Indian Retail Dilemma and Challenges

By Kunal Mehta, General Manager IT – Lifestyle Business, Raymond Limited

Indian retail today is at the cusp of a new dawn. With the Digital era and macro policy updates from the government on Foreign Direct Investment (FDI) and Goods and Services Tax (GST), the traditional retailing has rattled the retail landscape on a number of fronts, and retailers are left to pick up the pieces. Retailers have taken to multichannel because that’s where the customer is going—but it’s not necessarily where the profit is which the offline retailers have started to realize and hence have started concentrating back on the basics of making the stores profitable.

As customer needs and expectations continue to evolve, retailers must establish nimble, flexible, agile organizations to build successful value propositions

The key company-level strategic focus areas, were: Improve Bottom-line &Top-line, Improve merchandise & assortment, Format expansion, Increasing store level profitability, Improving customer service levels, Improving inventory management, Vendor engagement & satisfaction, Employee training & development , Strengthening CRM thereby increasing customer loyalty/retention

“Store profitability” is of paramount importance and retailers are making no bones about how critical this is. Retailers are looking at a mix of store expansions with a strong focus on store location, size and assortment and operational efficiency. They have also started taking hard decisions on closing unviable stores, resizing / revamping strategic stores. Making the Store “EBIDTA positive” is the new buzzword. Store managers are being trained and measured on store profitability. Retailers with strong regional structures have identified the regional manager as being responsible for the P&L of the stores
under him.

Employee engagement is the key to sustained growth.With competition rising Customer service is the true differentiator. They believe that customers will develop trust through right advice and exceptional service which will be reflected through increased loyalty. Given the high attrition levels and ever-increasing customer expectations – Employee training has assumed greater importance. There is a growing realization that happy employees create a better store atmosphere. Engaging with a younger, evolving and a technology-savvy and informed set of customers has necessitated the upgrade of store sales staff capabilities.

Inventory Management Processes: At the store are a key focus area for all retailers. There is increasing evidence of a partnership between the operations and finance functions to decrease shrinkage levels by focusing on process, policy and technology initiatives. This is seen by retailers as a quick win for improving the bottom line. Process focus areas include implementing RFID, Single-picks and pick-by-store operations at warehouse to reduce cycle time and inventory checks at stores. Physical stock take process and ensuring gap-scanning every day at store has also geared up. Retailers are also implementing staff policies that reward shrinkage below a stipulated level and penalise
high shrinkage.

Space Range and management Tools: These are being used by large format retailers as space efficiency assumes great importance due to the high real estate cost, ensure better product assortment which can significantly affect revenues. The grocery retailers have especially invested heavily in such tools due to the large product offering and
store size.

Lease rentals Lease rentals continue to be a key cause of concern for retailers. With falling footfalls in malls, and even standalone stores at prime locations, retailers across segments and formats see variable rentals (revenue based) on sales as the only sustainable
way forward

Loyalty /Reward programs have become of prime significance for retailers of all formats.  Further, retailers with multiple brands and formats are looking at implementing a single loyalty program to obtain a ‘single view’ of their customer and leveraging it across the brand portfolio. Customer analytics is gradually gaining importance.The retailers have realized the importance of customized promotions as per individual customers requirements. Instead of running ad-hoc campaigns. Compared to e-commerce where the analytics is much stronger, brick-and-mortar retailers are lagging behind. This space is bound to get more evolved given that retailers are looking towards targeted marketing for increasing store revenues and improving their return on investment (ROI) on store promotions

Finally the Omni-Channel has become “A Retail Reality” completely disrupting the retail landscape. Success relies on connecting to your omni-channel shoppers by reaching consumers wherever they are, on whatever device or point of interaction they choose to use. People no longer discriminate between mobile and desktop – or between a physical store and a digital channel for their shopping. This is changing the relationship between sales channels and driving new realities for retailers. Retailers recognise the need to operate and integrate multiple channels supporting both physical stores and internet sales channels. Retailers have also started working on Mobile apps to complement both their sales and marketing communications.

At a strategic level, the development of a multichannel retail model where there is seamless integration between the real-world stores, online and possibly mobile channels is yet to become a reality for many Indian retailers

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