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Retailers must focus on localisation, 'phygital' to beat COVID blues: Kumar Rajagopalan

Sangeetha Chengappa Bengaluru | Updated on December 04, 2020 Published on December 04, 2020

Retailers should also consider modifying their supply chains, says CEO of Retailers Association of India

Severely hit by the onset of the pandemic in mid-March, the $854-billion Indian retail sector is witnessing green shoots of recovery after the Diwali festival season sales. In a conversation with BusinessLine, Kumar Rajagopalan, CEO, Retailers Association of India (RAI), talks about the sector’s recovery, the need for an omnichannel approach, convenience stores and survival strategies in a post-Covid-19 world. Edited excerpts:

When do you expect full recovery of offline retail which is still at sub 30 per cent recovery due to Covid-19? And what will drive it?

Certain categories have started to show growth. All items relating to work-from-home (WFH) continue to show faster recovery, especially electronics and consumer durables, with some segments under WFH registering double-digit growth of 15-18 per cent compared to last year’s Diwali shopping period. The value segment of retail has done well, indicating 10 per cent sales growth over last year same period. Pharmacy and daily needs markets have done well too. However, some food retailers are still recovering slowly, observing a de-growth of 10 per cent over last year.

Omnichannel has been a buzzword in the retail industry since 2004-2005. But most traditional retailers only paid lip-service to it. Has the pandemic urged retailers to come up with a strong omnichannel strategy?

The pandemic and the resultant lockdown drastically changed consumer behaviour and expectations in several ways. The entire customer discovery process is predominantly becoming digital due to hygiene concerns. Offline to online and online to offline buying is going to be the way of life and most retailers have already adapted to this. Yes, the pandemic has enhanced the importance of retailers having an omnichannel strategy since concepts of digital browsing, click and collect, curb-side delivery, video shopping, etc have gained importance. Consumers are looking to purchase based on convenience, either as home delivery, time-scheduled shopping or by shopping at nearby offline stores. And retailers are fulfiling this need. The pandemic has also got many e-commerce-only companies thinking about offline stores to augment omnichannel retail because consumers trust and find nearby stores convenient.

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Reliance, Amazon and Flipkart are on an acquisition spree to build their omnichannel retail presence. How will this change the retail dynamics in India?

Modern retail, which has a size of around ₹6.6-lakh crore, has been a sunrise industry for some time in this country, and mergers & acquisitions are therefore a part of the retail ecosystem as it is for any sunrise industry across the globe. When new financial M&As happen, it encourages new retailers to strive harder to create value. This also encourages new start-ups. India is proving its capabilities to grow retail businesses. However, there is still a lot of untapped growth potential. Financial development of any nature which supports multi-category, as well as focused-category businesses, helps feed the required hunger of an industry.

Retail was called the ‘sunrise sector’ in the mid-2000s. At what stage of maturity is the Indian Retail sector in currently, and what does the sector need to do to keep itself relevant to customer needs in good and bad times?

The Indian retail sector which was valued at $854 billion in 2019 is expected to reach $1.1-1.3 trillion by 2025, (as per RAI-KPMG and RAI-BCG reports).

Our recent report with KPMG highlights a few key aspects, which retailers should consider post the Covid-19 scenario if they are to survive in this new reality. These include increasing impetus on localisation, Phygital, and using digital technologies to the maximum. Apart from enhancing their presence on e-commerce platforms, there is also scope for retailers to leverage strategies, like in-store operations including virtual reality, enabled trial room experiences, live displays of stock being available, click and collect, etc. Shoring up customer relationships and maintaining brand loyalty will be crucial and imperative. Retailers could look at experimenting with different feasible forms of media to stay connected with customers and build on trust. Retailers should also consider modifying their supply chains and develop capacities to plan inventories and logistics to meet fluctuations in demand.

Despite many formats flourishing in the country, the 24/7 convenience store format does not seem to have picked up. Don’t you think the market has matured for convenience stores in India?

Over the years, we have been working closely with the Central Government on the Model Shops & Establishment Act that applies to establishments employing 10 or more workers. RAI had been pursuing all the State Governments to adopt the Model Act. This Act seeks to bring about uniform working conditions across the country. Such uniformity will make business more conducive for 24/7 convenience store formats in India. The key features of this Act include freedom to operate 365 days a year and relaxation in opening/closing time of establishment. This could mean that shops and establishments can operate 24/7. Prior to Covid-19, some states had started implementing it under the State Retail Trade Policy. With social distancing norms in play, it would make more sense to expedite adoption of this Act to enable consumers to continue their shopping at their convenience, without having to crowd stores due to operational time restrictions and enabling the retailers to achieve more sales.

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How do you view the constant chorus of CAIT, Swadeshi Jagran Manch and other such bodies filing cases against Amazon and Flipkart accusing them of unfair trade practices and deep discounts?

In accordance with the laws in India as they stand today, FDI in e-commerce marketplaces will have to be like a mall (or a platform, which offers a wide range of product offerings) without being a retailer themselves. If this is not taken care of, there will be no level playing field for other small retailers since they aren’t as well-capitalised as marketplaces. In the larger interest of the retail community, care must be taken to ensure that marketplaces have no role to play in determining product prices.

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Published on December 04, 2020
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