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Evolving Face of Retail

“You can’t wait for customers to come to you. You have to figure out where they are, go there and drag them back to you.” — Paul Graham, Y COMBINATOR

Talking about retail in general, there has been a constant change in shopper preferences and habits from time to time which only magnifies the pressure on retailers to evolve. The ongoing pandemic has been an eye opener for the entire retail ecosystem and has forced everyone to rethink about the fundamentals of buying and selling. The truth of the matter is that retail is ever evolving and success at the shelf is no longer about the depth and breadth of inventory, but about creating engaging and comfortable experiences for customers.

Keeping the ever evolving nature of retail in mind I have analysed opportunities around 2 important pieces in B2C retail which are seeking tailwind from this pandemic: 1) Increasing need for offline businesses to have a digital presence 2) Growing need for improved customer engagement online

1) Need for offline businesses to have a digital presence

The long-term effect of the pandemic on the offline retail sector’s supply chain and logistics is projected to culminate in a global sales loss of $2.1 trillion in 2020. Currently when the entire world is at a halt, the only thing running is e-commerce. This pandemic should provide a long-term boost for online sellers post which we could see a permanent change in consumer preferences enabling them to reduce their frequency of visiting brick and mortar stores. At those times, the businesses who have a digital presence would survive and grow. Usually, the transition from an offline to an online store somewhat affects the live business but since the current sales are down and there’s time to introduce the flip side of the coin, businesses should actually think about it. Successful evolution of Offline-to-Online and Social Commerce has smoothened the journey for going digital.

Offline-to-Online (O2O):

Increasing adoption of offline-to-online models can been attributed to two significant developments in the field of technology: a) Easy access to huge marketplaces b) Increasing ease of going solo with a personal online store

a) Getting listed on huge marketplaces

Large online retailers like Flipkart, Amazon and Alibaba have the leverage of deploying sophisticated tools and systems to attract audiences. Spending millions of dollars on marketing and logistics infrastructure has helped these giants in penetrating the remotest of areas. Owing to a sale for every occasion, be it Diwali, Dussehra, monsoon or even the first pay day of a month, these giants have been successful in creating a huge price disparity between online and offline retailers. Primary reason for these giants going great lengths for making marketing, selling and fulfilment super easy for brands and retailers is the highly profitable nature of the marketplace model. These channels expose offline businesses to a large and completely different audience which they never had access to and hence in my opinion it’s better for offline businesses to ride this wave than going against it.

b) Going solo with personal stores

When businesses want maximum autonomy and target a specific type of audience they prefer setting up their own website or store. If you’re not tech savvy and you want your own e-commerce store, and have outgrown marketplaces like Alibaba or Amazon there are companies like Shopify, Magento, WooCommerce and Bigcommerce who are building services for you. These companies are providing an exhaustive suite of services that any online business needs, starting with a “no code” platform for creating a professional store to even supporting them with last mile logistics. Value added services like cloud infrastructure management, payments integration, marketing tools, customer support and legal services are also available on the platform. Most of these companies have been successful in proving their positive ROIs and hence continue to grow very strong.

Growing Shopify revenues YoY

I hold a view that this pandemic should only accelerate the offline to online shift for retailers. Question being which one of the above mentioned channels would see a higher adoption rate?

“Amazon vs Shopify” is like “Buffet vs A la carte”

Adoption of social commerce:

Social media today is an integral part of our lives, influencing how we think, communicate and feel about a particular subject. The number of active users and average time spent by a user on these platforms has only been rising with every year. This pandemic should only boost this trend going forward.

Increasing usage of social media platforms

The line between social media and e-commerce is increasingly becoming blurred, giving space for social commerce. Listing down some key highlights from a recent survey which clearly points out the increasing need for social commerce platforms.

· 87% of e-commerce shoppers believe social media helps them make shopping decisions.
· 1 in 4 business owners are selling through Facebook.
· 40% of merchants use social media to generate sales.
· 30% of consumers say they would make purchases directly through social media platforms.

Companies like Wechat, Meesho, GlowRoad and Simsim have leveraged the drop in data rates, growing vernacular/localised content and growing social media engagement levels to grow their businesses exponentially. Current vulnerable times have encouraged retailers to try out newer ways of making money which is the primary reason for a sudden spike in retailer populations on these platforms. Going forward such instances should definitely help in reducing the initial inertia of retailers towards social commerce.

2) Need for improved customer engagement online

· Global conversion rate across devices is 2.58% i.e. only 2 out of 100 people coming online actually purchase a product.
· The average mobile conversion rate is about 1.82% ; Growing mobile usage for online shopping is alarming for overall conversions
· Conversions are a huge pain point for long tail categories like apparels and furniture.

