We all as consumers have gone through different phases of Retail in the last 4 decades. It would be only imperative for us to understand what really has been the trigger to this, what really were the game changers in those eras and how will these truly evolve over the next decade. For the sake of convenience, let's look at these from the lens of what has been instrumental in bringing the change that the markets adopted…
The 3 major drivers for the changes that happened in the 3 eras defined as 'waves' for a particular period is as below:
Wave 1: 1986–1995 — Infrastructure
Wave 2: 1996–2005 — Changing Consumer Preferences
Wave 3: 2006–2015 — Digital and Technology
Wave 1 was the era where Infrastructure played a major role in how the trade and retail truly operated in the marketplace.
Wave 1: 1986–1995 — Infrastructure
This wave in its initial phase was completely revolving with the producer ruling the market and deciding what the consumer should ideally consume. Consumer demand was high however supply was a challenge due to poor infrastructure in terms of roads, railways, retail supply chain, and technology in retail. The awareness levels were quite low with less focus on quality. The market was still operating with relatively low levels of competition and earning high margins was one of the prime focus of the retailer. Retail in this phase comprised of Kirana stores also known as Mon and Pop stores/Traditional retail outlet/General Trade outlet (shops in front and residence in back, Wholesale stores were the driving force for bulk buying, Department stores, Single category manufacturer’s own brand like Raymond’s and Bata, Government-run outlets like Kendriya Bhandar were also running in this phase.
This wave was also known for the textile majors who ventured into retailing via setting up their own outlets. Few examples are Vimal and Bombay Dyeing. With the onset of Liberalisation, the market opened up and it led to the opening up of outlets by Pure Play retailers like Shoppers Stop by K Raheja Group and Spencer’s by RPG Group in early 1991. As a category, apparel started gaining momentum in this phase. Foreign Direct Investment (FDI) of upto 51% allowed under the automatic route in select priority sectors.
This wave also presented early signs of change in consumer buying behaviour wherein the consumers were happy to upgrade from a typical wholesaler to Kirana and then to bigger Kirana with better assortment. This wave presented early signs of demand on infrastructure requirements due to growth and innovation in retail. The seeds of Supermarket were sown in this era and the consumers were given a unique experience of buying inside the covered air-conditioned environment with computerized billing. The variety seeking nature of the consumer became the foundation block for the development which happened in the next wave.
Wave 2 was the era where Changing Consumer Preferences played a major role in how the trade and retail truly operated in the marketplace.
Wave 2: 1996–2005 — Changing Consumer Preferences
This wave brought with itself a paradigm shift in the way retailing used to happen in the previous wave. Consumer preferences were seen in various aspects of a consumer’s day to day consumption pattern. A classic example is home delivery which became a norm with Kirana stores and the concept of easy monthly credit became their defining factor. Rising demand complementing equally rising supply, margins were under pressure resulting in a continuous focus on building customer satisfaction. Hunger for branded products across categories started increasing. Retail concepts started proliferating in the country not only with the expansion of pure-play retailers like Shoppers Stop but also with the opening of competitive brands like Pantaloons and Lifestyle. Their expansion saw beyond regions and was more focused on multi-city presence. Growing momentum came into fashion and apparel cum accessories led categories. The concept of western wear started fast emerging with Men accepting the change a lot more than women. The concept of Malls came up in this wave and it brought a lot of newness for the consumers. Since awareness levels were high through the internet, consumers were a lot more vocal and power shift was visibly moving from manufacturer to consumer.
The competition was visible in this wave with the onset of globalization and the dotcom era. Consumers had the choice of differentiating between products and marketing cum promotions played a determining factor in assisting value-seeking consumers. Retailers used multiple communication channels to reach the consumer and in this, the launch of telecom services under Reliance’s Dhirubhai Ambani Pioneer Offer (DAPO) played an important role. This was the 1st time that middle and lower-middle-class population comprising the bulk started receiving messages which led to the launch of offers on the mobile phone. The variety of Marketing channels assisted in bridging the gap between brand and consumer. Towards the end of this wave, Retail became a buzzword and a favourite of the Media. The key retail models which emerged in addition to Wave 1 were Discount outlets, Value format retail-like Big Bazaar, Specialty stores like Landmark Bookstore, Vijay Sales, Great Eastern Appliances in West Bengal, Vijay Sales in Maharashtra, etc. These formats of retail were embraced by the consumers considering the removal of a middleman who was involved in traditional retail. Better prices and service became the hallmark towards the end of this wave.
