As physical and digital touchpoints converge, the retail landscape sees the emergence of highly aware customers, ready to experiment and preferring direct engagement with brands.
Image: Manjunath Kiran / AFP
TIndia’s e-commerce industry has grown rapidly, fueled by a high rate of digital adoption, ambitious consumers, and the maturity of the ancillary ecosystem such as logistics, packaging, payments, etc., leading to faster penetration beyond subways to level II and III cities.
The Covid-19 pandemic has accelerated these trends, with a significant proportion of consumers shifting their spending to the online channel and sticking to that decision, even as physical stores opened. This is reflected in Deloitte’s consumer tracking status for November 2021, with the internet becoming the intended purchasing channel for 50% of Indian consumers in key categories such as electronics, personal care and clothing.
In response to these paradigm shifts in consumer behavior, we have seen companies restructure and create a wide range of new capabilities. This has led to the emergence of new digital business models (distance selling, fast commerce, etc.) as well as a rapid scaling up of existing models (omnichannel, D2C, etc.). Organizations are increasingly realizing that e-commerce offers benefits beyond the channel and also a huge potential for using data from a front-end and organizational perspective to improve revenue and create ready operating models. for the future. Three clear themes emerge that will define the way business is conducted in the years to come.
The rise of Direct to Consumer (D2C) models: As physical and digital touchpoints converge, a new set of ‘non-linear’ consumers are emerging who are highly aware, ready to experiment, and prefer direct engagement with brands . This has led to an explosion of D2C models that allow businesses to directly own consumers and access high-quality data that can be used to create highly personalized and responsive offers. On the one hand, native digital businesses have thrived by taking an online-first approach and creating multiple revenue streams like subscriptions, memberships, etc. Additionally, as the partnership ecosystem has matured, digital natives have focused on their core acquisition retentions skills, leaving other operational activities such as technology, logistics, and payments to a larger set. wide of specialized companies working in all sectors. There are also established examples of such businesses which then grow by creating offline touchpoints that allow customers to touch and feel the products, enrich the existing customer dataset, and help them grow. expand to new segments.
On the other hand, traditional businesses are creating online channels and connecting their existing physical assets, such as exclusive points of sale. This allows them to better leverage their existing assets by adopting phygital business models. Many adopt a path of acquisition to gain access to this space more quickly.
Regardless of the approach, to be successful in this new arena, companies will need to focus on unit economics while ensuring they deliver a high customer experience. A key consideration for brands is the increasing competition due to low cost barriers. Therefore, it is imperative that every brand innovates to acquire and engage a large number of active users by offering convenience (e.g. app-in-app integrations), differentiated products (private brands), etc.
Disintermediation Through Digitization: In recent years, emerging technologies such as cloud, artificial intelligence, machine learning, blockchain enabled by innovations from India’s strong startup ecosystem have redefined the contours of businesses. commercial channels in many sectors aimed at consumers. Organizations are increasingly turning to these technologies to create future-ready businesses by leveraging digital capabilities and creating integrated processes along the value chain. As we enter the era of Web 3.0, accelerating decentralization will lead to new ways of doing business “headless” and lead organizations to move away from traditional business channels. In addition, their rapid adoption in key building blocks of e-commerce such as supply chain, warehousing and payments will reduce barriers to entry and create a more vibrant ecosystem. This is already being seen to play out in industries such as finance, retail, education, and healthcare, with a shift towards thin asset cloud-based models emerging as key areas of differentiation. Adopting these initiatives can lead to increased margins, increased consumer reach and long-term market share.
Businesses are going beyond using the online channel as a means to facilitate transactions; they adopt a platform model to provide a holistic mechanism for all stakeholders to create value for each other
Adoption of the platform approach: Organizations are increasingly moving beyond using the online channel as a means to simply facilitate transactions. Instead, they adopt a ‘platform model’ which, unlike the traditional value chain, provides a holistic mechanism for all stakeholders in an organization to create value for each other. transparent and resource efficient way. It allows brands to make sound decisions, sustain results, be agile and minimize risks. To successfully implement a platform business, brands need to focus on a digitally driven mindset, service efficiency, and effective portfolio management. Many are increasingly choosing to be an ecosystem engine where they provide a branded platform to connect fragmented and unorganized industries, ensure a great customer experience, and collect customer data from all interactions that can. be used for information generation. In addition, they can charge both customers and suppliers for the provision of value-added services. Another approach is to play the role of an aggregator who acquires brands, builds standardization to reduce costs and pollinates learnings to continuously learn and innovate.
As these themes emerge, they will have several implications for organizations. Consumers will demand a top-notch experience centered on transparency, two-way communication and sustainable practices. Organizations will therefore need to accelerate digital adoption and enable agile, agile and targeted working methods to create deeper connections between communities. These are sure to be exciting times for the e-commerce industry and as we venture into the New Year, it’s time to buckle up and enjoy the ride.
Ramanathan is Partner and Bagri is Associate Director, Deloitte India
Click here to see Forbes India’s full coverage of the Covid-19 situation and its impact on life, business and economy
(This story appears in the January 14, 2022 issue of Forbes India. You can purchase our tablet version at Magzter.com. To visit our archives, click here.)