The next five years will be dedicated to the convergence of all channels and the emergence of truly new multichannel retail. The inaugural session of the Phygital Retail Convention, Live on Your Screen, on October 14-15, 2020, saw some of the sharpest and most forward-thinking minds of the retail industry today speaking on digitalization as a way of life, the phygital consumer of today and tomorrow, retail convergence and integration, and crisis leadership.
The panel included:
- Manish Tiwary, Vice President, Amazon India
- Bryan Bade, Chief Executive, Reliance Digital
- Vidya Laxman, Director – Technology, TESCO (Global)
- Arjun Sharma, Chairman, Select Group
The session was moderated by BS Nagesh, Founder TRRAIN and Chairman & Non-Executive Director, Shoppers Stop.
Buoyant Consumer Story
Pre-COVID, retail math was very simple – a physical store’s next step was to go online and online only brands were looking to establish at least one physical touchpoint, if not more. With COVID hitting, physical retailers were suddenly left with no choice but to capture and engage audiences online and 24×7 or perish.
The nature of the current customer has changed with the onset of COVID. Select Group’s Arjun Sharma gave an insight into the new psyche of the consumer saying, “People are still scared to go out, but we have noticed some changes. So, while the footfalls are 35-40 percent of pre-COVID times, ticket sizes and purchase values are much higher. It almost seems like people feel like they have missed out on something. And we were surprised to see that they were buying everything. Even categories like ethnic wear, which admittedly picked up slowly, are now seeing big ticket sizes.”
He added that brands like Croma and Reliance Digital, also FMCG brands did extremely well. One category which did surprisingly well is cycles, which are replacing gyms for people and which were sold out clean at brands like Decathlon.
Sharma said he had a theory and that was that even though the pandemic had hit the world hard, and there were lay-offs, salary cuts and the global economy was in a tailspin, Indians are inherently savers, and this propensity of saving is cushioning some of that economic downturn that the economy is facing. This is where the buoyant consumer buying sentiment was coming from.
As far as convergence was concerned, he went on to explain that shopping malls are about much more than just retail – they are about spending time with family, dating, watching a movie, gaining new experiences. They are also about touch and feel and while he explained that he was a big fan of Amazon, the fact remains that products bought online may not always be of the desired quality.
“Now, I feel that offline and online must work together, incubate together and create joint experiences together. In fact, take for example online fashion stores. Till about six months ago, they put old collections. Today, they have the latest stuff selling online. However, we need to work on touch and feel,” Sharma stated.
Consumer Behavioural Changes
Amazon’s Manish Tiwary begged to differ a bit. He said that compared to February 2020 (the last normal month before COVID hit), in August 2020, seller registration on Amazon was up by almost 80 percent. He said that consumer had not changed, there was no new normal consumer. Retailers on the other hand have had to adjust to a new normal of selling.
“Admittedly, there has been a noticeable shift in consumer behaviour. For example, grocery shopping behaviour completely changed and has become advanced by a few years according to me. There was some pent up demand when online retail opened up after the initial lockdown but now even though we are well beyond that point, we see the spike in demand continuing,” he explained.
The traditional thought that online consumption was being done by someone young, in a metro, is slowly giving way to the fact that online consumption is penetrating deeper and deeper into our country. More than 65-70 percent of both our buyers and sellers are from small towns. “In fact, when we launched Amazon in Hindi, there was surge of sellers from the Hindi heartland of the country – UP and Bihar – because they were comfortable in that language,” stated Tiwary.
Some other trends which Amazon has noticed since the onset of the pandemic included:
- Amazon was seeing an increase in the number of consumer across cities and tiers – the increase was pretty secular across the length and breadth of the country.
- People buying across categories – things like cycles, yoga mats, open slippers are in high demand.
- Prime members are buying more and at a higher frequency.
Tiwary stated that looking at the numbers, he was of the firm opinion that it was not about offline versus online but about serving your customer and fulfilling his demand. “As consumers use both mediums to shop widely, a collaboration will simply serve to drive consumption,” he said.
