Post lockdown, local retailers are giving the big players a run for their money

Offline retail has been written off many times. There have been numerous articles on how offline retail is dead and it is just a matter of time before online becomes bigger than offline. Thus, it is not surprising that COVID and the related lockdowns have accelerated this talk. 

There is no doubt online is growing but even in a large developed market like the US, it is still only 15% of total retail. What is happening is that the boundaries between online and offline are getting merged. Retail is becoming omnichannel.

In developed markets such as the US, the competition to pure online (ecommerce) is coming from large offline retailers. Walmart and other offline retailers are aggressively adding online capability while Amazon continues to expand offline (not just warehouses but physical retail concepts such as Amazon Go). 

Thus, what COVID has done is the acceleration of the shift towards omnichannel. It will not be about offline players vs. online retailers, but it will be about who manages to serve the customers better across all the touch points.

In India, the well penetrated and nimble local stores are well placed to give the large guys competition. Let us compare offline local retailers with large organised/online retailers. 

• Pricing: Larger retailers have the advantage, especially with the heavy discounting being done for user acquisition that could be temporary and unsustainable
• Convenience: Online wins but offline is not far away, especially with the addition of delivery at home by retailers across categories
• Customer service: The local store has an upper hand. No wonder the usual recommendation is to buy expensive/branded items form local authorised shops
• Experience: Depends on the customer set. But online does offer a more relaxed shopping experience. Ease to browse websites/app, live tracking, infinite selection, etc. However, there is a certain joy in visiting a store and getting the look and feel of the product you want to buy 

What offline small retailers lack is access to technology. Pre-COVID that was not a blocker for success. Local shops could over-invest in experience and customer service to hold on to their customers. However, post-COVID, it has become a necessity. 

Lockdowns have accelerated the pace of tech adoption by small stores. Neeraj who runs Park Super Mart in Old Gurgaon has seen nearly 50% of his sales now come from home delivery. This used to be < 10% before COVID. He has done so by building his home delivery service on WhatsApp.

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Smaller stores are at the forefront of the retail tech adoption in the last six months:

Storefront

Shopify has extended this to online sellers and the same is now being extended to offline stores by the Facebook shop, magicStore, Dukaan, and others

Customer relationship

Multiple channels of demand means you cannot now rely on your memory or a notebook. For the omnichannel world, you need to store who came, which channel (online, offline, hybrid), when, what all was bought, and then re-market to get better ROI

Promotions/marketing

Newer marketing medium needs to be explored with greater emphasis on digital (Google, Facebook, Instagram) and demand generation aggregators. Many retailers have also started using WhatsApp to communicate with their customers and share their catalog

Store operations are changing

You now need more tech-savviness in your staff to operate CRM/online store, etc. Hygiene and cleanliness are critical and adding to the cost and complexity

Throughout the stack of offline retail, tech solutions are getting accepted. This is levelling the playing field for the local stores vs. the ‘big’ guys.

There are two more points worth considering before writing off physical retailers, especially the mom-n-pop stores. First, the resilience of these small stores.

During lockdown, it was these local shops who reacted better to the supply chain disruptions. Local kirana and pharmacies were at the forefront of serving customers.

Second, the innate craving of humans for social interactions. I have lost count of friends who have ventured out (tentatively at first!) to their neighbourhood markets and malls and felt rejuvenated. How long can we keep the human spirit of exploration and social engagement locked up? Can online ever mimic and satiate this primal drive? 

While the naysayers are back again writing obituaries of offline retailers but they will be surprised. I believe that the return of local stores will be faster than what many are expecting. And this new form of local retailer will be more powerful with the addition of technology to their armour.