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CX is the winner

 

CX is the winner

Retailers need to take advantage of their unique competencies for exceeding customer’s expectations and living upto promise by delivering a reliable experience.. Digital remains the “front door” for retail. Before arriving at a store, consumers have used digital media (web, mobile, social) and the Internet of Things (IoT) to collect information about products tha they intend to buy. However, customer demand for speed and immediacy of acquiring products requires increased use of the physical store. The convergence of digital and physical assets will continue to prove more powerful than digital on its own.

Execution is the point of differentiation for customer experiences. A study by Gartner indicated that more than 40% of data analytics projects will relate to customer experience. 25% of customer service operations will use virtual customer assistants by 2020, a jump from less than 2% in 2017. More than 70% of retailers want to use AI for better performance. Retailers are expected to spend $7.3 billion on AI by 2022. The number of retailers using AI has jumped from 4% in 2016 to 28% in 2018, said one of the reports of Capgemini.

 

When customers have a great experience, they’re willing to pay up to a 16% price premium says PwC. While shopping customers want an experience built on being Connected, Consistent, Contiguous and Convenient, whereas when buying in the store they expect the products available on the shelf, which are easy to find, easy to try and easy to return with fast check-out service. They wish to have detailed product information when they need it in real time and informed available staff. Salesforce believes that 53% of millennials don’t think store associates have the tools they need to provide great customer service, such as mobile devices for looking up customer profiles and recommending products.

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Online Grocery Shopping In India 5

Kiranas and Online Retailers Can Work Together to Overcome Challenges

[Excerpts from “Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets” by Prof. Piyush Kumar Sinha, Srikant Gokhale and Saurabh Rawal in Customer Needs and Solutions (2015) 2:317-324]

So far, most online retailers operating in India are selling non-grocery products. Numerous reasons for this exist. Food shopping involves purchasing a basket of goods [1] that may be both perishable and heterogeneous [2]; it is also subject to habits, everyday routines and a host of related activities like meal planning, preparation and cooking [3]. Food purchases are necessary, repetitive and seasonal, and many customers like to physically touch goods before buying. Although most kirana stores sell dry groceries and packaged goods, touch becomes important when customers buy grains, cereals and pulses and especially vegetables and fruit. Finally, grocery products tend to have a low value-to-weight ratio [4], leading to higher cost of fulfillment and warehousing.

Kirana stores and online stores complement each other as they offer many similar values, with kirana stores providing localisation and online providing personalisation and choice.

The heterogeneity of the consumer basket can be managed by partnering with multiple kiranas; this would also build a larger basket size. Some online retailers have started supplying fruit, vegetables, eggs, milk, dry groceries, and ice cream from different stores to the same customers. Online retailers can add value by bringing the benefits of being a marketplace. Besides getting a larger assortment to choose from, consumers can still buy from their primary kirana store. In addition, they can choose from any other store nearby in case of nonavailability at their regular store. Each kirana can benefit from an e-store, for which they have neither the resources nor the capability to create for themselves. The challenge that online stores face is delivery, as these orders will be serviced by different stores and the deliverers from these stores may arrive at the customers’ premises at different times. How long and what kinds of customers would patronise these online stores is yet to be established.

Kirana stores could become pick-up points for customers ordering online. However, due to the small size of most stores, they will not be able handle large numbers of orders. Nevertheless, kirana stores can equip themselves with the technology to receive orders from internet-enabled devices such as tablets and mobile phones. The ubiquitous kirana can enhance its accessibility to consumers through the medium of the internet, resulting in a larger catchment area for each store. The online retailer will be able to reduce its inventory, delivery and other overhead costs.

Online grocery stores selling to a targeted and more geographically concentrated customer segment through kiranas may reach profitability faster than larger ones due to their smaller catchment/fulfilment area. However, retailers will need to address the challenges of resource constraints, channel integration issues, staff support difficulties and cultural issues in integrating the two formats [5]. As the scale of business through online stores is not very large, they are being tested even by the kirana stores. Currently, the expectation from kirana stores is not high since the responsibility of customer acquisition as well as delivery is with the online retailers. Channel integration and conflict issues will emerge when online

retailers gain scale; companies that develop plans to manage these situations will benefit in future. Another point on which online retailers need to focus is servicing a large number of scattered customers, which will require strict checks on customer acquisition and fulfillment costs. In other products, these become tenable with scale; in the case of groceries, a new business model will have to be developed which is modular, profitable at smaller scale and easily replicable.

