What's next for modern retail?

I have come across the modern retail industry a lot in the last half a year and I thought it’ll be best to start my contribution to this blog by sharing a few perceptions on it. I’ll talk about the two issues that I think, plague the industry and will come to the forefront in a short time.

We all have witnessed the growth of modern retail over the last half decade. The shift has been enormous from a time when our parents visited the weekly Mandi to this day when the neighborhood store from ABG/Reliance or Mr. Biyani has become the obvious choice. Leaving apart the hypermarkets, let’s see what the supermarkets have tried to do. These stores try to capture the market in the radius of 5km, from the kirana/general stores by offering same/cheaper prices in a better environment and also giving the shopper an opportunity to assess the products on the shelf unlike a kirana store. The only two areas where a kirana store had an upper hand were a) the provision of credit & b) the benefits coming from the fact that you dealt with the same guy every time (bargaining/he knows what you buy etc).

While the credit issue was well handled through tie-ups with banks and offering credit cards that earned you reward points, the second factor was and is still troubling the stores. This, in my opinion is the first issue that will impede the ascent of the industry (let’s forget about the real estate and funding issues for a moment). The management sitting in a board room planned as to how they will tackle the issue and voila, came the solutions like well-trained staff & attractive uniforms. But, such initiatives have to be implemented effectively at the grounds rather than being discussed in the boardrooms. If you haven’t noticed it yet, next time you visit one of the stores please do try to see how helpful and aware the employees are and you might figure out what I mean. For a fact, I have seen the staff of Reliance Retail beating up a group of 3-4 customers over a petty issue and I’ll leave it at just that.

The second area that needs attention is the use of business intelligence in this industry. It’s not very difficult to understand that this is a very data oriented industry with every transaction of every consumer being recorded. The SKU type & the category type data have to be put in and then there are daily/weekly/monthly price discounts or bundled offers. We have done well in recording all this information but where Indian retail players need to gear up is using analytics efficiently by embedding them into their day to day decision making. I worked on one such project this term for my course – ‘Business Analytics & Intelligence’ where we created a market basket for a retail store based on the transactions over a period of two and a half months. We started out with the goal to find out ‘associations’ across all the transactions. What this meant was looking for a combination of products in a particular bill that was bought repeatedly. This task introduced my project group to two tools (both are add-ins for MS-Excel) namely, XLMiner and Microsoft’s Shopper Basket Analysis Tool. Both require different kind of input but the first add-in has a limitation. The free demo version can handle only 600 rows of the excel file. Considering that you have lakhs of transactions, that’s a limitation that cannot be dealt with. On the other hand, MS’s tool is a blessing for any category manager or a retail store manager. Its output gives you the percentage of lift that a product gets because of another product(s) and that is how you know that bundling product X with product Y or placing the category A adjacent to category B would result in higher value for the store.

Use of analytics in online retailing by players in the developed markets is a case in point that the stores can achieve a much better level of efficiency through employing tools that help in unlocking the door to understanding the consumer behavior. Many analytics firms like Manthan Systems have realised the potential of this opportunity and are catering to the BI needs of retailers across the geographies.

Let me conclude this post by saying that to succeed, the modern retailers need to excel at both the qualitative and the quantitative aspects of the business and the two concerns that I've mentioned are exactly at the extremes of these.

Just read through the comments at the following link that I picked and you’ll know what magic analytics can do. Happy Reading!

https://www.insightcommunity.com/case.php?iid=1188

Bedi.

P.S. - Next up: "Loss Leaders @ Big Bazaar" & "Growth of Private Labels"