How are brick-and-mortar outlets dealing with the challenge of online shopping?

Despite a robust online presence, several retail outlets #IRL need to strategise to keep the footfalls constant

At 72, Geeta Gokhale was simply stumped when Mumbai went into lockdown in March 2020. Gokhale and her husband Inder live in the bustling neighbourhood of Dadar and were left wondering how they would manage their daily lives without a steady stream of vendors coming to their doorstep and the convenience of deliveries by local shops. Come 2022, and Gokhale and her husband are now experts at negotiating their way through online spaces, Whatsapp groups and the world of retail apps. “It was thanks to my younger friends in the colony that I was able to learn how to shop online,” chuckles Gokhale. Quite the techie now, she even taught her granddaughter the ropes when she visited for a few months last year from Satara. Gokhale’s 18-year-old granddaughter Tara, though, was more interested in checking out the sales for beauty and fashion products. “All week long, we would receive packages for her,” shares a bemused Gokhale.

When asked if Gokhale will return to shopping at a brick-and-mortar outlet, she exclaims, “I’ve gone back to using my local kirana store and several vendors–who now communicate through WhatsApp with us–but it’s a mix, really.” Gokhale now patronises online grocery retailers such as Amazon Fresh, Big Basket and Star Quik for her large orders of packaged goods, along with Whatsapping local vendors from whom she has traditionally bought her monthly supplies. Tara, however, was itching to hit the malls and retail stores to shop for Indian fashion wear, everyday casual wear and beauty products. “I needed the experience of trying on the clothes there and then, instead of waiting to receive the parcel, then trying them on and possibly returning them. Besides the thrill of shopping IRL is really something else,” she shares.

Both Gokhale and her granddaughter are, in a way, the tiny kernel of what is the story of India’s retail landscape at the moment. India, with its population of 1.3 billion, is a sought-after retail destination with a growing base of young and affluent shoppers like Tara. The retail sector contributes ten per cent to India's GDP and accounts for eight per cent of the country’s workforce. According to the India Brand Equity Foundation, India is the world’s fifth-largest global destination in the retail space. In the FDI Confidence Index, India ranked 16 (after the United States, Canada, Germany, United Kingdom, China, Japan, France, Australia, Switzerland and Italy). Data from Forrester Research indicates that India's retail market was worth an estimated $883 billion in 2021, of which grocery retail accounted for $608 billion. By 2024, the market is expected to grow to $1.3 trillion.

New ways of living

The year 2020, was a pivotal one for humankind. It was when the entire world experienced a (still continuing) pandemic and multiple lockdowns. Change was truly the only constant. In late 2021, the recovery of the Indian retail sector from the country’s devastating second wave of COVID-19 infections was still underway. According to Retailers Association of India (RAI) chief executive, Kumar Rajagopalan, recovery has been uneven, not only across income groups—income inequality has broadly been widening over the last 20 years in India—but also geographically. Yet, overall, Rajagopalan, as quoted in the McKinsey and Company’s State of Fashion report 2022 says the “India story” is as compelling as ever for the broader retail sector: “India has a young population; its middle class is growing; per capita income is growing above the $2,000 level; all these stories are still there. If you consider [all that alongside the return of] government spending and employment…the market for retail should return to its full might in 2022.”

According to RAI’s own September 2021 business survey, nationwide retail sales had already reached 96 per cent of comparable levels in 2019, boosted by the beginning of India’s festive season, which runs through to December, and the return of weddings, many of which were postponed due to restrictions on the number of people attending social gatherings.

Trends and hurdles

What are the challenges, then, for the retail industry at large? Visha Suchde, who worked through the pandemic even managing to convert her retail business from a franchise to a wholly owned multi-brand fashion store, Tinkara, in Ahmedabad, Mumbai and Hyderabad, has several insights. “The challenge is to stay relevant at all times while staying visible. We have to focus on building a brand [through many brands] that will draw the consumer physically into Tinkara.” Suchde wanted to establish a multi-brand store that had ten times the punch of a single brand, like the franchise she ran earlier. While it’s much tougher to run a multi-brand business, Suchde is very clear that it’s the differentiating factor that will make Tinkara stand out. What about the costs? “Yes, we’ve chosen a tougher route as our costs include rent and social media campaigns that will help us stay visible.” But as she explains, save for expenses on promotional activities, Tinkara’s costs don’t include logistics for home deliveries, returns and technology.