Engagement trends for online retail

These statements reiterate the fact that customers today are empowered with choices online, which means they’ve become more unforgiving than ever before. The pressure is on retailers to provide a seamless digital experience at every step of the customer journey. Everything starting from product search to final payment gateway needs to be engaging enough to avoid losing the customer. I have highlighted three areas where online business can spend in order to improve their customer engagement levels.

Providing “try-before-you-buy” experience at home:

Touch and feel has always been missing while buying online which has often resulted in lower engagement levels and increased product returns. Retail businesses today are seeking new and innovative solutions to bridge these gaps and stay more relevant. Growing adoption rates of immersive technologies like Augmented Reality and Virtual Reality (AR/VR) can help online shopping experiences become more intuitive, friendly, and satisfying. Integrating these futuristic technologies with existing platforms can help customers re-image their buying experience sitting at home.

AR/VR Revenues ($Bn)

My conversations with small and medium sized online retailers suggest that constraints on in-house engineering capabilities, tech infrastructure and budgets have been the primary barriers in adoption of such technologies. However evolution of companies like Scapic*, Mobcoder, Sayduck and Plugxr is pivotal in democratisation of such technologies. Such companies allow retailers to use proprietary “no code” platforms to create advanced but affordable AR/VR solutions in-house. With people currently staying home more often than ever, I expect these futuristic technologies to become a necessity very soon.

Making product discovery easier and more relevant:

What happens when e-commerce customers can’t find what they are looking for? That’s right — they leave. There are dozens of psychological studies which state that having too many choices makes people miserable. Almost all online sellers have huge catalogues which makes product discovery very painful for their customers. Buyers often have multiple dilemmas but I would want to highlight two of the most basic yet most frequent pain points for customers buying online.

“I don’t know what I want, but I’ll know it when I see it”

There is a lack of intelligent customer profiling done at the sellers end which ideally should be a reflection of specific customer data, external socio-economic factors and real time customer feedback. Not so apt product suggestions result in a less engaged buyer which is the ultimate reason for tanking conversions.

“I know what I want, but I don’t know what it’s called”

Businesses currently have their catalogues tagged to simple attributes derived from supplier data but not to keywords actually used by a buyer. This often leads to confusion and poor discovery ultimately hurting the conversions.

The solution to these problems should be unlocked by emerging ML/AI companies who have the capabilities to record, process and learn from infinite data points generated from both online and offline sources. These companies have the power to process primary and feedback data in real time which helps in improving search, merchandising and recommendations. This has also helped businesses to streamline the process for catching early consumer trends and buying more relevant products. Companies like Materiall*, Syte.ai, Algolia and CamFind are combining new age technologies like computer vision and machine learning to create advanced engagement solutions for online businesses.

Use of voice and vernacular to unlock the next million customers:

The last decade has seen internet companies globally solve urban problems, owing to the fact that urban population adopted the internet first. Illiteracy and language incompatibly have been the two biggest barriers in internet adoption globally. Speaking of India, currently 90% of the population does not speak English and we have over 77-plus languages with 6,000-plus dialects. It is assumed that the next 400 million online consumers in India will be unlocked using voice and vernacular integrations. Realising the importance of these technology aids online business globally have started integrating such solutions on their platforms. Companies like Saarthi.ai, Gnani.ai and Vernacular.ai are helping online businesses to hop on this bandwagon.

The retail ecosystem currently is experiencing it’s “Survival of the fittest” moment where retailers are expected to be super agile in decoding changing buying patterns and customer expectations. Correct use of technology would be super critical in determining the success of businesses going forward. The retail ecosystem should not be apprehensive of this ongoing evolution given that change is the only constant.

About the author: I am currently a part of the investment team at Speciale Invest. Have previously worked with internet companies like Flipkart and Paytm and hold an engineering degree from BITS Pilani. Can be reached out at Anirudh.garg@specialeinvest.com and https://www.linkedin.com/in/anirudh-garg98/

About Speciale Invest: Speciale Invest is a deep science and technology venture firm investing across enterprise software (AR/VR, Cloud, Voice AI, Vision AI, Computer Vision) and industrial hardware (propulsion tech, robotics, rocket engines, lithium tech, micro-electronics, photonics). We are typically first institutional investors and have been early pioneers of AI SaaS, Electric Mobility, Space Tech, Vision based Robotics and Photonics.

*- Part of Speciale Invest portfolio



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Anirudh Garg

Anirudh Garg


Venture Capital @ Speciale Invest | BITS Pilani | Ex-Flipkart