COVID: Accelerating Omnichannel in India
“I don’t think that consumers have changed,” said Bryan Bade. “Even before COVID hit, a lot of our consumers – over 80 percent – would go online too. And while we sell online as well, earlier we didn’t have many Omnichannel / combined features. The COVID crisis really forced us to develop and launch those quicker. Aside from this, when we opened up stores we were certainly worried about the percentage of customers that would come in as compared to pre-COVID, but when we opened up, the percentage of customers was more than 100 percent as compared to pre-COVID times. A lot of these customers came to buy ‘work from home’ items, so a lot of the demand was for laptops, speakers. We thought that this would just be an initial rush, but from May up until now, we have been selling almost 50-60 percent above pre-COVID times,” Bade stated.
He added that the sales weren’t confined to ‘work from home’ items. People were also buying domestic products like washing machines, mixer-grinders etc.
“So, even though we launched these great Omnichannel features and we expected there to be a great shift in consumer buying behaviour, but people were walking into the store a lot. We did have a lot of consumers taking advantage of the Omnichannel initiatives but those were new consumers and it all just added to make our consumer base rich. There was really no shift from offline to online. In fact, we saw both mediums rise – a happy, unexpected surprise. As far as COVID goes, our business is actually above normal,” he explained.
When Tesco began its tech-transformation journey five years ago, it focused on people, software and hardware and that is one of the reasons the company was able to double its online sales within four weeks.
Vidya Laxman said that in UK, Tesco opens up 600,000 delivery slots around Christmas, but when the crisis hit, they opened up 1.6 million slots in 4 short weeks. “We had to cater to vulnerable people in the UK and we are a frontline, essential services business. However, this transformation didn’t happen overnight. We worked on our technology – like service oriented architecture and enterprise APIs – for four years. We focused on cloud and that was really big for us because our developers in Bangalore were able to seamlessly shift to working from home because of cloud technology. Many organisations stuck with legacy systems were not able to make the shift so efficiently,” she said.
Tesco’s store business is generally 91 percent of its online business, but suddenly, in just a few months, the online business grew from 9 percent to 16 percent. Laxman said that over 86 percent of UK grocery consumers had shifted to buying online during COVID and almost all of them will continue buying online even post COVID. “So, while our online store was just an enabler earlier, it has accelerated really fast now. We converted our big stores into urban fulfillment centres especially since the footfalls were low and social distancing norms had to be strictly followed and stores were flying empty. We always had facilities like click-n-collect, so there was always a kind of a merge between the digital and physical stores, but with COVID, we had to accelerate a lot. The first urban fulfillment centre was up and running in 3 short months. We’ve already started drone deliveries in Ireland, and we will soon start them in UK as well,” she said.
Lessons in Crisis Leadership
“When the pandemic hit and people started panic buying and hoarding, keeping calm helped,” recalled Laxman. “Tesco focused on technology and growing through the online medium and this really helped. We merged business and technology and thought about how we could give faster, better value to the customer. That really was my learning,” said Laxman.
Sharma said that this was the time when leadership in every sector was under massive scrutiny. “People were scared and nothing in the world could have ever prepared us for this kind of leadership / management. The first big message which Select Group sent out was that your jobs are safe, and we’ve held on to that. As a business, we haven’t let go of a single employee. We also haven’t cut a single salary. In fact, we paid April salaries in March. We sent out very positive signals to the work force,” he stated.
“What this did was, that it really, really calmed everyone down. The message was that this is the time to not panic and with this burden off their heads, everyone was just looking towards the business – how to handle the customer, how to forward the business. We worked on new initiatives like click-n-collect, deliveries, personal shoppers for brands which were not online but wanted to stay connected. We invested in stuff which could not have been done when the mall was open – like we shut down the parking lot and renovated it. We went off rentals and got into profit sharing. This garnered us eyeballs from internal customers i.e. brands and this speaks volumes of a business,” he stated.
