Two mega deals happened in the Indian retail scene for two altogether different reasons. Wal-Mart paid $16 billion for a majority stake in Flipkart, 2 years back to find a foothold in the lucrative and fast-growing Indian market. More recently, Reliance paid $3 billion to acquire the customer facing businesses of Future Group, one of India’s largest retail chains. The Reliance deal was aimed at an inorganic expansion of the Reliance Retail plan at a time when digital had already become a driver of value at Reliance Industries.
What does the exit of Flipkart and Future Group Show?
Why did the promoters of Flipkart and Future Group choose to exit? Clearly, the next phases of growth in the retail space are going to be tougher, more expensive and a lot more complicated. In their erstwhile shape, neither Flipkart nor Future Group had the balance sheet muscle to invest heavily in digitization and customer experience. The Indian Retail space now almost becomes a 3-way battle between Amazon, Wal-Mart and Reliance.
With all the three players gunning for the neighbouring Kirana shop, the consolidation of retail is going to be total and also a lot more rapid. That also means that the big 3 will heavily leverage on digital strategies to redefine the customer experience in India. Here is how the customer experience is likely to change in India.
India gets introduced to the Omni-channel experience
Traditionally, retail transactions in India have been a one-track street. You either went to the shop or the mall to make your purchases or the online mall came to your laptop and you got the goods delivered at your doorstep. With just 3 big players fighting for market share, the digital experience could change drastically going ahead.
The omni-channel experience is all about creating a click-and-mortar structure where the push and pull models of retail work simultaneously and seamlessly. In short, new retail will be the convergence of physical and digital commerce. The focus of retail will shift to making products available where and when customers want; and not about footfalls any longer.
One standout feature of the omni-channel experience will be the customized shopping experience. Imagine your shopping cart auto filled each month based on your previous 3 month purchases and delivered for your approval. This will reduce your effort substantially. This type of customized shopping experience will increasingly become the norm.
Future is about Cloud and Integrated Ecommerce
Small and medium sized retailers will no longer find value in remaining independent retail players. That is hardly going to add value to anyone. They would rather log onto a cloud based distributed infrastructure created by one of the big players and ensure that their franchise becomes more of an order procuring and order fulfilment centre. That is also likely to be a more viable business model.
One of the big challenges that small retailers have faced is with respect to inventory matching and management. With the cloud available at a low cost, all these small retailers can be integrated on a cloud platform and provided centralized order management and inventory management. That will actually add value to the retail chain.
Better use of bots and robotics for the ultimate retail experience
Can you imagine a situation when you log on to an ecommerce website and have to just deal with a bot. The bot not only conducts an intelligent conversation with you but also has a digital logic to answer your queries. The bot makes things so much simpler for smaller retailers to integrate and for customers to transact.
The next step is robotics. There is likely to be an increased use of robotics and automated machines in retail counters, inventory management, and dispatch management. This will not only ensure long term cost efficiency but also automatically digitize the experience and create an invaluable database to mine and act on.
Get used to more intense use of artificial intelligence
The future retail models will be largely based on emerging technologies like Artificial Intelligence (AI), Machine Learning (ML), and Augmented Reality (AR) etc. We could actually have virtual trial rooms, touch-less in-store shopping, and personalized digital communication. If you combine live streaming, the prospects in retail are limitless.
What we have seen till now on the retail front is just the tip of the iceberg. The actual shift could be seen in the next few quarters. There will be intense use of technology at the front end and at the back end. At the front end, technology will be used to enhance the customer experience and to customize the product and solutions to their unique needs.
At the back end, the extensive use of technology will be towards creating an ecosystem where customer demand becomes a simple pull factor. Indian retail is surely moving in that direction!