Shayak is a serial entrepreneur and is also a mentor and a public speaker. Prior to this, he has served in the Indian Navy, transformed hotels on the beaches of Goa, and has headed the cross-border ecommerce division for a marketplace company across 21 countries spanning LATAM, Africa, South Asia, and China.
The technology adoption was treading slowly in the Indian retail world until 2020. You had to literally coerce management in retail companies to take a good look at technology by offering heavy discounts, sweetheart deals etc. Unlike in the West, where technology has always been a rather important pillar of strategy, in India it was often relegated to the domain of operations and used to come rather low in the totem pole of important decisions.
However, the COVID-19 pandemic induced crisis catapulted tech adoption in the Indian retail market unlike ever before, and today, retail leadership are talking about integrating latest technologies to enhance their customer’s online shopping experience. The past two years have seen the rise of new customer segments, and new capital has been unlocked to target and convert them into loyal customers. Most of this is online. The merging of offline and online has never been this obvious as we see the impact of Artificial Intelligence shape customer experience like never before. From creating virtual (called synthetic) models to automate image generation, to creating world class content using AI, merchants are tapping into new customer cohorts through targeted media.
Where is India on this map and how exactly is the archaic Indian retail industry reinventing itself to target these new global trends? Here are some trends from 2021 and predictions for 2022:
1. Artificial Intelligence. According to a study by IBM Corporation, the adoption of AI in retail and consumer products industries is expected to leap from 40% of companies currently to more than 80% in three years. The global artificial intelligence in the retail market is expected to register a CAGR of 35% in the forecast period (2021-2026). Do these numbers paint a picture? What is the takeaway?
According to a study by Juniper, global retail spending on AI would reach USD 7.3 billion annually by 2022, up from a predicted USD 2 billion in 2018. Investments in AI-powered predictive and prescriptive analytics would more than double in the time frame. Most businesses don’t even realize when they are using AI. The opportunity cost of not utilizing AI to its full extent will be felt most by brands in the coming year. Today, a typical consumer is looking for a highly personalized and hassle-free shopping experience. Artificial Intelligence plays a major role in meeting the needs of today’s consumers. Deploying AI helps provide personalized recommendations, and AI brings forward smart product recommendations and predictive search that makes a consumer’s shopping experience quick and hassle-free. Although this is a no brainer, but most small to medium businesses will start investing in AI actively (not passively as they have been doing in 2021) in 2022.
2. The rise of the Vendors. Here’s the rub though. Most businesses in the mid-market category that I am speaking to are looking to take shortcuts in the absence of enough understanding or lack of good technology solutions. Unlike the West or China, where we are seeing increasing adoption of technology by either building these solutions in-house or clubbing together existing solutions, in India we are seeing the rise of DIFM – Do It For Me. Most brands are happy to handover their brands to marketplaces like Amazon or Flipkart and become their vendors or distributors who are selling on their behalf online. In the process, brands are losing control over end customer experience and pricing positioning, not to mention the absolute lack of customer data that will cripple their business in the long run. However, the most important risk in this process is the existential risk to their business as the brands are likely to get disintermediated by the marketplaces/distributors and become commodities. This troublesome trend will continue though in 2022 and more brands are likely to be hurt in the process.
3. Omnichannel seems to be evolving. There was a time, not even 5 years ago, when omnichannel used to be defined as where inventory was located. Today, thanks to the availability of data, intelligence and automation, location is scarcely a limitation and cannot define what omnichannel really stands for. True omnichannel today is defined only through the lens of customer experience. Can your system identify a customer though video, search, marketplace and your retail store equally and offer the same customized experience every time? Can your system identify the most important customer cohorts and offer them custom solutions? Can your system automatically transition, payment methods, shipping and supply chain to suit each customer’s needs? This new definition of omnichannel is driven to a large extent by Artificial Intelligence. With more data being available, companies who have traditionally been sitting on treasure troves of data are now starting to realize the benefits of combining offline and online channels and mapping customer cohorts to create community benefits. Omnichannel – B2B +B2C, Local + Global, Online + Offline – will continue to evolve and become a mainstay for 20-25% of retail businesses in 2022.
4. The Physical Internet – Supply Chain. The sharing and integration of supply chain, warehouses, shipping partners is leading to the evolution of the physical internet. While logistics and supply chain still remain very much a domain of old school strategies, it is also the industry that holds the most potential for change and disruption. It is like watching a dragon wake up from slumber and realize its potential. To begin with logistics and supply chain companies did face an initial onslaught on their services in 2020. However, they recovered fast due their sheer perseverance and 2021 has been nothing less than spectacular. Most logistics and supply chain companies operated at more than full capacity and rates have been 2X of pre COVID throughout. The national logistics grid in India, the physical internet in EU, the emergence of faster shipping options in certain corridors and categories, the integration of new network models and adoption of blockchain and AI have all led to one end goal – better services for the end customer. Brands now have the ability to bring their supply chain costs down from 25-30% per order to 8-10% per order. We will see an increased adoption of integrated logistics + supply chain + ecommerce software in 2022 as more brands wake up to realize its benefits.
5. Democratization of Technology through SaaS platforms. While 2021 has been a fairly tough year overall, it has never been easier to start, monitor and scale a business in history. A whole host of SaaS platforms from shipping aggregators to supply chain management systems integrated with intelligence network logistics options, programmatic marketing tools to drive sales and marketing automation tools to track and optimize customer experience, payment gateways that integrate backwards into collection, taxation and accounting tools, communication platforms that allow brands to customize their messaging based on customer cohorts and specific channels to fintech solutions that offer everything from revenue based financing to omni-payment/collect solutions. The world of SaaS today looks more like magic from Hogwarts and less like tech. The problems also arise from the same point. To a normal small to mid-market brand, this looks confounding, leading to my first point – most of them are choosing to become vendors rather than navigate this witchcraft. Shouldn’t tech make lives easier? If so, why are all these brands hiring technology teams and trying to build stuff that is not their core competency?
All these trends have led to the rise of one Meta Trend. The emergence of an ecosystem platform. So, here is my final prediction for 2022. We will see the emergence of a major platform that connects all the above trends in 2022. What is not clear at this point is whether it will be a startup or an established tech giant. My gut says (or hopes) that it will be a startup. Fingers crossed.