Bade concurred with Sharma saying that even Reliance Digital worked to intensify internal communications with teams to counter the overwhelming feelings of concern and disconnect. “We also sent out a health survey everyday to all employees and if we thought that something was concerning, we stepped in and ensured they got proper medical attention. We connected our people with proper medical infrastructure across the country. We extended this service to anyone living with that employee in his house and this really kept the morale of the teams up,” he explained.
Omnichannelisation, Digitalisation & Inclusivity
Tiwary said, “We are very focused on getting consumer experience right. As far as we are concerned, it is always Day 1 for us, and we have a lot to get done. For the next few years, our focus is to get more and more industry people online whether to buy or to sell.”
He also said that Omnichannel was sure to develop for the brick-and-mortar sector in the sense that they would be able to provide consumers with a brand experience that they are used to online and can also deliver fast because of store proximity to localities.
Sharma said that he saw certain hiccups in this model in as far as the Shopping Centre Industry was concerned, because then who does the customer really belong to? “Does he belong to the brand or to the shopping centre? That is where some distrust could come in and hamper the model of inclusivity. Even if we omnichannelise the mall, who does the data belong to and reside with? E-commerce players have sorted themselves out as far as data goes, but brick-and-mortar and shopping centres still have some ways to go. If there is a platform which can help us digitise the shopping mall within, I think that is easier. I won’t be surprised if the Amazons and Tescos of the world bring into their folds, the offline, because really at the end of the day, they have great digital platform and can white label it for many, many uses,” he said.
Workforce Skill Shift
With the focus on technology and digitalization, there then be a shift in the job roles of the industry.
Tesco’s Laxman said she thought that the future would certainly be skill-based workers. “In fact, Tesla’s Elon Musk is already hiring people irrespective of their degree and based only on the skills they possess. Aside from hard skills like software development, we are looking at soft skills in people – like how well they respond to change, how well they handle ambiguity, are they capable of upskilling and re-skilling,” she stated.
Tiwary added to this saying, “If you see in the US, people have moved on from retail to AWS. Then having learnt there, they are now designing smart offline stores. In a way, organisations like Amazon have reverse mentored people, giving them a chance to learn new skills. Older people are being taught new skills by the smart, young generation. So, I feel that the formal education system will take a backseat and people who develop new, unique skills are the people who will be recruited by the industry.”
He said that the pandemic had given young people who worked in the physical retail industry a golden opportunity to movie online. “During the pandemic, we recruited 50,000 people and during the festive season, we hired half a million people. Aside from this, there is an opportunity for people to join online – courses, jobs – learn and then move back to offline and apply their newly acquired skills there,” Tiwary further stated.
Bade was a of a different opinion saying that despite virtual reality and having the conveniences of working and shopping from home, humans would always prefer and choose the interactions that physical spaces provided.
Tiwary agreed to a degree saying that while there were many jobs which machines did better including amassing and sorting data, there were other jobs which machines could never do – motivating employees, human / value judgement etc. No algorithm or machine learning could ever do justice to these roles, he stated. “At Amazon, we have data engineers for bigger roles. For everything else, there are machines. So, upskilling in my opinion is very critical. Every professional, regardless of age or experience needs to upskill because base activities can be easily done better by machines today.”
He added, “I would urge all MSMEs and small retailers to invest in digital activities – whether it’s in business, sales or financial activities, because digital will bring very, very good dividends, during the pandemic and even after it. Amazon Launchpad helps smaller retailers and MSMEs go digital.”
While better digital infrastructure is still needed for convergence of offline and online retail in India, Bade said that every retailer needs to come together to build better consumer experiences.
Tiwary agreed saying that the entire Retail Industry in India needed to work together and every single retailer, big or small, needed to develop together. “Indian businesses are more resilient and will bounce back faster – this time collaboratively. I am inviting everyone to partner with Amazon and meet consumer demands across the country together,” he said.
Nagesh concluded the session by saying that the inclusion, cooperation and collaboration between the entire industry during the pandemic was a huge, huge opportunity for bridging the gap between offline and online retail.