In Depth

Corporate Retail has delayed omni-channel strategies, here is why they need to know what the consumer wants

Vishal Krishna
28th Apr 2016
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The last three years have seen a sea change in retailing, with the advent of e-commerce and mobile shopping. A large percentage of categories like electronics, low-priced apparel and books have moved to Flipkart, Snapdeal and Amazon India. These new-age organisations have raked in more than a a billion dollars each in sales, by managing to connect with a generation that is glued to mobiles. Retailing is a function of using the most efficient and relevant sales channel to reach the consumer. In India, as well as around the world, there are multi nodal-sales channels used by consumers. Therefore, the online or mobile format is just another sales channel that even brick and mortar retailers will eventually have to adapt to stay relevant to their customers.

Large retailers, like the $3-billion Future Group, the $1.6-billion Arvind Group, the $200-million Aditya Birla Fashion and the Dubai-based $5-billion Landmark Group, have all been implementing pilots to make their supply chain dynamic and ready for the new world. They are doing so by linking their physical stores—functioning as suburban last-mile ports—to service the customer, who is either ordering on the web or via the smartphone. But why is it taking time?

The problem is in integration of technology, which can be mitigated by having CEOs, CTOs and CMOs working with each other. They have to get their technology objectives in place in order to get their IT vendors to merge the physical and online sales channels and integrate them with the entire supply chain processes. This is taking time and money.

Delivery mechanisms need to be integrated to facilitate:

  • Order online/through smartphone and pick up at store closest to home.
  • Order online and get the product delivered home.
  • Return online and get the product picked up.
  • Order at store kiosk and get the product delivered at home from the store closest to the house.
  • Order at store and pick up from store closest to the house.
  • Using WiFi-enabled beacons to attract consumers to the store and power smartphone-based discovery.
  • Connecting franchise stores and distributors to service the customer.
  • Implementing payment gateways across the ecosystem.

This node of linking all channels is known as omni-channel retailing. But what is the node? It is the bridge to link a multitude of technology, of several parties, which need to interact with each other. These could include legacy, cloud and many outdated IT systems and infrastructure. The systems include the following parties to complete the omni-channel chain.

The technology needs to be in place to integrate the following:

  • Distributors and franchise stores
  • Own stores
  • Corporate analytics and management team running the e-commerce channel
  • Warehouses and factories.

The difficulty is in linking A and B together. The cost of the technology will have to be negotiated by the retailers because IT vendors will charge a hefty sum – say anything between $40 and 100 million for a 1,000 stores. All this depending on what kind of objectives the retailer needs. The cost of implementation could go into maintaining cloud infrastructure, building new databases, creating applications, building analytics engines and visualisation tools for omni-channel retailing. Perhaps this is where omni-channel experiments have not gone national for “retail” corporate. However, all retailers have IT systems that are modern. Perhaps the only investment could be in getting IT systems to integrate with smartphone platforms to understand replenishment rates for this new sales channel.

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What does corporate retail say?

“Omni-channel is about being efficient to service the consumer. For this the organisations needs to have technology platforms in place before we implement it full scale,” says Siddharth Sood, Co-founder of the $50-million Wildcraft, an adventure gear manufacturer and retailer. Their omni-channel plans are just about coming in place for their 140 exclusive stores. Siddharth adds that 20 percent of their business was already coming from their e-commerce channel and that it was only a matter of the next 18 months when retailers would have omni-channel plans going live.

Arvind Retail has been working with a US-based firm to put a structure around omni-channel retailing. Aditya Birla Fashion and Retail has been using kiosks in store to help customers discover new collections and catalogues. Their TrendIn platform, which is also their e-commerce store, is piloting the omni-channel store experience in a few stores in Bengaluru.

“Omni-channel will become a very important decision for brick-and-mortar retailers to boost sales because we can understand the customer’s habits from store data and mobile phone data. It allows us to customise,” says Shivanandan Pare, Head of e-commerce, at Aditya Birla Fashion and Retail.

Apparel retailers like the $650-million Shoppers Stop and the $625-million Lifestyle International (Landmark Group) too have been building their technology architectures that can support their stores to function in a hybrid world of web, smartphone and connected stores.

The Future Group has tied up with Manthan, the analytics firm, to deliver and study information on customer shopping habits and help marketing teams shape campaigns. It has also tied up with Amazon to deliver grocery to customers through the Amazon Now programme.

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Opportunities for startups

Internet-of-things (IoT) is going to be a major part of the physical world. Consumers will always flock to high street and want to discover their shopping experience, but they have no way of possibly knowing what each store is offering. Bengaluru-based startup Mobmerry aims to bring a combination of beacons and discovery based analytics services to retailers. They have implemented beacons across 80 stores in Indiranagar, which provides discovery to consumers who have downloaded the app. They will also help retailers with proximity marketing and aggregate all brands on the app. The data will then be made available to the brand to understand how it fared at sales by location. “As a startup you need to add services to solve the discovery problem for retailers. It is necessary that brands understand that customers use not more than 15 apps on their phone,” says Krishna Prasad, Founder of Mobmerry. Therefore, the Mobmerry team has to go to each brand and sign contracts with them to make to make the app the de facto omni-channel marketing tool.

Companies like Bengaluru-based Mobstac have worked with retailers on a similar model in the USA and are now implementing pilots in India with a couple of consumer companies.

Fulfil.io, seeded by incubator 500Startups, is another Indian startup integrating legacy IT systems of corporates to store their IT and is enabling an omni-channel experience for brands.

The market size

But e-commerce in India is still a mere percent of the total market size of $600 billion, according to consulting firm Ernst&Young. Only about 10 percent of the market is organised, brick and mortar being the largest, with close to $54 billion in sales. The expected technology spends in India, for retailers, is a $1-billion opportunity only for organised retailers and is still a small market. No wonder IT implementations in the Indian retail industry have not attracted large-scale IT vendors like Infosys, TCS or Cognizant to focus on Indian corporate retail. Globally, it is a different story; everyone from Target to Lowe’s to Walmart is betting big on the future of retailing, which is omni-channel. The technology spend is the highest in the North American region. But the growth can come from India in the next decade simply because this region is the largest consumer market in the world. According to Gartner Inc. retail sector’s IT spending growth was at 0.73 percent in 2015, for a total of more than $175 billion.

For now, though, the market is evolving. Perhaps it is time corporates figured how their consumers want to be served. That’s when brick-and-mortar retailers will stay relevant.

 

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