapid pace of technological advances and social transformation, expectations for outstanding customer service and experience are now being set by those outside the business. Consumer expectations are going global, while age-old national and industrial divides are shrinking.
To remain ahead, many retailers must make a difficult choice on what to offer and how to make sense of it, profitability-wise. This means there’s a necessary conversation around tough tradeoffs—what really matters to the consumers, and what most companies have internally before going after the shiny new object?
At its very core, convenience is a human-centred experience that provides customers with a feeling of ease. While the perception of convenience can range from “saves me time” to “meets all my needs in one place,” what many people are looking for is something that simplifies life while delivering a positive experience. People want to “outsource” the work of getting products. Instead of focusing on the act of purchasing products, they want to focus on the act of using them.
Digital retail trends takeaways
A myriad of new and more convenient options are coming our way in 2020-21. Here are a few considerations to help move towards an enhanced retail experience:
- Understand that convenience is related to an overall consumer experience that eases the shopper journey while providing additional services
- Take stock of the organization―is convenience a common thread?
- Realize convenience is the new normal. Invest in, conveniences in the areas most aligned to the brands promise
- Determine your shoppers’ willingness to pay for convenience and the organization’s willingness to invest
By focusing efforts across the organization and into your supply chain, new retail business models can evolve. Winners and losers will likely be decided on who can execute these new ventures best. And they will ultimately shape the future of the retail industry.
India’s merchandise retail has an outsized share of food and general (staples, groceries, FMCG, pharmacy etc.) retail that stands at 70% of the total merchandise retail basket, implying ₹40.95 lakh crore of estimated sales in FY 20. From a household perspective, this is “essential retail” that is crucial for the day to day functioning of any household.
With or without lockdown, the primary consumption demand for essential goods will continue in FY 21 with minor blips in supply chain provided India transitions to a phased relaxation from May 20 onwards. In FY 21, essential retail is therefore expected to grow by nearly 10% to end at ₹44.8 lakh crore by the end of FY 21. The operations of departmental stores, supermarkets, grocery e-retailers and pharmacy stores continue during the lock-down period. Therefore, the stock market remains bullish on retailers focussed on essential retail and FMCG-focussed consumer products companies. But, given the retail industry’s outsize role in India’s economy, post the lockdown period, the immediate task will be to mitigate the economic threat on this sector. One key action point for the sector to mitigate the retail sector’s pain is to revive the consumer sentiments well in time before the start of the second half of FY 21 and that can bring the consumers back to the retail stores with a positive frame of mind.
–Suresh Lakshmipathy