The wave of organised retail hit over a decade ago. Today, the retail scenario in India is grappling with the desired levels of profitability and returns. Despite heavy investment of time and capital during this long gestation period, the return from the retail business continues to be a major concern. The year 2014 was no exception, with leading retailers keeping their financial goal of profitability on the top of their agenda. At store level, the retailers are focusing on improving store profitability further through productivity enhancement and better inventory management. At corporate level, they are keeping major costs such as supply chain and manpower in line with the revenue to ensure profits.
Recently, having bid adieu to 2014, we, at OMG India, were mulling over what the new year holds for the retail industry. We have listed some of the trends and predictions for this new year.
Personalised in-store experiences
‘Personalised Retail’ is a trend where the retailer provides an in-store experience that is customised for each visitor. Personalising the shopping experience for customers can increase profit margins, strengthen customer loyalty and level the playing field with competitors. Consumers not only desire but also expect a personalised experience. They expect retailers to have good knowledge of their preferences and interests. Whether it is about greeting customers as they enter the store, sending personalised e-mails, tailoring deals based on their previous purchase behaviour or making purchase recommendations – personalisation is the surest way to promote customer loyalty; and loyalty is valuable when it comes to attracting new customers. The retail industry requires that store employees keep their existing customer base satisfied.
Use of technology
While loyalty programmes, point of sale (PoS) solutions, billing management solutions, RFID technology or inventory management solutions are all that a majority of retailers have banked upon thus far, the future of retail IT looks much more promising. According to a report by the consulting firm Deloitte, there will be significant investments in technology facilitating a coherent multi-channel marketing strategy in foreseeable future. However, it would be some time till we see large-scale usage of analytics by a significant chunk of brick and mortar retailers in India.
The retailer needs to consider technology as an enabler of providing richer experience to its customer base. The future belongs to retailers who implement and harness the best tools and flexible ownership models to create value-based, one-on-one relationships with shoppers. What will matter in the future is an understanding of the various ways in which a consumer engages with a retailer – basically the points at which a consumer ‘touches’ the retail brand.
Uss of smartphones
Nowadays, retailers are utilising the power of mobile phones in the best possible ways to reach out to consumers. Smartphones on their part have empowered consumers to search for products, do research, compare prices, transact, review and seek comments from peers on social networks. In a way, smartphones have transformed the way consumers shop. Providing in-store apps, loyalty programmes, customised coupons and offers which are not available online, will not just engage customers but help combat showrooming. Moreover, customer experience – in-store as well as online – needs to be integrated and optimised to maximize business results.
Relationship marketing
With rapid evolution of technologies and changing customer behaviour, marketing has acquired an all new meaning. Today, marketing revolves around relationship marketing, which is also defined as ‘a strategy designed to foster customer loyalty, interaction and long-term engagement’. Relationship marketing is a model designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication. There is an increased effort to not just push products but enhance customer experience and brand loyalty in this form of marketing.
Growth of private label brands
Private labels are catching up fast with consumers these days. About 5 per cent of all modern trade sales in India are store branded (versus 1 per cent in China and 3 per cent in Indonesia). Of late, private-label sales have consistently outgrown sales in modern trade, and these store brands are now spreading to unconventional categories like confectionary and dairy. According to a survey, at least 58 per cent of modern trade shoppers have bought some store brand in the past four weeks. Interestingly, in 2014, India’s modern trade shoppers believed that private-label products were more synonymous with quality than ever before. Twenty-nine per cent of shoppers felt that the quality of private-label brands was at par with renowned brands (up from 25 per cent in 2013), while 26 per cent of shoppers felt that the quality of private-label products was improving (up from 21 per cent in 2013).
Focus on category & format
The last few years have seen many international and domestic players foraying into new and specialised product lines adding laudable value to the existing range. Rising demand for better lifestyle products has fueled the success of product categories such as baby and child, and men’s personal care. According to industry sources, these categories have grown exponentially and will continue to boom.
Many national retailers will also be experimenting with new formats, leaving aside traditional hyper and super formats. A significant number of compact hypermarkets (22,000–25,000 sq.ft.) with carefully selected product range are already in the pipeline and all set to revolutionise Indian modern trade.
Thus, the year 2015 will see successful retailers cashing in on opportunities by putting mobility, analytics, cloud, and social network to work in their customer and operations strategies. The practices of adopting omni-channel integration technologies and IT governance, unifying customer engagement for hyper-personalised loyalty, adopting product intelligence for marketing and competitive insight, employing location-based services via analytics-driven agile engagement and operations, utilising socially networked on-demand delivery services, and gain share with private label merchandise will also pave the way for a new future in Indian retail.
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