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Changing dynamics between brands and retailers

Changing dynamics between brands and retailers

                                        

Monika Pandey

VP & CSD

Wunderman Thompson

Monika.Pandey@wundermanthompson.com

"it's not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change."

-Charles Darwin

Emerging new technologies and radical shifts in consumer behavior are pushing companies to rethink and realign their business strategies with human-centric goals. The need for agility in the face of uncertainty has never been greater than it is now. E-commerce, which has undergone years’ worth of growth within the space of a few months, is a prime example of this truth.

Traditionally, physical retailers were the principal connection between brands and the consumer, buying what they thought people wanted, and then selling it at a profit. But the internet and smartphone penetration has changed the retail model from a linear path to a platform-based play where many make and many sell. For instance, a decade and a half back I used to purchase my monthly groceries from Jain Bros., my local kirana, or I would drive down to buy them from the closest supermarket. Fast forward to today, when I get my groceries home-delivered from my local kirana using Dunzo - or I can get it from Amazon, to name just two among countless many options.

In this digital age where young and technology savvy consumer expect a seamless shopping experience, technological innovation has become imperative.

“Adaptation,” consequently, is the new holy grail!

But is it adaptation to survive, or to win? It is important to understand the difference. Adaptation to survive is a slow-paced struggle to stay afloat, where chances of disappearance are very high. Adaptation to win is future preparedness to stay ahead of the game - to conquer one’s environment with  sharp focus and strategic agility.

Adaption to survive: India’s retail majors have been slow at adapting to the digital world

"Waltzing the trolley around, waiting for hours at till, and carrying my purchases back home… give me a break!" says 28 year old Tanya, a task-rich, time-poor consumer for whom shopping should be more than a chore.

As the market moves to more omnichannel and delivery-based models, brands and consumers expect retailers to adopt innovative approaches to not just enhance the consumer experience, but also reimagine operations for tomorrow’s needs.

The recent pandemic is a true consumer experience barometer in which all the challenges associated with retail become magnified: it is a time when many of the retailers have had to shut stores, or else barely make footfalls due to multiple restrictions or snake-like queues.

While a few retail majors are now integrating technology, their speed is too slow. This lack of agility has changed the dynamics between brands and retailers for the worse.

Adaptation to win: Leveraging technology and understanding consumer shifts with agility

Amazon's personalized “recommendations” thrill my friend while she is shopping online. “Isn't that great!" she says. Unflinchingly, the e-commerce industry has risen on the back of its effective analytical tool. Much more so than physical retail, e-commerce uses technologies like AI and machine learning to predict future trends and consumer behaviors. The result? A seamless experience for both brands and consumers.

Consumer brands (both national and regional) are increasingly placing their bets on e-commerce through marketplace models like Amazon, Flipkart, and Snapdeal. They are also investing in DTC models by beefing up their e-commerce sites. Doing so offers brands multiple leverage points:

  • An expanding consumer base for whom convenience is the new normal

The consumer base of digital natives (Gen Z and Millennials) in India is expanding,  offering tremendous growth potential for consumer brands and retailers. These digitally empowered cohorts are always on the lookout for shopping experiences that meet all their needs in one place; for them, convenience means online shopping.

Gone are the days when consumers patiently waited for 6-8 weeks for shipments; today, they expect “same-day shipping.” As a result, e-commerce giant Amazon has launched same-day delivery for its Prime customers, while Flipkart launched a hyper-local, 90-minute delivery service called Flipkart Quick in Bengaluru. Easy-to-use payment methods like BHIM UPI, cashless payments, and net banking have added additional convenience to online shopping.

  • An expanding reach: exploring the hidden treasure

Robust supply chain networks and e-commerce giants’ improved logistical infrastructures have helped brands transcend geographies and serve unexplored markets in India – the most vivid example being Snapdeal, for whom 85 percent of consumers come from non-metro cities.

Facebook, similarly, has introduced a Facebook shop for sellers that is agnostic of vendor size and budget; the goal is to make it easy for even the smallest of companies and local brands to reach Facebook's nearly 3 billion users.

While the digital players are adapting with agility, India’s very own, non-glitzy traditional mom pop retail sector (which accounts for 87 percent of the total retail industry) has also shown keen desire and agility to upgrade themselves and co-adapt with FMCG giants and marketplaces.

Walmart-owned Flipkart has already established a delivery model using local kirana stores across 700 cities. Meanwhile, JioMart is massively gearing up to enable and engage many kirana stores across the country.

Embrace with agility

"To touch and feel" is a human need that will always pull consumers to physical stores. Organized retailers need to leverage this advantage by quickly adopting a hybrid physical-digital sales model – the better to enhance the shopping experience for consumers, and optimize supply chain management for sellers. They can take inspiration from international “hybrid” players like the HEMA stores that have thrived in China, or the checkout-free Amazon Go store in Seattle. Both use technology to smartly enhance the in-person rituals of buying and selling.

Ultimately, success will accrue to players who embrace “Adaptation to win” thinking: who are committed, in other words, to evolving alongside the fast-changing trends and forces shaping the Indian retail landscape.