Digital Interventions Altering the Complex Indian Retail Landscape

Here's why the landscape of the retail industry in India has changed more in the last few years than ever before

learn more about Jayaraman Krishnamurthy

By Jayaraman Krishnamurthy • Apr 8, 2019

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While the commencement of Goods and Services Tax (GST) has forced retail companies to take a hard look at their supply chain design, the growth of digital technologies has opened up unseen avenues to engage and retain the customer.

Issues With the New System

Firstly, there were the teething troubles of a new system of taxation that made companies take a hard look at how they do their books. While the earlier regime was all about designing tax outflows to tackle the excise and sales tax components, the new system gave companies an opportunity to revamp their entire supply chain, in terms such as the cost of manufacturing, procurement, and logistics.

Since then, companies have been critically redesigning their networks and nodes based on fundamental supply chain principles, away from the usual thought process of tax avoidance. Big automakers and FMCG brands such as ITC are investing big in automated warehouses that are much larger and technologically superior to their existing ones. Thus, these supply chain redesigns with technology disruptions enabled by omnichannel commerce have opened up a huge opportunity for brands and manufacturers to reinvent their longstanding structures and enter the next wave of growth.

These Factors Have a Role to Play

The last few years have seen massive growth in ecommerce and omnichannel retail in India in cities as well as rural markets. Even smaller retailers are now developing their own ecommerce sites, private marketplaces, and local grocery delivery chains. A big FMCG brand has enabled customers to order from the app and collect products from their neighbourhood store. The ease with which a modern customer, especially the millennials (35 and younger) order from mobile devices has enforced a redesign of traditional distribution networks and fulfillment strategies.

The playing field has levelled in many senses. A combination of GST-led optimization of the supply chain and the emergence of omnichannel commerce has opened up new customer engagement possibilities. Earlier, sales and inventory details had to be synchronized at scheduled time intervals. Today, mobile apps, portals, and microsites let retailers and distributors even in the lowest levels of the supply chain order from a manufacturer, directly. Invoicing and fulfilment have become less cumbersome. On the other hand, manufacturers also gain great visibility and reach, enabling them to pass on promotions and schemes in a more targeted fashion. While major brands are pushed to nurture new ways of engagement, smaller brands have been gaining same leverage as big ones.

Channel loyalty in digital times

Indian FMCG and Manufacturing Industry has been a multi-tier, multi-dealer-retailer network with geographical complexities. While most industries have begun their digital journeys to reach customers directly, the existent multi-tiered way of functioning is not going to be completely dismantled. The multi-tier distribution structure is not going to be reduced overnight and hence all brands want to engage with the channels in the best manner that they can.

Fostering Channel Engagement and Loyalty

Dealers, distributors, wholesalers and retailers all are critical members of any manufacturer's distribution network. Brands need to engage with them and have them stay invested in their brand and to be loyal to it. This however is easier said than done, since in most common manufacturing categories like cement, steel or paints, the end product is usually a commoditized item where product differentiation is minimal and an average retailer or distributor would find it very difficult to get "Loyal" to one brand over the other. One way that brands use to drive this loyalty is through trade discounts and rebates but again these techniques too very soon become the industry norm again reducing the scope of uniqueness. With digital, the old way of blanket trade discounts and rebates to top performers is now changing. This is where capabilities like artificial intelligence (AI) and machine learning (ML) enabled gamified, engagement-centric approaches treat every customer individually.

While sales-led discounts and rewards have appealed to the previous generations, the current millennials often take over the businesses need personalized attention from brands. Further, there are end-users such as mechanics, carpenters, electricians and drivers who exercise disproportionate influence over purchasing decisions.

Some of the themes that have worked well for these small business are:

  • Digitizing the entire sales value chain to identify, authenticate, and track point of sale moments using technologies such as QR codes, mobile apps, OTP-based authentication etc., to help build convincing platforms of customer engagement and loyalty.

  • Gamification of the whole loyalty program to foster a sense of community among the various channel partners. The use of tracking and display of leader boards and badges based on sales and engagement with the brand. While sales are always an objective way of tracking Brand Loyalty, use other softer parameters too like knowledge of the brand, industry and treat the channel Partner as individual.

  • Fraud Elimination: Create Fraud Proof Processes even while designing a loyalty program by leveraging mobile, scanning and optical character recognition technologies and not wait to reconcile after the event.

Lastly, emerging technologies such as AI and ML help analyze and segment the various channel partners to tailor sales campaigns rather than mere post-facto analysis. When a promotion fails, early warning signals can help companies immediately rectify their campaigns. Thus, today's complex Indian distribution system needs much more than traditional loyalty programs. Only those companies that reimagine powerful digital-led customer engagement tools will win the game.

Jayaraman Krishnamurthy

Head of Consumer Product Goods (CPG) division, Capillary Technologies

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