References:

  1. Gronow J, Warde A (2001) Introduction. In: Gronow J, Warde A (eds) Ordinary consumption. Routledge, London, pp 1–8
  2. De Kervenoael R, Soopramanien D, Elms J, Hallsworth A (2006) Exploring value through integrated services solutions: the case of egrocery shopping. Managing Service Quality 16(2):348–445
  3. Miller AD (1998) Theory of shopping. Polity, Cambridge
  4. Raijas A, Tuunainen VK (2001) Critical factors in electronic grocery shopping. International Review of Retail, Distribution and Consumer Research 11(3):255–265
  5. Lewis J,Whysall P, Foster C (2014) Drivers and technology-related obstacles in moving to multichannel retailing. International Journal of Electronic Commerce 18(4):43–67

Related Resources:

  1. Brand adoption by BoP retailers, Prof. Piyush Sinha, Suraksha Gupta and Saurabh Rawal, Qualitative Market Research: An International Journal Vol. 20 No. 2, 2017 pp. 181-207 Available for download
  2. Format Choice of Grocery Retailers, Prof. Piyush Sinha, Elizabeth Mathew and Ankur Kansal, 2005 Available for download
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Online Grocery Shopping In India 4

Online Grocery Shopping Is Gaining Popularity In India

[Excerpts from “Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets” by Prof. Piyush Kumar Sinha, Srikant Gokhale and Saurabh Rawal in Customer Needs and Solutions (2015) 2:317-324]

Kirana stores continue to flourish in India despite several inefficiencies. They do not derive much value from buying or maintaining efficient inventory control. In some cases, it was found that almost 30 % of inventory had remained unsold for more than 6 months (local suppliers had placed these goods on consignment). They also stock infrequently bought merchandise, sometimes due to shopkeepers buying it after inquiries from just a few customers.

A kirana store is an established format and follows a demand fulfillment model, whereas online stores face a demand creation challenge; the format is yet to be accepted as a primary shopping channel for many product categories, in particular, groceries. Consumers have started buying groceries online, but they are still experimenting and tend to exhibit significantly more exploratory behaviour than those in task oriented situations [1]. Consumers are still evaluating the format and tend to behave more cognitively. It is expected that until consumers have become familiar with online retailing, the format will still be chosen cognitively, as against a kirana store, where the format choice is more affective [2].

Consequently, in most cases, the basket size of an online grocery customer is not very large. High proportions of them live in areas which are developing or remote and do not have good penetration of kirana stores; some are using this channel for emergency or fill-in purposes. Low per capital purchase affects customer profitability, so while each customer buying from a kirana is profitable, online grocery retailers must struggle to cross-subsidise their customers. Conversion in online retail is less than 5 %, whereas it is close to 100 % in the case of kiranas.

[It is proposed that] online stores will work in areas where there is less kirana penetration. In all other places, they will need the support of kirana stores for fulfillment and basket composition until online grocery purchasing reaches a sizable proportion.

Table 2: Operation of Online vs. Kirana

References:

  1. Moore RS, Kinard BR, Moore ML (2005) The carry-over effects of a physical store’s image on its ecommerce distribution channel. Marketing Management Journal 15(1):59–68
  2. Anand KS, Sinha PK (2009) Store format choice in an evolving market: role of affect, cognition and involvement. International Review of Retail, Distribution and Consumer Research 19(5):505–534

Related Resources:

  1. Store format choice in an evolving market: role of affect, cognition and involvement, Kamaljit Singh Anand and Prof Piyush Sinha, The International Review of Retail, Distribution and Consumer Research 19(5):505–534. Downloadable on request
  2. Impact of Store format on Shopping Involvement, Prof Piyush Sinha and Dwarika Prasad Uniyal, Working Paper W.P. No. 2014-03-06, March 2014, Indian Institute of Management Ahmedabad. Available for download
  3. Format Choice of Grocery Retailers, Prof. Piyush Sinha, Elizabeth Mathew and Ankur Kansal, 2005 Available for download
  4. Store Choice Behaviour in an Evolving Market, Prof. Piyush Sinha and Prof. Arindam Bannerjee, International Journal of Retail & Distribution Management; 2004; 32, 10; ProQuest pg. 482 Downloadable on request
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Online Grocery Shopping In India 3

The Indian Grocery Consumers

[Excerpts from “Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets” by Prof. Piyush Kumar Sinha, Srikant Gokhale and Saurabh Rawal in Customer Needs and Solutions (2015) 2:317-324]

Consumers shop using different formats based on the values that they derive [1]. Store formats are chosen based on availability, accessibility, ambience and affordability, as well as the cost of shopping tasks [2]. It is found that consumers tend to choose new formats like online based on cognitive factors, whereas established formats like kirana are chosen based on affect [3]. Studies indicate that the extent of adoption of formats also depends on chronological order of first use [4]

A format represents a combination of particular levels of each element of the retailing mix, such as product assortment, pricing, location, service, ambience, customer interface and the level and type of services offered [5]. Each format tends to maximise on one value dimension supported by other dimensions. While a retailer would use one or two of these as primary variables, the interaction among them makes each format a unique business to manage. In any product category, customers choose the format that fits their needs most; they choose different formats from the same product categories based on their requirements [3, 6]. For instance, food can be purchased from convenience stores, grocery stores, warehouse stores, cash and carry stores, online grocers, kirana stores and mass merchandisers.

