As smartphones and an Internet generation force businesses to reinvent rules of the game, IMAGES Retail takes a look at how customers and technology are raising the stakes for retailers in India.
One clear trend in modern Indian retailing is the more-intense focus on customers, now effectively at the heart of all retail strategies. Most goods retailers until recently focussed on automating the “controllable” moments in their value chain – on inventory, assortment automation. Customer-facing processes were more unpredictable, and therefore more challenging to automate. Until now. Focus is now gradually shifting to the front end, to reading and psychoanalysing the customer and his/her moments of truth with the aid of technology.
“In the last couple of years, innovatively-thinking, new age or modern retail has really started recognising the potential of ICT (information and communications technology) for marketing, engaging and nurturing the customers,” says Nitin Padmawar, CTO and co-founder of MartJack, a ready-to-use platform with a comprehensive set of features that help retailers in establishing and running their online business.
“A whole new type of technology companies and start-ups has seen this as an opportunity and created interesting innovations that can help retailers and marketers tap digital channels such as web, mobile and social media to reach the target customers and engage them with personalised merchandising and offers,” he adds.
Agreeing that understanding of and investments in technology have picked up pace in the last few years, Arun Kumar, E-commerce head at Embitel, emphasises that rising competition is the key driver of this need to augment IT spends.
“Indian retailers are also spending a relatively larger share of their revenues on digital marketing services, than they used to do earlier. We have seen a lot of our customers asking for services such as SEO, online campaigns and paid marketing,” he adds.
“Indian retailers have certainly started investing in the customer-facing technology offering – assisted sales is one of the key aspects on this trend. Many such investments are already under way. Loyalty, kiosks, among others, are all in the same line,” notes Samik Roy, Director and Business Head, Microsoft Dynamics Applications Business, Microsoft India.
Anand Mehta, Director, Asia Pacific-Retail Vertical, Motorola Solutions, notes that the year 2013 in particular witnessed focus on front-end retail solutions addressing in-store inventory assortment planning and replenishment, enabling store/ field sales teams, converging “clicks and bricks” and personalising the consumers shopping experience via mobile devices.
“The emphasis of acquisition of new loyalty members and retention and utilisation of existing ones is on top-of-mind for the best in the industry,” he emphasises. “Competitive pressures and rising operating expenses are forcing this efficiency upon retailers as well and the traditional approach of retail relying upon walk-in consumers only is being turned on its head. Retailers are migrating from serving consumers to managing the lifecycle of the loyalty customers and the positive impact on business is plain to see – know your customer, make them relevant offers and watch you same store sales increase.”
According to Amit Bhatia, Retail Head at NEC India, retaining customers – through both products and services and the shopping experience in totality – is a main area of focus for all retailers now. “With this objective in mind, retailers are looking at innovative means of deploying creative CRM solutions,” he opines.
Iksula Founder and President, Samarjeet Singh endorses the role of technology in customer relations, saying that with the advent of Big Data, retailers are making more informed decisions on customer experience and marketing strategies. “They are now using this knowledge to focus on customer-facing processes and loyalty to enhance the shopping experience,” he states.
“Fashion, lifestyle and CDIT retailers are now particularly aware that their customers are tech savvy and using digital media to decide when and what to buy, in addition to expecting services beyond the in-store experience. Brand clearly has to be present wherever shoppers go and influence their purchase decision cycle,” says Padmawar.
While the customer appeared to be more front and centre in 2013, many tech companies, however, believe that not enough investments are being made on analytics and mining shopping behaviour data.
Baskar D, Director, Posiflex India, for instance, points out that while customer-facing innovations are picking up, such experiments are still in the proof-of-concept stage and yet to see significant impacts, adding that loyalty continues to be fragmented and exists either as stand alone or within group companies. This results in customers being lost due to multiple loyalty programmes. “Loyalty for an individual benefit – this area requires strong consolidation and back-end data mining to result in inter-operability,” he says.
Rohit Khetan, VP-Marketing at Ginesys, also believes that there is still a long way to go in leveraging technology to build better customer relations. “As of now, customer innovation is just limited to offering discount vouchers to promote repeat purchases. Very few companies (Flipkart and Myntra being good examples) are actually going beyond to offer something unique for shoppers based on technology, not only at the time of shopping, buy for servicing complaints as well,” he points out.
“Unfortunately, Indian retailers are yet to focus extensively on the demand side of their business,” seconds Kumar at Embitel. “In order to build customer experience, retailers will not only have to track customers’ behavioural, contextual and past data, they also have to store and process this information well.”
Qualifying this observation with a note of optimism, Kumar admits that more traction can be expected with less expensive, implementation-friendly, result-oriented open source frameworks such as Hadoop gaining in popularity.
Where exactly do you need it? Retailing is a complex, multi-layered business, and often difficult to predict, especially now as the customer increasingly is a moving target. Are Indian retailers clear about how and where they want technology to touch customers?
