Technology Disruption in the Essential Services Sector – Improving Businesses and Customers
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While India has been witnessing the buzz created by eCommerce over the past few years, technology has slowly and steadily disrupted a number of services- ranging from sourcing, buying products, financial payments and healthcare. Whether it is about making digital payments, or ordering food online, booking an air ticket/hotel on an app, or booking a lab test/ doctor’s appointment- technology has totally transformed our daily lives and the way we approach essential services. So much is possible without all the running around for businesses and customers.
Recently, history was created for the Indian startup ecosystem with the recent Flipkart acquisition by Walmart. This was a celebration of the hard work put in by Indian entrepreneurs, who have been working tirelessly to make lives better for fellow Indians. The foundation for eCommerce is well laid in India. Amazon, which is the big daddy of eCommerce across the most developed markets, is also moving ahead with significant spends in the Indian market. One would wonder that with all the action happening on the online front, is it the end of the road for the offline retailers? However, this is far from the truth.
If one researches well, we realized that even in the US the offline retail is more than 91% and will continue to dominate in the decades to come. A major difference between US and India is also the fact that US is primarily an organized market, while India is not. We have seen some action on the payments front for the offline merchants, with the increased usage of QR codes (especially after demonetization) by even mom-and-pop shops in tier-2/3/4 cities. In Fact, it is a usual site to see street vendors providing the digital payments options to their customers. The rationale for this is very simple- convenience for both the seller and buyer (do not need to worry about change) and better accounting.
Clothing and Fashion Industry as an Example
Let me talk about the fashion industry in India in more detail in this article. It has its set of challenges – too much variety, non-standardization of products, as well as variance in taste and design preferences across locations. This causes a huge roadblock to the unbranded offline retailer category (that are in millions in India) as they are at a disadvantage since branded products have existing customer awareness in terms of quality, fit etc.
The unbranded products, although might have the best of quality and design, suffer from lack of awareness and stand a limited chance in comparison to the branded biggies. Interestingly, with almost 92% unorganized market, India continues to be a non-branded fashion market which can only operate with a touch and feel.
Comparison Between Online and Offline
However, there is a decent 10-20% churn in the fashion offline shops (much steep in online though) and that happens primarily because shopkeepers fall into a trap that they cannot exit. To understand this better, let's first understand how unbranded fashion, especially in offline works. It works on latest designing that gets created at manufacturer’s end, could be a copy / inspiration / fusion of multiple designer inputs of brands or otherwise.
Every retailer has a certain target client group where a particular taste works – there is no one size fits all here and this is one of the reasons why India has 2.5 Million fashion retail stores. Every seller has a different variety and hence, the millions of sellers continue to coexist, with each having a certain clientele. The growth of their business completely depends on the quality and taste of the inventory that they are selling. Most customers prefer to visit a store where latest and fast- moving designs are available. It becomes a positive loop – good designs -> good footfalls -> faster churn -> newer and high frequency buying ->ability to show newer designs to walk-in clients on every visit -> more buying and more repeats -> … and the growth continues. The key to this growth is walk-ins and repeats from a certain catchment area which means shopkeeper has to always impress his walk -in customers with designs, quality, and best of service. TT achieve this, since decades, the offline merchant has been travelling across the country so as to be able to build an attractive assortment of latest fashion, which is high quality, as this is critical for the growth of his business. If he doesn’t do this, then he is repeating the mistake done by big brands like Nokia. He is neglecting change in trends, which will in turn impact walk-ins and his business. With poor fashion taste / wrong selection, he gets into this cycle of de-growth which can even lead to business closure.
This is where it becomes important to empower these offline retailers across businesses so as to enable them to do better business as well as sell the best to the customers. Technology and the new age brands are not only disrupting the online space but there are numerous startups who have been working on driving efficiency in the offline space.
One should understand that offline shopkeepers do everything possible to get hold of designs that can move fast – they travel, they hunt for wholesalers and also buy at the terms of suppliers and at higher rates, often for the inventory that moves fast. This clearly means that curated inventory has significantly higher value for the shopkeepers.
A Good Platform
If there is a credible and innovative platform that can provide access to immense variety, does it become a winning proposition already? The answer we learnt is ‘No’, unless we can use technology and provide curated taste/ offerings to these shopkeepers. A platform in B2B or B2R has buyers who are equally demanding like a B2C platform. One has to intelligently use data science, machine learning etc. to provide designs to shopkeepers that can sell very fast. Only then will a shopkeeper value a supplier and will start getting dependent on it.
A platform also needs to provide technology solutions / interfaces that can help these shopkeepers expose their inventories to end buyers which can generate walk-ins for them. Many startups tried and failed in getting the inventory digitalized and expose it to generate walk-ins. The primary reason being that the shopkeepers had no incentive to upload their designs as the efforts were not getting translated into walk-ins.
Innovation to Standout
To get out of this chicken and egg situation, one needs to put efforts on getting the inventory first. This is so because once the inventory is in place without the effort of shopkeepers, some traffic can be generated, which will in turn get the shopkeeper to upload more designs. This is also the genesis of the O2O model that will drive the next billion users online and can dent the current eCommerce race against Amazon and the likes, according to technology giants.
Since offline is here to stay in India and the offline merchants carry far more inventory as well as offer the advantage of instant fulfilment, along with easy touch and feel for walk-in customers, online discovery is a great starting point. With Google clearly prioritizing local inventory listings against online portal ads, it clearly is an indication of where the next big revolution is.
Interestingly, this also makes fashion ecommerce more complex with 2 modes-online and offline fighting it out for the customer wallet share. However, offline touch and feel and instant fulfilment have been the most stable blocks on which the industry is already thriving. Given the way technology is evolving, B2C ecommerce will not be able to easily give jitters to offline, forget about derailing them.
This is the just the beginning of how technology is helping the merchants and customers. A revolution is in the making, as India progresses to be a developed global economic superpower.