The format chosen by the retailers determines the system required to deliver the values promised to their target segments. This system is designed by identifying and managing the selected retailing activities that fulfill the desired customer experiences. While the elements of retailing mix remain the same, each format mixes them up differently to create a customised business model. Hence, retailers using the same format can follow different business models based on the segments they serve, context in which they operate and their value appropriation objectives.

References:

  1. Venkatesan R, Kumar V, Ravishanker N (2007) “Multichannel shopping: causes and consequences”. Journal of  Marketing 71(4):114–132
  2. Bell DR, Ho TH, Tang CS (1998) “Determining where to shop: fixed and variable costs of shopping”. Journal of Marketing Research 35(3):352–369
  3. Anand KS, Sinha PK (2009) “Store format choice in an evolving market: role of affect, cognition and involvement”. The International Review of Retail, Distribution and Consumer Research  19(5):505–534
  4. Pentina I, Pelton LE, Hasty RW (2009) “Performance implications of online entry timing by store-based retailers: a longitudinal investigation”. Journal of Retail 85(2):177–193
  5. Michael L, Weitz B (2008) Retailing management, 7th edn. McGraw-Hill/Irwin, New York
  6. Bhatnagar A, Ratchford B (2004) A model of retail format competition for non-durable goods. International Journal of Research in Marketing 21:39–5

Related Resources:

  1. Store format choice in an evolving market: role of affect, cognition and involvement, Kamaljit Singh Anand and Prof Piyush Sinha, The International Review of Retail, Distribution and Consumer Research  19(5):505–534. Downloadable on request
  2. Impact of Store format on Shopping Involvement, Prof Piyush Sinha and Dwarika Prasad Uniyal, Working Paper W.P. No. 2014-03-06, March 2014, Indian Institute of Management Ahmedabad. Available for download
  3. Format Choice of Grocery Retailers, Prof. Piyush Sinha, Elizabeth Mathew and Ankur Kansal, 2005 Available for download
  4. Store Choice Behaviour in an Evolving Market, Prof. Piyush Sinha and Prof. Arindam Bannerjee, International Journal of Retail & Distribution Management; 2004; 32, 10; ProQuest pg. 482 Downloadable on request
  5. Business Models in Retailing, Prof. Piyush Sinha, 2016 Downloadable on request

 

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Online Grocery Shopping In India 2

Online Grocery Shopping: India in the Global Context

[Excerpts from “Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets” by Prof. Piyush Kumar Sinha, Srikant Gokhale and Saurabh Rawal in Customer Needs and Solutions (2015) 2:317-324]

The physical retail landscape (the fourth factor) in India and China is very different to that in more developed countries.While in many countries, online retailing arrived long after large-format retailing was well entrenched, it came much sooner in India and China. With access not being limited by geography and online retailers providing a wide range of products at very attractive prices, the online format has found acceptance in smaller towns and rural areas where large-format retailing is yet to enter. In India, almost 40 % of the sales of many large online stores come from small and medium-sized towns and rural areas which are not being serviced by large format retailers.

There are more than 14 million physical stores in India,constituting more than 99 % of small retailers. About six million of these are small kirana stores. Leading national and regional brands reach more than 75 % of these stores through direct and indirect channels. In the period 2008–2013, store based retailing in India generated about $435 billion in revenue and non-store retailers about $5 billion; store-based retailing grew at a CAGR of 6 %, whereas the rate for non-store based retailing was 15%1. Large-format chain retailers have found it challenging to grow and become profitable;one of the primary factors has been the steep rise in real estate prices, which comprise up to 10 % of sales in India as compared to 3–4 % in developed economies2. The availability of good retail spaces is low, despite more properties being developed. Wherever hypermarkets have low penetration, online stores have found wider acceptance1.

Five circumstances seem to necessitate a new business model. These are disruptive solutions, new technology, markets that require continuous refinement or customization,fending off disruptors and responding to a shifting basis of competition3. Online retailing is one such disruption,which has forced all formats of retailing and multiple categories of product sellers to rethink their business models.Retailers have innovated with their business models to enhance value creation and appropriation beyond the levels afforded by traditional approaches to retailing4. They tend to operate around customer value proposition, profit formula,key resources and key processes to differentiate themselves.

