Customer trends, changes in retail industry post-pandemic

The customer behaviour shift that we saw seeded in the pandemic, will be reinforced

Dr Anil PillaiUpdated: Wednesday, June 01, 2022, 08:50 PM IST
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Supply chain constraints coupled with the release of a post-COVID pent-up demand, means the retail industry has its task cut out. / Representational Image |

Water, water everywhere, but not a drop to drink. And it’s not just the Indian summer that is red hot. So is Indian retail. The Great Reset is giving way to the Great Uncertainty. Demand is rising rapidly; supply just cannot keep up. There is no rear view, no history to rely on. These are truly uncharted waters.

Supply chain constraints coupled with the release of a post-COVID pent-up demand, means the retail industry has its task cut out. That there is pent-up demand is a given. But will this demand hold?

As inflationary pressures increase globally, retail cannot remain untouched. India, at the time of writing this article is still better off than the developed world with regards to inflation and this should hold unless the monsoon Gods decide to play spoil sport. Notwithstanding any additional surprises, the retail industry is slated to see the following shifts. Each of these shifts has a significant impact on Consumer Engagement:

Keep it simple

The behaviour shift that we saw seeded in the pandemic, will be reinforced. Convenience, Relevance, and the hunt for a good deal will continue to take pole position. Utility or Vanity? This categorization of purchases will drive the experience that consumers will demand of retailers. Utility purchases, as the label suggests, are those regular things we need or must have.

Consumers will rely on the comfort of known brands or on the allure of a sweet deal. Consumers, making these purchases will demand a low friction, ease driven buying environment with little or no choice overload. Consumers do not want excessive cognitive load while making these routine buying decisions.

Make the decision journey and the consumption journey as high velocity, low friction as possible, is what consumers seem to say. Retailer would benefit from paying heed to this. Vanity buys on the other hand, are products and services that I could do without, but I am anyway going to indulge. Here consumers will seek an immersive, experiential engagement, perhaps even a high touch shopping environment.

The retailer challenge will be to seamlessly integrate technology with physical interventions while designing for a tight control on the cost structure. As inflation rises, Vanity purchases in many categories would come under pressure. Consumers will seek aggressive pricing but without compromising on personalization and custom experiences.

Vocal for local or low mileage products

As global supply chains choke or in some cases go missing, there will be a surge for local produce and products manufactured within proximity. The supply chain challenges may have provided the urgency, but this shift was in the making. As countries look inward and are prompted to cater to internal job and wealth creation, this is fertile ground for local and even hyper-local brands to flourish. Sustainability and the appeal to help save the planet will play a role in the choice of products with low travel mileage or in other words produced in close proximity to the consumer.

Many hitherto small brands now have the potential to scale both at the supply side and at the demand side, the moot question is, do they have the internal capability and the know-how to do so. This preference for “local”, will in turn force global brands to accelerate their localization programs.

Coupled with a D2C focus by local, home-grown brands, this shift will challenge retailers, both online and offline. This would also see an aggressive acceleration of many marquee retailers to launch their home brands, thus being a competitor and a partner. All parties will accept this as par for the course

Levelling e-commerce

The Third shift is catalysed by a rather unique Indian experiment. On the back of the enormous success of UPI, the Government of India has embarked on an ambitious program to “open-source” ecommerce via the Open Network for Digital Commerce or the ONDC stack.

Just like UPI democratized the payments ecosystem, the Government hopes that ONDC will replicate this success in e-commerce. ONDC seeks to move small to medium retailers, restaurants, and other providers from the usurious clutches of the e-commerce biggies and platforms, who in most cases call the bargaining shots, leaving very little margins for the producers themselves.

Currently a 5-city trial of the ONDC stack is on with an ambitious end 2022 nationwide rollout being slated. Should ONDC live up to its UPI-esque promise, e-commerce in India will never be the same again. The appeal of an ONDC is that it will allow SMB brands to reach and own consumers directly without the intervention of an Amazon, Flipkart or Zomato like intermediary. This has significant promise.

However, the second order impact is that these SMB producers will now have to massively scale up their customer engagement ecosystems. It will no longer be enough to deliver a good quality product, brands will have to learn the consumer experience and engagement game. They will most certainly have to deliver a superior experience, one that betters even the legendary Amazon experience itself.

Crystal gazing even at the best of times is a mission fraught with risks. In these current times, even more so. The one certainty we can bank on is that there has never been a better time to be a customer! Brands big or small, that do not see themselves re-inventing their customer engagement will perhaps learn this the hard way.

(Dr Anil Pillai is Director, Terragni Consulting)

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