Time for retail revelry – The Financial Express

The role of the retailer is changing and new business models that best serve the customer will need to evolve.

Alagu Balaraman

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Festivals have been about renewal since time immemorial. They are times of harvesting, making, cooking and renewing. In today’s world, this means we go shopping. This tradition is deeply set in Indian culture. Despite a gruelling 18 months of pandemic-induced disruption, or maybe because of it, everyone has been looking forward to the festive season.

For e-commerce sales, this is looking like a great year. Reports of the first week of festival sales from RedSeer Consulting show a 23% growth over last year. This is not a case of base effect either. Last year, without vaccines and with the first wave really picking up, online sales still showed a 37% growth over 2019.

Happily, offline retail is also showing recovery from last year. The Retailer Association of India reports that the sales in September have been 26% higher than last year, pan India. However, in 2020, sales were badly hit. Shuttered shops, zero revenue for months, inability to pay rentals and a challenge of working capital meant retailers faced a steep decline last year. The current sales boost will probably bring them close to pre-pandemic levels.

The online phenomenon

In the world of online sales, when we break down the 23% growth that was seen in the early part of the season, we see very little change in the GMV per shopper since last year. Almost all the sales growth has come from the addition of new shoppers. Now, more than 60% of the online shoppers are from tier II cities.

Some things have not changed since last year. The fear of infection continues. A survey by Shopify India, shows that consumers are still wary of in-person shopping this year despite significant vaccinations in larger towns and a decrease in test positivity rates nationwide, except in a few states. Today, 68% of respondents in a survey conducted over smartphones in tier I, II and III cities are planning to shop online during the season. While these surveys might be considered self-serving of the online community, large online retailers are putting their investors’ money behind it in tangible infrastructure, as we shall see a little later.

Another constant factor is the tendency of companies to ride on festival seasons. That’s when consumers are more disposed to spend generously. Companies amplify these consumption binges with discounts and offers to capture as much of the market as possible. Traditionally, online retailers were heavy discounters and consumers now plan and wait for these festive times.

Evolving trends

Apart from these unchanged factors of Covid-19 and festive buying, there are some trends that are fuelling growth in online sales. Both the nature of the consumer and the supply side capabilities are shifting significantly.

We have already noted that tier II cities contribute the majority of shoppers. What is driving this? One part is that brands are focussing more on direct-to-consumer models. So, brands are embracing online communication, and it is working. This season, one in three people surveyed over smartphones in smaller towns said they were first-time shoppers. Delivery models have improved dramatically, giving greater confidence to these first-time shoppers. Amazon, for example, has invested heavily in storage capacity, partnering with local stores and pushing for delivery in under two days for 80% of its customers.

Omnichannel purchasing is rapidly evolving, with customers using a mix of retail outlets, online and social research, and online ordering to optimise their convenience and cost. This has allowed people to research in advance and plan purchases, even as they time their actual buying to capture the best festive discounts on offer.

Millennials form a larger part of the customer base both in metros and smaller towns. Most of them have a strong preference to shop online — in non-metros, this is as high as 53% of millennials. They like the customer-friendly, last-minute deals, express delivery and easy return policies that de-risk purchases.

Easier access to finance, with EMI and Buy Now Pay Later options being integrated into online purchase screens, provide consumers more ease of use. The way home and car loans greatly expanded their respective industries, providing easier consumer finance is likely to dramatically expand the consumer retail market.

The role of the retailer is changing and new business models that best serve the customer will need to evolve. To do this, companies will need to be more dynamic and data-driven when analysing, understanding and responding to sales changes.

The author is CEO, Augmented SCM

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