The evolving consumers were introduced to the concept of loyalty programs and happy hours on shopping deals. The inputs and views of the consumers started seeing more value in the eyes of the retailers. The seed for offseason sales was also sown around this period and the consumers changing preferences gave the retailers an upper hand to grow bigger and bolder in the years ahead.
Wave 3 has been the game changer era where Digital & Technology played a major role in how the trade and retail truly operated in the marketplace.
Wave 3: 2006–2015 — Digital and Technology
This wave made Consumer the King. Technology, in particular, played a key role as its primary enabler. Retail in this wave is changing faster than the available infrastructure can keep pace with and Innovation in technology is rapidly making the existing one obsolete. There were a plethora of choices available with cut-throat competition and convenience with experience became the key. Content became a buzzword with technology playing an important role both as a channel with e-commerce retailers like Flipkart, Myntra, Homeshop18 etc. as well as a Marketing medium with concepts like Orkut, Whatsapp, Facebook, Twitter etc. The concept of Organised retail started taking bigger shape from the beginning of this wave. It started with established Indian corporates venturing into organized retail and gradually it led to opening up various kinds of formats to assist the needs of consumers across categories. The launch of formats like Home Town from Future Group, Crossword from K Raheja Group, Reliance Trends from Reliance Retail are examples in this space. The aggression in the retail market was visible and this eventually led to the consolidation of bigger brands acquiring smaller ones. The expansion and investment happened both in terms of no. of outlets and also towards building the backend for retail.
The urban market saw immense momentum and it percolated to the opening of stores in Tier 2, Tier 3, and rural towns as well. The change in FDI policy in 2006 which allowed foreign retailers to acquire 51% stake in JV with an Indian firm opened up the market further leading to brands like Giorgio Armani, Versace, etc. to enter the market. India was seen as the most attractive retail destination as per AT Kearney’s Global Retail Development Index (GRDI) for 3 consecutive years. This mapping was prestigious considering that it was amongst the total universe of 185 countries on a 100 point scale showcasing relative attractiveness of these markets.
Technology played a key role since every retailer started using it for different purposes ranging from it being consumer front-facing to support in terms of backend supply chain and warehousing. Customization in technology became the key driver and data gained immense importance for rolling out tailor-made plans for the consumer. Mobile phone penetration in the country made retail a lot more accessible sector with digital which played a huge role in social media. Digital channels are being put to use for expansion and technology is continuously being used towards capturing consumer experience and in evolving technologies that were in test pilot mode during this wave comprising of Artificial Intelligence and Virtual Reality. Gamification and Simulation in retail became common in this wave pre-empting the next growth that technology would bring into play. To end, this wave started talking about Data being the new oil and in the years ahead a lot of traction would be observed in the field of data and analytics driving the retail and consumer space.
How ‘s the scenario changing post the above and in the current scenario?
The drivers of Infrastructure, Changing Consumer Preferences, and Digital cum Technology would continue to evolve in the next 5–7 years since these form the backbone of any developing economy. Innovation will be connecting all of these drivers. Omnichannel will continue to bridge the gap between the physical and digital worlds. With the pace of competition on an ever-increasing speed, solutions which are accessible as well as affordable with the mindset of meeting changing consumer preferences will become the need of the hour. The thread connecting this would be Innovation which has brought a lot of growth in the last 10 years. Retailers would have to reinvent their physical stores and infrastructure in terms of the supply chain will have to become a lot more capable to meet the instantly gratifying digital consumer needs.
