Shifting Consumer Sentiments Drive Retail Innovation Amid Ongoing Global Pandemic, Retail News, ET Retail

By Porus Doctor, Anand Ramanathan The COVID-19 pandemic has changed the way an Indian consumer perceives the end-to-end retail experience. Lockdown restrictions across the country have resulted in limited product availability, a shift to online shopping experience and reduced marketplace options.

Deloitte State of the Consumer Tracker, an ongoing initiative to track consumer sentiment, recently revealed a growing trend toward convenience, social welfare, and mixed commerce models. Over the past 12 months, consumers have started to prioritize safety and hygiene, with 78% of consumers caring about their physical well-being and avoiding visits to stores.

Retailers have responded to the pandemic and changing consumer needs by moving away from traditional brick-and-mortar stores towards integrated multi-channel offerings. Digital collaborative distribution models have emerged, providing customers with a personalized and consistent offline-to-online (O2O) experience. The share of e-commerce and D2C channels is expected to grow due to rising digital spending by millennials, a growing need for convenience, and growth in home consumption.

Retail Drivers

The latest edition of Deloitte’s Global Powers of Retailing report analyzing the top 250 retailers provides some interesting factors behind their successes. The following key themes emerged:

Response to store closures

The impact of mall closures and restricted sales of non-essential goods has forced many businesses to pivot their product portfolios to supply essential goods, absorb contribution margin losses, or close permanently. Successful retailers operated through different business models and identified new channels to reach consumers directly, which enabled them to minimize the impact of forced store closures.

Digitally savvy retailers

Retailers with digital DNA were well positioned to manage the impact of the pandemic and were able to respond, recover and thrive faster. Conversely, companies that relied solely on traditional distribution channels were at a disadvantage and had to rebuild their networks to adopt a more digital approach.

Focus on consumer “stay at home”

Businesses have seen a significant number of purchases coming from e-commerce channels, with more than 70% of consumers preferring to stay home, according to Deloitte’s State of the Consumer Tracker, and willing to pay more for the convenience of home delivery. Retailers have re-evaluated their product offerings and consumer strategy to better meet this consumer preference. As a result, we are seeing a move towards large, value-for-money packaging and continued investment in digital technologies to serve the increasingly connected consumer.

Retailer product category mix

Consumers have shown an increased preference for spending on groceries, household items and medical products as they continue to hold back on discretionary products to preserve cash. Companies need to re-evaluate their product line to align with these changing consumer preferences, especially with a greater emphasis on convenience and health.

History of the growth of e-commerce

Digitally influenced non-linear customer journeys and the development of integrated omnichannel retail experiences have led to high adoption of e-commerce based retail models. This trend is expected to lead to new innovative offerings from companies.

According to Deloitte’s Global Powers of Retailing 2021, India’s Reliance Retail was ranked the 2nd fastest growing retailer in the world. The company invested in its retail and digital presence, with 13% more stores than in the prior year (across different product offerings such as electronics, groceries, fashion and retail chains by retail). In addition, partnerships with WhatsApp for the future launch of JioMart on the platform, and the acquisitions of Netmeds and UrbanLadder have increased their e-commerce presence.

The growth and emphasis on e-commerce is not limited to Tier 1 and Tier 2 cities, with a significant contribution coming from rural India. In fact, during the first wave of the pandemic, we saw rural India generating retail revenue. Several players are forging new strategic alliances to expand distribution capabilities and direct coverage in rural parts of the country.

The future of retail

Several trends have emerged over the past 12 months, a growth in e-commerce, more diverse product portfolios, the availability of hyper-local delivery models, changing consumer preferences and an increased focus on health.
Going forward, brands and retailers will need to realign their businesses and priorities across manufacturing, distribution, and product mix, enabling them to improve their responsiveness to an ever-changing market landscape. Companies are updating their business models to more D2C and omnichannel options and increasing their investments to digitize their supply chains to operate efficiently and allow them to scale as trends change. Retailers may see the pandemic as an opportunity to disrupt the traditional shopping experience and create something truly connected.

(The author of the article is Porus Doctor, Partner & Consumer Leader, Deloitte India & Anand Ramanathan, Partner, Deloitte India)

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