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Spurt in Digital Commerce - New Challenges for Brands

Spurt in Digital Commerce: New Challenges for Brands

Sanjay Mehta

Joint CEO

Mirum India

Sanjay.Mehta@mirumagency.com 

As Maruti Suzuki India resumed business after the pandemic lockdown, they shared that every second car sold by them over the months of June-July was sold online!

Significantly large proportions of stock market sales and purchases are also happening online now.

Who would have imagined? That we would be buying cars online, or that the online stock trading platform will pose a threat to the good old stockbroker?

It had all started with books. Yes, you knew the title of the book that you wanted to purchase, and it was an easy thing to do: to go to an online site, order it, and have it shipped home. There was no mystery about purchasing a book, and you would be sure to get what you asked for. But then the categories kept growing. From music to fashion to jewelry to food items to furniture and gift items. Some of them were not as intuitive fits for e-commerce success as, say, books were. Would people like to purchase fashion online, without trying the clothes out? Would people purchase expensive jewelry without seeing and feeling it in their own hands? And so on. In spite of all these doubts, these categories gradually took off. Today, one hardly hesitates to purchase anything online.

But even then, who would have imagined that we would be purchasing a 4-wheeler online? But that is the kind of transformation that this pandemic has brought about!

And this is very symbolic of what changes have transpired from March 2020 onwards.

Even as the country went into complete and then semi-lockdown periods, a vast majority of businesses were not able to operate, nor able to sell their products. The only exceptions were those businesses that had existing e-commerce setups – thanks to which, they were able to meet consumer demands through their online stores. After years of being a relatively small percentage of the retail pie, during these periods e-commerce sales became a very dominant and large percentage of retail.

The businesses that had only made small beginnings on their e-commerce journey, or others that had not yet started out into e-commerce, all accelerated their efforts to be impactful via e-commerce. Since it was clear that regular physical stores would take a while to reopen with regular working hours, it made total sense for businesses to step into the e-commerce space and enable sales as best as they could.

Ordinarily, setting up a full-fledged e-commerce site and supporting it with necessary logistics can take several weeks of work. But because there was a sense of urgency involved, many businesses found quicker ways to sell online, even if there were some compromises involved. If not through their own website, many have found a way to sell via marketplaces. And a few have even embraced what would be termed as social commerce – selling via Facebook front-end, or even using WhatsApp.

Beyond the world of pure-play product sellers, even businesses that offer different kinds of services have found a way to go online and sell.

On the consumer end, where pre-pandemic online shopping adoption was driven by a matter of choice, during the pandemic many adopted digital commerce because it was their only means to get products and services that they needed. Much as demonetization hastened the use of digital payments, the pandemic has done the same for digital commerce. And while the pandemic may be what originally brought these new consumers to digital commerce, many will become long-term online shoppers after seeing the convenience, choice, and overall ease of use available to them.

All of this has clearly happened at the expense of brick-and-mortar retail.

For the longest of times, a deep physical distribution network was considered to be a huge asset for a brand. And while this truism still holds value, the distribution that e-commerce provides is far deeper and wider. So let’s say you are an established brand with several thousand storefronts across the country selling your products. And this has been an asset for you for all of these years. And then along comes an upstart competitor, who opts for a direct-to-consumer model using e-commerce. Thanks to the logistics partners that the new brand can engage, their distribution is not restricted to a few thousand stores, but pretty much every home in the country!

Clearly, the challenges for traditional brands that have not adopted to e-commerce so far are:

  • A sharply reduced “asset value” for the physical distribution network that they had developed
  • In a world where consumers will continue to fear the virus, they face much reduced footfalls into those physical stores
  • Consumers, having tasted blood using e-commerce in pandemic times, and understood the convenience of online shopping, may well make digital their preferred way to shop
  • Using a variety of technologies combined with the basic cost-efficiency of e-commerce, the competitor selling online has extra cost savings that they can pass on to the consumers - putting price pressure on traditional stores

Irrespective of how and when the pandemic ends, some of these changes are irreversible.  If a traditional business is considering to “wait it out” before the “old normal” returns, the reality is that the old normal will NOT return. Some changes are for good and will stay with us. And that, indeed, is the new normal.

Traditional brands will need to reinvent themselves rapidly.

The answer does not lie in a knee-jerk, isolated e-commerce plays. What is essential to do at this point in time is to embrace the entire gamut of change that can be loosely termed as “digital transformation.” High-level digital transformation is about imbibing a true digital culture across all aspects of the business.

Setting up an e-commerce front end is part of the solution - but it’s certainly not the only thing brands need to do. Other elements to embrace will include digital marketing, marketing automation, investing into a data management platform (DMP) and perhaps a customer data platform (CDP), and investing in a rugged, state-of-the-art website and other digital touchpoints – with a key focus on user experience (UX).

But efficient transactions are the key, and hence a good strategy around e-commerce becomes the key. As emphasized, internal cultural and organization structures become critical as companies make such big moves. Digital transformation may require some retraining for existing team personnel. It may also require bringing in some key new roles, starting with a Chief Digital Officer and Head of E-commerce.

Most of all, there has to be an understanding that there is no going back. One has to be prepared to only dig deeper into understanding the digital consumer, as well as the platforms, dynamics, and tools of digital businesses. Traditional businesses need to embrace these tools – truly embrace them – and then work to create success.

Success in this new normal digital age will require a fundamental shift in the ways that traditional organizations both deliver value and drive revenues.