New rules post lockdown: Re-orienting retail with a big dose of tech

There will be strong headwinds from Amazon/ Flipkart/ JioMart/ BigBasket that will make good retailers adopt technology to remain relevant.

By Anshoo Sharma

COVID-19 has changed the way we live and we have been seeing this play out from close quarters in the retail ecosystem. The good news is that with every passing month most retail categories are seeing strong recovery. However, it will leave a lasting impact on retail.

Share of online ordering will accelerate: Consumers are building the habit and retailers are building the capability to transact remotely. Food ordering volumes will go up and more players will come up. Swiggy and Zomato have consolidated the market but more players will enter. Amazon is piloting in Bengaluru, and Google has signaled its intent to follow suit. There will be strong headwinds from Amazon/ Flipkart/ JioMart/ BigBasket that will make good retailers adopt technology to remain relevant.

Increase in cost of business operations: This will be across categories to create a visibly safer environment for customers to experience services/products with confidence. Cost of operations may go up by 10% for large stores and 30% for small stores and will need a rethink on product/ pricing.

Reduction in rentals: This is a much-needed silver lining. For example, malls reduced their rents by 50%+ during the lockdown and many have agreed to rent as a percentage of revenue. Businesses vacating office space will lower occupancy rates.

Service and experience to matter more than the store location: As users are ordering online, creating a memorable brand experience becomes more important. Even for transactional categories like grocery, ordering is now part of the experience. For delivery orders, the explicit referral from a friend or implicit information on the experience of friends/neighbours will matter a lot more. Platforms that can capture this information and make it available to assist commerce will gain traction.

Retailers will embrace a lot more technology: Strong CRM/loyalty, digital (re)marketing, contactless ordering, own web domains with ordering capability, payments/credit, omnichannel logistics will be in focus. magicpin has launched its fully integrated white label SaaS offering (orderher.io) to assist retailers in creating their storefronts within 5 minutes that enable uniquely Indian order management, payments, and logistics integration.

In premium offline segment, prices will go up though overall volumes will shrink: People working more from home will mean that many impromptu purchases will be missed. However, the value of physical meetings across business, colleagues, friends, and family has increased, and people will pay more for a good experience.

Manufacturing brands are going direct-to-consumer: Large manufacturers like ITC, P&G are investing in building their D2C websites (e.g. pgshop.in, itcstore.in).

As online grow, they don’t want to remain overly dependent on Amazon/Flipkart as online retailers will look to substitute them with private labels. This means a reversal of the trend from consolidation of retailers to stronger D2C retailers joining the e-commerce ecosystem.

Apparel will see a drop in overall demand and change in sales mix: Working more from home will have an impact on the kind of clothes we need (for example, tops versus bottoms for video calls, more comfortable wear than formals).

Home infrastructure is seeing an increase across the board: As people invest in a productive work environment, there will be an overall increase with respect to: Personal gadgets (desktop/laptop/tablets, earphones/headphones, screens); Productivity furniture (chair/table); Automation (washing machine, dishwasher, vacuum).

Retail will revive but with new rules for the game. However, the importance of customer service obsession will not go away. Businesses and entrepreneurs that get ahead in retooling themselves for this new retail, will create long term impact.

The writer is CEO & co-founder, magicpin