While some tech companies say that Indian retailers are yet to develop clarity on their processes and needs, and therefore the solutions required, others like Roy at Microsoft note that there has been evolution on this front in recent times.
“The tough times that this industry has gone through have given time to the leaders in retail organisations to review what can improve. In this process, one of the aspects that came out clear was standardisation of processes, which reduces re-work, re-engineering and this helps in improving productivity,” he observes. “CIOs are ready to go beyond and deliver more value to business using technology and they are finding ways to achieve this within existing solution spectrum – primarily because they have achieved standardisation to a certain extent.”
“Unlike in manufacturing, retail has always been heavily based on process due to the lack of predictability in inputs and outputs. As far as technology touching customers is concerned, we do note that the Indian market is still trying to determine its strategy – the concept of self-service in stores is only just starting to evolve and this is being driven by a younger consumer who is a ‘technology native’ and largely self sufficient,” says Mehta at Motorola.
“Any retailer first has to define and implement processes at an organisational level. Some retailers expect technology to be a solution for a lack of well-defined process. It doesn’t work that way; technology can only help streamline processes and ensure better output. Technology is only an enabler to build a basic foundation to get closer to the customer and ensure productivity and profitability,” Bhatia points out.
Addressing the challenge of developing process clarity, Burjis Cursetji, Retail CEO Head, Tectura, recommends deploying role-based business performance dashboards to provide real-time metrics to retailers. “A constant improvement programme should be established to analyse short-term achievements towards the retailer’s ultimate business goals,” he adds.
While in an ideal world, processes need to drive the technology input, since there are many tried and tested systems available, some retailers do cut to the chase and choose a seemingly best-fit solution, says Nilesh Shah, Director of marketing at RanceLab.
“My suggestion would be to not reinvent proven processes such as inventory management, SCM, OMS and POS, but consumer-facing experiences, which could be a strong differentiator. If the retailer possesses the capability to handle the technology, he must definitely look at having an in-house team once the foundation for the business is laid,” says Iksula’s Singh.
Broadly categorised, the zones of challenge for most retailers are in six key areas: planogramming, employee issues, shrinkage, cross channel or omni-channel shopping, customer retention and supply chain management, with each of the zones higher or lower in importance depending on the retail category in question.
Having said that, while India ranks embarrassingly high on global retail shrinkage rankings, as per the Global Retail Theft Barometer, shrinkage seems to be still surprisingly low down the list on most retailers’ assortment of challenges.
Regardless of the differing criticality of challenges, in recent times, retailers across formats have increasingly focussed on customer retention and building omni-channel experiences as the key areas of attention.
“Omni is the only channel. Omni-channel is no longer a buzzword – it’s a reality,” emphasises Padmawar. “Integrating seamless customer experiences across all available shopping channels has become a critical requirement for retail to be relevant for the today’s customer. Customer experience with your product/brand can begin at several different points – the web, a mobile phone, a tablet, etc – and does not end upon the completion of transaction but goes further by his/her chatter on social media to generate a referral lead for the next potential transaction. It’s important for any new age retail business to not only acquire customers but nurture and retain them as well as make them your loyal customers and brand ambassadors.”
“For lifestyle categories like fashion and beauty, the personalisation of assortment as per his/her profile is very critical. For CDIT retailers, creating right product mix, competitive analysis and continuous pricing tweaks is the critical factor for success. CDIT customers are typically the most aggressive multi-channel customers and hence an effective strategy of customer acquisition through new mobiles and devices is the key standard requirement. If you can’t catch them, your competitors will!” Padmawar reiterates.
“One of the major advantages of a physical store is that it allows the customer to engage with the product and its utility before purchase,” says Anup Tapadia, Founder, TouchMagix Media, adding that shoppers typically place a high social and entertainment value on the entire shopping experience.
“The problem is that the level of engagement in many high-end retail outlets is based on the knowledge of the sales staff. Unfortunately, in many cases, due to a lack of knowledge about the product, the salesperson is unable to engage, educate and convince the customer. Now this can be countered very well by immersive in-store digital tools,” Tapadia contends.
Shopping is no longer a linear, one-dimensional activity, thanks, ironically to technology. With shoppers hopping across channels constantly and using digital media in unprecedented ways, the purchase decision cycle has become a complex, multi-faceted activity that cannot be deciphered or addressed by looking at just one workflow or process, says Padmawar at Reasoning Global.
“On the other side, retailers too lack the vision to catapult on this trend and also lack readiness from the skill and expertise viewpoint,” he points out. Because of the complex web of influencers and reduce unpredictable purchase decision cycles, he believes the platform business – as opposed to fragmented solutions – is the most viable and effective route for technology companies. “A platform that can develop, host and cultivate strong, intuitive apps to solve each problem independently and offer centralised services to these apps so that they all work with each other seamlessly, is the need of the hour,” he explains.