 

References:

  1. http://knowledge.wharton.upenn.edu/article/online-groceries-in-india-will-consumers-bite/, accessed on November 21, 2018
  2. Venkatesan R, Kumar V, Ravishanker N (2007)Multi channel shopping:causes and consequences. Journal of Marketing 71(4):114–132
  3. Johnson MW, Christensen CM, Kagermann H (2008) Reinventing your business model. Harvard Business Review 86(12):51–59
  4. Sorescu A, Frambach RT, Singh J, Rangaswamy A, Bridges C(2011) Innovations in retail business models. Journal of Retail 87S(1):S3–S16

Related Resources:

  1. Brand adoption by BoP retailers, Prof. Piyush Sinha, Suraksha Gupta and Saurabh Rawal, Qualitative Market Research:An International Journal Vol. 20 No. 2, 2017 pp. 181-207 Available for download
  2. Format Choice of Grocery Retailers, Prof. Piyush Sinha, Elizabeth Mathew and Ankur Kansal, 2005 Available for download
  3. Store Choice Behaviour in an Evolving Market, Prof. Piyush Sinha and Prof. Arindam Bannerjee, International Journal of Retail & Distribution Management; 2004; 32, 10; ProQuest pg. 482 Downloadable on request
  4. Business Models in Retailing, Prof. Piyush Sinha, 2016 Downloadable on request
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Online Grocery Shopping In India

Introduction: Online Grocery Shopping In India

[Excerpts from “Online Retailing Paired with Kirana—A Formidable Combination for Emerging Markets” by Prof. Piyush Kumar Sinha, Srikant Gokhale and Saurabh Rawal in Customer Needs and Solutions (2015) 2:317-324]

Even when online business represents less than 10% of retailing and about 1% of grocery retailing, it is disruptive and forces every other format to rethink their strategies. Initial online retailing experiments in the grocery sector, such as Webvan and Peapod, were unsuccessful; however, some recent initiatives in India are expanding rapidly. Online grocery retailers such as bigbasket.com and grofers.com are expanding to multiple cities, and large online retailers like Amazon, Flipkart and Snapdeal have also announced their intention to sell groceries in India.

Image Sources: 

  1. https://www.statista.com/statistics/692871/global-online-shopping-preference-by-category/
  2. https://www.statista.com/statistics/730982/online-grocery-sales-share-worldwide/
  3. https://www.statista.com/statistics/730965/online-grocery-sales-value-worldwide/

A time-starved younger population, along with increasing disposable income, provides substantial scope for growth in ecommerce. The format saves time and fuel for consumers, demands no expensive real estate investment for expansion, and is accessible even through a smartphone. In contrast, large-format physical retailing in India is facing many hurdles such as rising real estate prices, lack of viable store locations, high overheads, underdeveloped back-end infrastructure, pilferage and lack of trained manpower. The limitations of large format retailing in countries like India and China facilitate the explosion of online retailing.

With the entry of online retailers in the grocery sector, we may be witnessing another disruption which large-format retailing could not achieve—reduction of the market share of small retailers. This has already occurred in the case of music (almost totally), books (substantially), and mobility products (to a large extent). Large-format retailers such as supermarkets have not been able to take business away from kirana stores in India, even after offering discounted products.

As food and grocery retailing constitutes almost 60% of total retail sales in India and China, and small-format shops comprise more than 96% of retail stores, this category is expected to define the future growth of online retail formats in India. As online and kirana stores have very distinct business models, whereas the ‘big box’ retailers offer values similar to online stores (a wider assortment and lower prices), it is suggested that these formats can complement each other and together deliver very high value to consumers.

References:

  1. http://knowledge.wharton.upenn.edu/article/online-groceries-in-india-will-consumers-bite/, accessed on November 21, 2018
  2. Portal.euromonitor.com, Euromonitor International – Login 2014. Available at http://www.portal.euromonitor.com/Portal/Default.aspx, accessed 1 Sep 2014

Related Resources:

  1. Format Choice of Grocery Retailers, Prof. Piyush Sinha, Elizabeth Mathew and Ankur Kansal, 2005 Available for download
  2. Store Choice Behaviour in an Evolving Market, Prof. Piyush Sinha and Prof. Arindam Bannerjee, International Journal of Retail & Distribution Management; 2004; 32, 10; ProQuest pg. 482 Downloadable on request
  3. Business Models in Retailing, Prof. Piyush Sinha, 2016 Downloadable on request
  4. The Online Consumer – Course Reading, Prof. Piyush Sinha Upcoming book preview
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