Consumer buying behavior is evolving faster than before; buyers expect not only a frictionless but also a real experience. Today’s consumer is socially empowered, tech-savvy, information rich and time starved. The resulting level of disruption driven by this generation of consumers is unprecedented. Their ability to influence fellow consumers and companies alike is magnified well beyond that of previous generations. As a result, these consumers expect the world to be at their fingertips, at a place and time of their convenience. They don’t go shopping, they are shopping 24X7. Further, they want an authentic shopping experience that is customized to their needs.
Four mindset megatrends will have far-reaching implications for the retail industry over the next five years.
1. Interconnected: Interconnectivity will become a part of life. Consumers will expect to connect to anyone, at any time, about anything and from anywhere.
2. In control: With interconnectivity as a base assumption, consumers will also become more adept at controlling the ways in which they interact. Control will take three forms:
Clout control: Consumers will find that strength lies in association, and this can empower them to drive change. Crowd clout will help consumers demand the products they want, via the shopping experience they want, from companies that do business in the ways they want.
Context control: Tools and technologies that enable time shifting and place shifting will increasingly allow consumers to capture information, communicate and conduct transactions regardless of time or place.
Contacts control: Consumers are also gaining more control of whom they let into their interconnected world’. They are increasing their use of filtering mechanisms to create a “closed loop society’, where connectivity is limited to the contacts they allow in. Such filtering mechanisms today include spam filters, permission-based marketing, cell phone as primary phone, caller ID and sites where consumers can “reject”unwanted contacts.
3. Indulgent: Over the next few years, consumer indulgence will be focused on as the “next new thing”and the “next best thing’. Interconnected shoppers will have the tools to easily discover, find, filter and try the next new thing at ever more affordable prices and then quickly move on.
4. Individualized: Shoppers will gravitate towards products and experiences that offer individual focus, interaction and involvement in the entire value chain process. They will desire products and experiences they perceive as meeting their unique needs.
Competitive intensity is on the rise like never before; the growth of well-funded ecommerce companies coupled with hyper-local regional players can lead to consolidation in store footprints for many retailers.
The rise in e-commerce is forcing traditional brick-and-mortar retailers to rethink their store formats and numbers. At present, e-commerce is confined to the metro-dwelling, web-savvy, computer and smartphone using professional class. It is the same class that is also being served by big corporate-run stores. Right now, this retail segment, more than small shopkeepers, faces a threat from e-commerce. Sales per sq.ft for big Indian retail stores has been declining due to this competition. The decline is particularly noticeable in segments like music, electronics, books and apparel. For the past three years, many big retailers have cut down on their new store openings as a result of competition from e-commerce. Planet M, the prominent music retailer, actually closed 100 stores between 2011 and 2013. The key factor driving up the competitive intensity is pricing and the growth of well-funded large-scale e-commerce players who have successfully leveraged discounting as a mainstream business model. From being a much-anticipated annual event, discounting and sales have become a way of life. As a result, price has emerged as the biggest differentiator driving consumers to shop online or in-store. The other factor to watch out for is the rise in hyper-local regional players, offering highly specific and local products to a set of targeted customers. By doing so, they are hitting at the core of many a small multi brand retailer.
Birth of the “experience”store will set new benchmarks in overall customer and brand experience In the PwC India report titled “Total Retail 2015: Retailers and the Age of Disruption’, they have discussed how the physical store will evolve into a sleeker, more customized and less transactional model. While the purchase journey is still centered on the physical store, the practice of omni channel retailing has helped transcend physical boundaries for both the customer and the retailer. Over a relatively short period of time, Indian customers seem to have comfortably embraced multichannel shopping. This change has also come about as a result of the smartphone revolution in the country. Physical stores have metamorphosed into experience stores and are trying to enhance customers”experience of buying in-store. So while e-commerce portals are luring a significant percentage of the demographic, physical stores too attract their fair share of customers. This two-pronged approach to entice customers, who are becoming channel-agnostic, has been working well for some retailers in India. For instance, Big Bazar Fashion Store sells its clothing and apparel through its retail outlets at Home and also has an online presence on all the leading websites in addition to its own web portal.
For some retailers, such a hybrid model has helped them scale up in terms of growth and also reach out to a wider target group. Online jewellery retailers in particular have found that physical stores have helped build customers”trust in the brand. The “try and buy”concept has always proven to be successful. With experience stores becoming popular, retailers are definitely setting new standards in customer service and brand experience.
Indians are learning to look beyond products and are ready to invest in services One of the key drivers in the growth of online retail is going to be the onset of “services”which will bring in a whole new arena of business that was not perceived as retail into the purview of this business. When Best Buy launched Geek squad it was a pioneer in building a billion dollar service business as a retailer. Services associated with the product such as installation, insurance, extended warranty, annual maintenance contract (AMC), etc. did not qualify as key differentiators, now Indian consumers are looking beyond the product and are expecting organizations to understand their needs and offer end to end solutions.
Localization, and Reimagining the overall value proposition of products is needed for retailers to woo customers. The retail industry is facing an explosion of creativity and retailers are pulling out all the stops to woo their customers. Brands like Chumbak, Happily Unmarried and India Circus have carved a niche for themselves with their quirky design themed lifestyle products. Retailers like Forever 21 and Zara, also considered as pioneers in fast fashion, have seen meteoric success with their unique “fresh off the ramp”style and youthful appeal. Similarly, gourmet food retailers and several fashion and apparel retailers have gathered their most loyal followers on the basis of their specially-curated collections. Apparel and fashion retailers are increasingly launching collections which have been handpicked by youth icons and fashion designers at affordable prices. Product exclusivity, which has traditionally been a forte of luxury retailers, has caught on as a marketing strategy across categories and prices ranges.
Food and beverage products, electronics, and the fashion and apparel segment saw several exclusive product launches through their online channel as a strategy to attract maximum consumers in the past year. Retailers are becoming extremely conscious of maintaining exclusivity in their product portfolios. It has become vital to ensure long-term brand affinity not just through innovation in product design but also through innovation throughout the purchase journey. Retailers are striving to gain visibility among consumers right from the point of discussion. Location and micro-location based marketing strategies are fast gaining prominence in India.
Today, all popular social media platforms allow users to check-in”and make their locations known, making it easier for advertisers to push for more customized promotions towards targeted consumers. On the other hand, fan pages of retailers on social media sites that have contributed greatly in spreading awareness about the latest launches and collections, will now have a “buy”button to facilitate the transition from product discovery to purchase. Not only has it become easier to settle complaints and grievances but also social media fan pages and conversations involving brands have steadily contributed to the on-going marketing efforts by retailers. Testing a new advertising concept or even revising brand positioning has never been easier. Amazon, for instance, is crowd sourcing ideas to generate original content for its video services. The retailer lets aspiring screenwriters and filmmakers upload scripts to its website. Additionally, it also posts ideas for films or TV series in the form of comics to invite reviews and feedback from its customer base.
Such differentiated service offerings will help retailers create brand-defining experiences, thus driving more sustainable growth. Interestingly, start-ups which have been springing up in the retail space in the country recently have this concept etched in their psyches. They seem to be causing disruptions in the most fundamental way possible through innovation in product design.
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