Technology will change dynamically with the proliferation of Artificial Intelligence(AI), Virtual Reality(VR), Augmented Reality(AR), Machine Learning(ML). For example,
- the concept of Augmented Reality will assist in bridging the gap between the digital and physical world.
- the concept of Artificial Intelligence will assist a shopper to buy something just by virtue of clicking the pic. This technology will work in the background to identify a similar product across multiple e-platforms with just a quick search.
Some of the other enablers are:
- Product Customization will continue to be the key meeting changing consumer preferences. This aspect gives the consumer the power to have something which can be suited to their required specifications.
- Retailers have to keep evolving with several touchpoints to ensure that they are only more responsive to the consumer’s demand but also cover the entire buying journey. For example, when a consumer intends to make a purchase decision, the channel doesn’t hold significance. Instead, it’s the need to shop which is of primary importance.
- E-commerce will see significant growth and will gain a prominent market share.
- Faster delivery — The concept of 2-hour delivery is already in the trial mode now and will gain huge traction in the years ahead. For example, online retailer Amazon’s drone delivery technology.
- Social Shopping — Social media which started more as a communication platform is fast emerging as a strong e-commerce channel as well. Influencer marketing is fast emerging and consumer's ability to buy directly on the social media platform can be a strong force as part of the omnichannel platform. This would be completely driven by the Digital and Technology platform.
- Private Label — Today’s value-seeking consumer prefers to buy their product at a price cheaper than an established brand.
- Rise of Experiential Retail — Consumers have evolved from just a product purchase concept to an engaging experience. The youth are the primary drivers of the new experience. For example, concepts of beacons and smart shelves not only ensure that staff are more effective instore but also communicate with consumers using Bluetooth.
Basis the above, what do you think will be the future 5 years in the world of Retail and more so in the Post Covid era? I have strived to narrate the story of the upcoming 10 years...however a lot can be added basis your experience...
How these drivers are going to change in the next 10 years?
The drivers of Infrastructure, Changing Consumer Preferences, and Digital cum Technology would continue to evolve in the next 10 years with India becoming a global player in a bigger way and Innovation becoming a routine norm just like a lot of other developed economies. The key aspect in this period in addition to the ones mentioned in 5 years would be:
- AI, VR, AR, and ML will take over the lives of Urban consumers and make their life a lot easier and assist in meeting their increasing needs. For Example, hot water automatically getting switched on just 10 mins before you need to use it on a daily basis. They will also contribute to making one healthy by constantly throwing data connected with sugar levels, steps walked, blood pressure etc on a real-time basis. The percolation will start moving into Semi-Urban and Rural areas in rapid speed especially in the post-covid era.
- New categories will shape up on the e-commerce platforms and gain significant share
- Retail will be highly driven by Data and algorithms
- Data analytics tools and analysis will significantly improve inventory as well as logistics performance leading to not only faster delivery but also drive higher levels of experience
- Discounts were a norm in the years when retail was expanding however assortment and convenience coupled with a high level of customer experience will become a routine
- Most of the services with exceptional customer experience will have established pricing and thus service differentiation would become the key
- Concept of Cash on Delivery will continue to decline over the years since people across urban and rural will embrace digital and technology in a significant way
- Use of beacon for sending customized offers to the customers while they are in the store would become an established concept
- Cross channel loyalty programs will get established giving the concept of new retail - a seamless amalgamation of offline and online would take place
- Mom and Pop outlets will become established channels to support the online and organized retail and now more so in the Post Covid scenario
- The consumer decision tree would prioritize various stages for the consumer based on their category of purchase. For example – The clothes that I picked in a clothing department store to try on in the fitting room – it will cater to features wherein the virtual mirrors will assist the pics to be sent to my personalized list on social media for their quick opinions.
- Retailers will focus on building experience zones in-store wherein the consumers can not only plunge themselves into their wish list of products but also touch, feel, and experience them and make a lot more informed decisions.
Does this article resonate with you? What has been your experience in whichever field you are from or whatever has been your experience? Do share your thoughts and if you like these thoughts...kindly re-share with others.
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