In early May 2020, when I spoke to the owners of one of the biggest fashion brands in the country, they were despondent. Lockdown after lockdown over a four-month period had magnified retail challenges, bringing the business to its knees. Large format stores, national brands, niche players, and regional retailers saw sales collapse by 90%. Every time I reviewed the sales data, my heart skipped more than a few beats. Retail has always been a low-margin business, and surviving such a cathartic quarter is, in itself, a huge achievement. You need nerves of steel to thrive in this industry.
A lot of people may feel that once we get past the pandemic, business will come back to its original rhythm plus some minor tweaks. That is pretty unlikely to happen with retail. Tectonic shifts are afoot in the Indian market, and Reliance has taken on the onus of redefining this space. Many large players who were perceived to be financially and operationally strong have not proved to be so. Do some homework online and make some calls, and you will quickly know the pain retail is undergoing due to retail challenges.
Of course, here I am not referring to the millions of Kirana stores and the small business ecosystem that India has. Though they too have been severely impacted and faced their own challenges. The story in organized retail is the same globally. J.C. Penney, with more than 800 stores and nearly 85,000 employees, has filed for bankruptcy, so have Neiman Marcus, J. Crew, Brooks Brothers, and G-Star Raw in the last few months. More than 21 retailers have filed for bankruptcy in the U.S. in 2020 alone. The pandemic has been devastating, turning countless shopping malls into retail wastelands in the U.S.
Facing the Retail Challenge: Some of the Key Hurdles for Businesses to Overcome are:
- How to manage the financial impact of temporary store closures caused by harsh lockdowns?
- How to dial up ecommerce operations and switch focus to digital consumers experiences?
- How to get the customers back to the stores and maintain high levels of hygiene as mission ‘Begin Again’ commences?
- How to ensure employee safety once they get back to the stores?
- How to manage inventory stuck in closed stores?
- How to reconfigure future inventory to meet the changed consumer behavior and needs?
If these challenges were not enough, the changing consumer behavior is likely to have a lasting impact on retail. There is a noticeable shift from conspicuous to conscious consumption. This at one level is driven by finances and at another by the realization that a lot of things that we buy, we probably do not need. Global trends show that consumers are radically altering their lifestyles in response to the pandemic. A lot many are facing new personal situations, with changes in income and time at home with families, which are driving behavioral change. Consumers are also shopping with greater awareness of the need for health and well-being. The biggest shift that is currently happening is the people who used to resist online shopping have had very little choice but to move online. A study done by Accenture shows that a record 160% jump in ‘new’ shoppers coming online. This may well be an irreversible and accelerated trend.
Retailers Must Be Agile to Tackle Retail Challenges with a Fresh Perspective:
- Respond with agility to changing customer preferences. Reset customer segments. The customers you thought you know may no longer behave or respond in the same manner.
- Move from shopkeeper mindset to a customer owner mindset.
- Create a safe environment both for your employees as well as your customers.
- Implement data-driven marketing. Use personalization and Loyalty programs effectively
- Give a good reason for customers to choose their brand. On the face of it this may sound obvious, but it is not. I do not mean - a great offer or a unique design. What I mean is the role or the value that the product will add in todays’ context. Create occasions reasons for customers to consider you and buy.
- Capitalize on the Vocal for Local, AatmaNirbhar movement.
- Work on location specific strategies. (Ironically, retail used to be all about location)
- Develop robust online sale channels. Integrate the online and offline experience. Drive the brands omnichannel experience.
As we prepare to begin again, both retailers and FMCG companies are feeling the need to reinvent their existing supply chain and distribution models. Even FMCG companies are taking major steps as massive reverse migration has led to a manpower shortage and shutting down of stores has brought the traditional distribution mechanism to a grinding halt. Marico has partnered with Zomato and Swiggy to distribute its food portfolio under the Saffola brand. Britannia has partnered with Dunzo to distribute its products. Consumers can get access to Britannia biscuits, cakes, and milkshakes by placing their orders in the Britannia Essentials Store on the Dunzo app, it promises to pick them up from the nearest Britannia distributor and deliver within an hour. While BigBasket and Flipkart have partnered with Uber, to deliver to consumers, cash and carry retailer Metro has started direct distribution to their kirana partners. With traditional distribution coming to a halt companies are looking at partnering with third-party supply chain companies which have a strong digital backbone.
Traditionally, retailers are hardwired to understand changing trends, picking up local nuances and behavioral shifts as they face retail challenges head-on. This is truly a battle for survival. I have heard numerous instances of how innovative and inventive the Indian retailer can be—their ability to adapt and thrive is probably unmatched. They are facing their biggest battle yet, and only the most agile and innovative will survive.
