Eighty-five per cent of shoppers did not return to retail stores in the initial weeks after the lockdown in Wuhan, China was lifted. Sales continued to be down 40 per cent year on year, even after a month. A similar situation is expected to pan out in India as the lockdown restrictions get relaxed, with retailers staring at empty stores, eager for a stray footfall.
Aneesh Reddy, Co-founder and CEO, Capillary Technologies, who has been regularly interacting with the CEOs and business heads of retailers across China and Asia, noticed this problematic trend.
"One of the challenges that stood out was how apparel and fashion retailers found it difficult to sell the inventory available in stores. Even the ones who were selling online, either through their own website or marketplaces (or both), were only able to sell the inventory available at their warehouses and not the inventory available across their stores," Reddy said.
A worse situation was if the lockdown continued for an unseemly time, or if customers did not come back to stores after the lockdown was lifted. The latter, Reddy said, is something the technology company has been witnessing across different regions as lockdowns get lifted.
"Because of the seasonality of fashion, all the stock in stores would go out of fashion and apparel retailers would be left with dead stock. Moreover, with no revenue being generated from stores, brands are finding it difficult to sustain the cost of real estate and salaries of their store staff," Reddy told Business Line.
Helping retailers optimise their inventory across stores and recover sales even with reduced footfalls was key. To enable retailers to create a unified omnichannel experience for consumers, Capillary Technologies and INCREFF teamed up to help retailers get back on their feet.
INCREFF, founded by IITians and backed by Binny Bansal and Sequoia, among others, helps brands optimise inventory and improve sales. The aim is to monetise the existing inventory across stores and warehouses and keep on doing it in the face of reduced walk-ins in a Covid impacted world.
Capillary and INCREFF both have Sequoia as investors. "Rajul Jain (of INCREFF) and I have been friends for over two years," said Reddy. "We both are involved with the retail sector and have been discussing how we can co-innovate to create solutions, especially in the current Covid times," he added.
Tech combination
Covid-19 has brought on a forced acceleration of technology adoption, with millions of retailers reconditioning to accept the new routine and follow the new ways of interacting with consumers.
As e-commerce gains acceptance due to the pandemic, retailers are accelerating technology adoption and enhancing their operational capabilities of selling on multiple channels.
"Knowing how INCREFF’s platform can list inventory across different marketplaces and enable a single view of inventory across all consumer channels, we decided to combine it with our omnichannel e-commerce platform, AnywhereCommerce+," said Reddy.
The partnership will enable retailers to sell the inventory available across stores on their website or marketplaces and allow retailers to fulfil online orders using inventory available at a store nearest to the customer, instead of a warehouse.
"This will help boost store sales and would offset losses incurred due to reduced or no walk-ins, as well as avoid stock in stores from getting outdated," explained Reddy.
By being able to sell the inventory available across stores online, brands can increase store sales and offset losses.
Road ahead
"By gaining a single view of the inventory across all channels - be it physical stores, warehouses, e-store and marketplaces, brands will be able to optimise inventory and sales," said Reddy.
Citing an example of a leading watch retailer, the CEO said the partnership helped "boost store sales by 12 per cent by enabling the fulfilment of online orders from the stores and reduced cancellations by 7 per cent since the orders were shipped and delivered faster from a store nearest to the customer."
Reduction in return rate by 75 per cent was noticed by the watch retailer, said Reddy, since the stock shipped from the store was in better condition as compared to the stock shipped from warehouses.
With e-commerce emerging as the preferred way of shopping for consumers in the post Covid-19 world, retailers will need to sell across multiple digital channels, while also ensuring that their physical stores operate efficiently and remain profitable. Traditional boundaries between offline and online business will begin to blur, said Reddy, enabling stores to offset reduced walk-ins by taking their collection online to their customers.
Though this was a gradual transition and already in the works, Covid-19 has accelerated this change.
"Consumers will expect faster fulfilment of orders and the brands that offer same-day delivery will be preferred," said Reddy. "In the near term, consumers will avoid crowded spaces and would prefer contactless shopping."