12-oct-blog

The Future of Unorganised retail: The fusion of technology, offline retail, and buyer preference has given offline a comeback in a new avatar.

12-oct-blog

Could the wave of the future be a dig from the past? In the 1970’s and thereabouts, the delivery of grocery and other staples was a dominant part of the culture in countries like North America and Europe. In India, for example, the door to door delivery of milk, vegetables, and home-cooked meals has never really fallen out of fashion. Across the globe, we are seeing a replication of this model with some modification – the resurgence of the home-delivery system with a revision. Now consumers are not just placing orders over the phone, or going to the store, choosing their order and getting it delivered home- now the consumer places order to a faceless system by pulling up the retailer’s webpage or using their mobile app. The same home delivery, same phone but a different underlying technology!

The Indian retail is a perfect of adoption of this revised business model serving well the tech-savvy, time-crunched millennial as well as the older generation living a comfortable retirement and do not wish to go shopping every few days of the week.

The unorganized retail sector is the newest entrant to technology savvy revised business model. So far underpowered, the adoption of the internet to attract, retain and acquire customers has increased intensified the battle for footfalls or clicks on the offline stores and e-commerce sites respectively. The retailers have readjusted their business to ride the digital wave.

Fuelling the changes of converting the Indian unorganized retail into the digital ecosystem is the cheap and ubiquitous internet and the penetration of the smartphones. The internet access to the price-sensitive Indian consumer and low customer acquisition cost helps the offline retailer to offer a better value proposition to its customers in comparison to its digital and organized competitors.

What is has online shopping picked pace in India? And why has offline retailer adopted technology and replicating online conveniences? The increase in affordability, accessibility, and awareness are the underlying factors to this shift.

The primary change in affordability has come because of the increased connectivity to large towns where people hop in search of non-agrarian employment. Since the income from non-agrarian employment is at least 10% higher than the farm income, the consumer’s with non-agrarian jobs have higher disposable income. Converting this affordability into expenditure is the awareness factor. With the penetration of mobile phones, Direct-To-Home satellite broadcasting channels, cheap mobile data, and ubiquitous internet, the consumer is aware of what’s available outside the local market. This awareness emanates into adoption and consumption of new categories of products.

The rapid urbanisation and high population density make the home delivery model economically viable, particularly when coupled with low labour costs, as is the case in India. A small factor affecting India’s food industry to shift online is the concern of the new age consumers on food safety, hygiene and the surge of organic foods.

Internet penetration has also allowed the brick and mortar stores to offer a great selection of products across categories, by using virtual catalogues, use data to forecast demand and offer customized delivery options. The emergence of a grocery store into a health and wellness store or an electronics store into a durable goods insurance agent have fused the lines of business scope.

Will the virtual replace real? Will the clicks replace footfalls? Not any time soon.  Other than the obvious convenience of visiting a nearby store to fulfil the need for immediate consumption, offline retail stores have a powerful sensory experience. The Indian shopper, for example, considers shopping as an entertainment activity also. Thus becoming a retailtainment. The smell of ripe mangoes, the fragrance of fresh flowers, and the texture of the fabric are virtually impossible to replicate.

This is the basis of the marriage of digital and offline retail sector, resulting in indulgence and thrill of discovery of unknown and unplanned items on the shelf.

We are witnessing a return of the old – repetition with some modification.

 

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