The McKinsey study points to five worldwide emerging trends that will help shape the future of retail:

1. ‘Seamless’ retail: Consumers no longer see boundaries between online and offline channels of consumption. This has led global players to experiment ways to create seamless retail experiences integrated across all channels.

2. Emerging revenue models: Retailers are experimenting with revenue models to enhance their customer value proposition by leveraging both traditional as well as emerging e-commerce models.

3. Rise of mega ecosystems: Rising competition and the need to constantly improve the customer value proposition is driving the rise of mega ecosystems, through acquisitions and partnerships, benefitting both shoppers and retail partners.

4. Personalisation at the core: Availability of quality data and the willingness of customers to share the same has enabled retailers across the world to deliver unique customer experiences.

5. Next-gen stores: Brands are experimenting with newer approaches to connect with shoppers, through in-store experiential concepts and using technology for blending digital content and the environment.

E-commerce cannot match the in-store experience

Retailer Anuraag Chadha runs two luxury stores: Hypetime, and a multi-watch store, Alchemy. He agrees that it is ultimately personalisation that will make a huge difference to his retail operations. “When we started Hypetime, it was to target the kind of customer who wanted to travel but just couldn’t and yet wanted access to luxury goods, the kind we retail at Hypetime [sneakers, apparel and accessories].” Chadha has observed that his customers are most comfortable with online purchases in the range of ₹50,000 and below. “For instance, at Alchemy, a mid-level luxury retailer, I’ve noticed that my customer wants to come in and experience a certain degree of personalisation and doesn’t mind paying a premium at all,” he notes, while lamenting about the customers who come in and repeatedly try on sneakers and apparel only to purchase the same online at a discounted rate.

Harsh Modi, co-founder and CEO of Mulmul, a brand that made many ripples on social media during the lockdown months and beyond, believes in a 50-50 model. Mulmul has a presence of 11 stores spread across six cities in India. “Comparing the two [online and offline sales] is really [like comparing] apples to oranges.” He says that customers just shop differently at different times using different methods. “The online and offline markets are set to co-exist. We experience this by being competition for each other; they are complimentary. We have witnessed an increase in online sales in particular cities where we have opened new stores.” Modi believes that a brick-and-mortar presence allows his customers to experience the product first-hand, giving the brand a face, thereby instilling greater customer confidence.

Shopping in real life

That the pandemic has proved to be an inflection point for brick-and-mortar retail has only reaffirmed the need for retailers to constantly innovate, adapt and navigate complexities. The sharp surge in eCommerce sales is not indicative of the death knell of brick-and-mortar stores. What’s evident, instead, is that retailers need to co-exist with both models and, at times, complement each other. One way to do this is by curating in-store experiences to engage their customers and foster their retention. It’s not just shop displays that are going to draw in customers anymore. As Suchde points out, “As a multi-brand store, I know I have access to several products that come together beautifully with my customers. My products have to be unique enough for them [the customers] to come in repeatedly.”

Experiential retail forever

Customer retention, a key part of customer acquisition strategies, will have to gain more importance as well. One way to do this is by building effective loyalty programmes. Brands and retailers will need to establish and leverage a variety of loyalty and retention technologies to connect and engage their customers, making sure they keep coming back. Consumer expectations are changing, and with it, customer acquisition costs are rising. What’s evident is that retailers in the offline space will need to refine their marketing tech stacks and prioritise relationships with their customers. Globally, this has worked for retailers.

Take the French company Splio, for instance, that helps brands and retailers set up their own loyalty programmes online, offline and on mobile phones. It recently integrated its marketing platform with WeChat to enable communication and engagement with Chinese consumers. The company also offers additional analytics and marketing tools that grant users the ability to do things like segment WeChat followers and deliver omni-channel marketing by mixing WeChat, emails and SMS. In November 2021, the company raised $11 million in a Series C funding, and among its customers are Shein, beauty brands L’Oreal and Sephora, and luxury brands such as Balenciaga. Companies like Segment, which was acquired by Twilio for $3.2 billion in 2020, provides a customer data platform alongside its automated personalisation software. The company provides a single view of each customer across channels by unifying customer data. This makes it easier to personalise interactions with customers across email, Facebook and Google ads, as well as in-product.

In the end, it’s customers like Tara who will ensure that footfalls to brick-and-mortar outlets will endure. “There’s no way I can only shop online. I live in a smaller town and really enjoy the big-city retail experience. Visiting malls and trying on different brands, perfumes and make-up is something I really enjoy.” Amen to that.

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