The last couple of years have seen a lot of noise about e-commerce. Be it the meteoric rise of marketplaces closing billions of dollars in funding to the sharp fall of hype masking massive losses or be it democratizing access in remote areas to the government taking lead to change the e-commerce landscape by pushing digital transactions.
What really baffles me is despite all the noise, online retail sales are merely 1.5–2.5 percent of the total retail sales today, which is expected to grow to 8–10 percent in the next five to seven years. Even in a developed market like the US, online retail sales are less than 20 percent of overall retail. The deep discounting of these online marketplaces has changed consumer behavior forever. They now equate online to discounts & demands similar price cuts from offline stores. No wonder most offline retailers run a sale or offer discounts for most of the year.
Offline retailers are now stuck. On the one hand, their growth is tapering, their brand with multiple touch points at retail stores throw chequered experiences. On the other hand, when shopping online, consumers expect the same service & experience they receive at a storefront. The complexity between the old legacy systems & the new cutting-age technology is increasing, but consumers want the same price discounts like the online stores. No wonder, several quick-service restaurants have closed around 80 outlets in 18 months.
The main question is ‘What can offline retailers do?’ Should they also create their own e-commerce sites, spend a huge amount of money on marketing to get consumers. Or become one of the thousands of sellers on the marketplace & be at their mercy to garner short-span consumer time. This is playing to their weakness & not strength.
Offline retailers have high overheads & inventory costs, they also have their strength of proximity to consumers, curated options, in-store advisory & entertainment options. They can use this to their advantage.
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This has been explained below:-
1) Curation: Retailers should realize that online shopping is becoming more of l, an ordeal than ever, with hundreds of SKUs for a certain product all trying to fit on a small screen. Somewhere along the line, the idea of ‘choice’ morphed into options, varieties, & platforms that are overwhelming, to say the least. Consumers today have so many choices that their attention span has greatly reduced & decision-making has become harder than ever before. However, because of limited shelf space, an offline retailer offers curation of some form & shape. Settling up in-store displays based on data about products frequently bought simplifies & speeds up the purchase process in retail stores. For example, placing basmati rice next to masalas, & noodles next to pasta. A similar transformation is starting across categories, especially electronics, mobile phones, fashion, furniture, home decor, & more.
2) Know your customer (KYC): Buying offline is a fairly anonymous experience unlike online. Retailers should get to know their customers who stay in their proximity better, understand their purchase behavior, & start treating them differently. Unorganised Kirana shops are currently doing it, but it’s time that organized chains, like Café Coffee Day, Big Bazaar, Shoppers Stop, also start doing it. Almost all of the big chains are using loyalty cards/membership plans, it is time to move towards a mobile loyalty solution coupled with IoT beacons for proximity interactions. In order to eat the same Mac Chicken burger with fries & coke, why do I have to stand in the queue every time I have to order it? I am different from my wife & my neighbor, but we all see the same static menu. Why is my interaction so impersonalized & standard every time at the Point of Sale (POS)?
Can IoT beacons not help re-imagine these interactions at the right place, at the right time, all the time? Can app-based loyalty & payments solutions (for example, QR code) bridge the gap between the old & new systems? Use it with beacons to provide in-store coupons & recommendations on its retailer’s app like how Target is doing in the west. Why not utilize the same tools of data & analytics that your online brethren are doing to make the in-store experience much more customized & personal.
3) Advisory: India has a culture of “Do it for me” versus the US “Do it yourself”. That’s why we have a flourishing consultant/ middle-man economy, for real estate, tax & investment, career & all government services like driver licenses & passport. We love getting advice from humans than machines. Why retailers do not use this insight for better sales & support staff training and treat them as partners to use the in-store interaction to upsell/cross-sell. These consultants are the ones who will convert consumer touch points into unflinching loyalty & trials into repeat purchases.
4) Engagement & experience: Shopping is NOT Buying! Retailers need to understand that millennials want an experience rather than just buying things. They are constantly fluctuating between brick & click visiting brick-and-motor to validate his/her online research & touch/feel the product he/she cannot do online. If I am preparing for a party & I go into the store to buy ingredients, what may excite me beyond price discount will be to get some educational content on cooking & hosting, & training, community of similar cooking enthusiast, & some tips from celebrities. Try to bundle your product with services around setting up, usage, finance to post-sale service & help. Start to engage with their shoppers through content, community, & experiences; be it cool things like virtual/augmented reality at one end to basic personalized experience at POS.
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5) Bridge old & new: Become an omnichannel “experience”. Adopt new-age technology of cloud, SaaS, mobility along with bridging the gap with older monolithic systems. Give a consistent brand experience across all your touch points. Also, it is time to get youngsters who are digital natives in your boardrooms to let them take charge.
The war is not over. It has just begun. Even after 20 years of its launch, Amazon’s revenues are still a fraction of those of Walmart. Indians are still enjoying the novelty of walking into an air-conditioned mall & touching & feeling brands. India’s retail market is expected to cross $1 trillion by 2020. There is enough space for each format to grow & thrive, provided they continuously innovate. It’s time to take online the offline way.