Retailers must tap new pockets of opportunity
Premium- Driven by the growth of “from home” entrepreneurs who have left their jobs to launch new brands, leveraging social media to reach their customers directly
Covid has defined a “new normal" for retailers and altered business dynamics forever for them. As a result, retailers, especially offline, have had to adapt to the new normal, leveraging technology to engage with and reach customers. Below are some of the major global trends that we are seeing in retail, with implications for both online and offline retailers.
Contradictory trends of commoditization and premiumization: Driven by the growth of “from home" entrepreneurs who have left their jobs to launch new brands, leveraging social media to reach their customers directly. In addition, most retailers have launched their own private labels, and both these trends are “commoditizing" established categories. At the other end, we are seeing the rise of “premiumization" across categories and the launch of hyper-focused “niche" brands, as consumers move to trusted brands and are willing to pay more for brands offering benefits like health, wellness, anxiety relief and naturals.
Digital success will become elusive and will be more difficult to stand out: With the increasing use of “influencers" and digital celebrities, higher spends on digital media to reach shoppers and consumers, retailers will have to spend more on digital media to attract shoppers and drive footfalls/clicks to their stores and to the categories within the stores. In addition, with shopper journeys becoming non-linear due to digital intervention, the five “Ws" (who, what, when, where and why) and the “how" of shopping will have to be relearned for each category to succeed.
Smaller, closer and convenience, the new battleground: As cities and shopping centres closed down due to covid, shoppers preferred to shop closer to homes or at home, and we have seen the revival of neighbourhood kiranas, convenience stores and high streets vs the malls due to factors such as convenience, proximity, open air, ease of access, quick turnaround and trust. Besides, kiranas, too, ensured app-enabled home delivery. Even now, shoppers continue to avoid crowded areas for fear of contamination, giving a fillip to neighbourhood stores.
New models impacting traditional retail growth: With the shift to mobile commerce, rise of “social" commerce and direct-to-consumer models, growth of second-hand market or re-commerce, development of membership models (community buying), rise of at-home consumption, increase in cooking vs eating out, vertical commerce, etc., is moving shoppers and consumers away from traditional retail channels including online platforms, and retailers need to be cognizant of the trends to embrace and include these categories as well as models in their businesses to stay engaged with shoppers.
Health and sustainability the new baseline: Major trends such as sustainability-focused marketing, rise of “healthier" consumers and rise of healthy “fast-casual", increased transparency, increased demand for “fresh" and for food safety, environmentally safe products, and community engagement, are shaping shopper behaviour, especially for the millennials and Gen Z. This may impact the retailers and brands shoppers connect with.
Fragmentation and consolidation: As smaller and local retailers in non-essential categories have struggled to survive and cope with frequent curbs, larger retailers are likely to continue to grow through acquisitions, becoming even larger. This will further consolidate power in fewer large retailers, and shift the balance of power. It will also bring in deeper analytics, customer focus and digitization in the Indian retail space.
Additionally, some other differentiators that retailers may need to focus on are as follows:
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• Emphasize CX (customer experience): Rethink their in-store and online CX and engagement strategies, and see how they can leverage technology to enable a better connect with shoppers to serve them better.
• Effective use of social commerce: Social media is evolving from being used for effective marketing campaigns to being used to sell products, and retailers can leverage this to reduce operational costs, while reaching a broad audience across the country.
• Optimize retail supply chain: Building real-time visibility of product availability to customers through item-level tagging, analytics-enabled demand planning and forecasting.
Consumer preferences have also changed drastically over the past year and many of these are likely to endure, including their desire for flexibility, convenience and “instant gratification". The focus businesses has to be on adopting practices to help thrive in the new normal of continuous change, and identify new pockets of opportunities to cater to these changing consumer needs.
Rajat Wahi is a partner at Deloitte Consulting.
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