“Retail today needs a platform and not a point solution that solves a ‘business problem’,” explains Roy at Microsoft. What may be inhibiting retailers transitioning to seamless platform systems is that significant investments have already been made in point solutions, which are not integrating well. “In wake of this, retailers still seem to be wary of exploring new ideas that can enable a faster and stronger from here on,” he says.
“Unfortunately the technology is not being used to its potential which is a cause of worry. Moreover, the IT and other technological applications that have been recently adopted have not been seamlessly integrated, which is a major lapse. Interactive technology, if used effectively, can play an important role in customer engagement as an issue, which is a major area of concern for retailers today,” notes Tapadia.
Pointing to a specific area of low attention, Mehta says, “What is clearly lagging is the use of apps on smartphones – retailers have not yet made full use of the opportunity to connect with their consumers via their smartphones / tablets. The power of taking the store to the palm of the consumer’s hand rather than waiting for the consumer to walk into the store first has not been fully tapped upon yet. It certainly will not apply to the masses but the impact a good app has on starting an individual conversation with a consumer that results in the purchasing in the store is not fully appreciated locally yet.”
The science and power of robust analytics has also not been adequately leveraged, according to some tech majors. “While online retailers like Flipkart use analytics extensively, brick-and-mortar retailers are yet to fully leverage it. But, as data analytics technology slowly becomes a commodity, we can expect more and more retailers to leverage this technology,” says Kumar at Embitel.
The future of retail
Going forward, says Cursetji at Tectura, a proportionate growth in technology investments is anticipated. Increasingly, he notes, Indian retailers will be selecting IT vendors based on:
Domain knowledge (50 percent)
Strong service & support (22 percent)
Good prices (17 percent)
Implementation experience in client LOB (11 percent)
“The future of retail lies in multi-faceted customer engagement, with more and more consumers making an on-line purchase at least once a month; an increasing number of consumers looking to Facebook for information on their favourite retailer before making a purchase; retail organisations that are looking to expand and re-define their physical store locations to drive a more direct and personalised brand experience,” Roy notes.
Reiterating his contention about the effectiveness of platform-based solutions rather than fragmented, need-based tech inputs, Roy sees more retailers wanting to adopt an end-to-end solution on a single platform in the future. “They realise that this lowers the the total cost of ownership and provides better ROI over a period of time. It is also less painful for them to implement, maintain and enhance.”
“Technology will now play the most important role in coming years. It has to scale, offer higher business value at optimal/lower cost. The next wave in retail is all about delivering consistent and seamless experiences to customers. And technology/solution providers have to be prepared to devise innovative ways to deliver solutions that businesses are looking for,” he points out.
“Over the next few years, consumer retail will experience a completely new model that effectively uses physical locations combined with world class Internet and mobile sites/apps to offer truly unique and delightful shopping experiences for their consumers,” Padmawar observes. Retail companies will transition to “lower-per-square unit-cost” and will utilise these spaces as a major asset to improve the costs and friction associated with shipping and returns, he predicts. “This will result in new and innovative ways to promote product discovery and levels of service and entertainment that will be difficult to match by algorithms and machines on the web,” he says.
“There is a larger trend that has been in emerging over the last three years – Managed Services,” says Mehta. “Increasingly retailers are realising that they need not build, own and operate all types of systems. The ability to outsource technology with very strict service level agreements allows a retailer the best of both worlds – reduced capex investment with no compromise on performance.”
Retailers will need to have the ability to evaluate and invest in technology that is scalable and future friendly, Shah warns. “Technology needs planning, just like store space, fixtures, merchandising, displays, etc.,” he elaborates.
“I think the retailer himself is transforming his business and to me that itself is the biggest challenge, to keep up to his changing mind. The retailers who invest on consumer facing technologies in my opinion would be the beneficiaries in the long run. For regional/niche retailers, my advice would be to consider web and mobility commerce very seriously as it allows them to go national/ international,” Singh at Iksula says.
The growing character of technology-driven retail is also expected to touch small and medium retailers in the fsuture, with many companies now specifically targeting smaller, regional retailers. “Regional retail growth and their new-generation approach are exciting us in terms of the opportunities to be tapped. Already, over 30 percent of our business is accounted for by regional retail stores,” Posiflex’s Baskar states.
Clearly, there are multiple challenges facing the future of retail in India, the biggest of which, arguably, is a moving, mutating target in the form of the consumer. Interestingly, the very industry – technology – that unleashed a worldwide communications and digital revolution a few years ago and created the phenomenon of the technology-powered shopper, will now have to find ways to help retailers outpace the shoppers.
About the Author:
Nupur Chakraborty is an independent writer, editor and media consultant based out of New Delhi