India’s retail industry is one of the most complex industries in the world. It is estimated that there are around 12 million retail outlets in the country, with about a million wholesalers and distributors. In 2019, the Indian retail market size was estimated at $779 billion. By 2024, it is expected to reach $1.4 trillion and continues to rise in the years ahead.
Most of these retail outlets, however, choose to operate without a digital presence. The pandemic hit the industry hard, with outlets having to close and no income being generated. Customers also figured they need to look for digital options if they are to get their groceries and other household items on time.
The pandemic also showed vulnerabilities in the retail industry supply chain. There were substantial disruptions that caused issues in inventory supply. People started to panic-buy and stock up on a lot of necessary household items for fear they may not be able to find them when needed. Companies themselves were having trouble sourcing raw materials, while social distancing measures meant they were not able to operate their stores with complete staff.
These issues have shown the importance of digitalization in the retail industry. Companies did not have the data they needed to make informed decisions. They have also had to deal with a liquidity and credit crunch crisis as overheads piled up at the outlets, but sales slowed down when customers chose to only buy essential items.
The market size for online grocery shopping is also set to surge, giving further incentive for the retail industry to go digital. As of 2020, the online grocery market size was about $3 billion but it is expected to go up by four times that amount by 2025. India also boasts a sizeable amount of internet users. Of the 50 crore internet users, 10 crore users count as internet transactors.
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With digitalization, companies will be better equipped to cater to what the customer wants. They will have real-time insights into changing customer preferences. This in turn will help companies refine their predictive analytics tools and better optimize their operations and decision making.
Consumers are placing more importance on value when making their purchases, especially considering the financial impact everyone is going through due to the pandemic. They are ensuring every bit they spend is getting the most value possible. They are also focusing on companies with several digital offerings. There is a willingness to experiment among customers, so they are keen on those brands that offer various product choices. Digitalization aids customers in value discovery and enables retailers and companies to manage their inventory, in line with consumer preferences.
Companies can take the help of their predictive analytics software to figure out which products are more likely to be in demand and stock up on those. All players in the supply chain can also be optimized to ensure the stocks are replenished as quickly as possible.
In this new normal, digitalization is the best way for companies to continue to serve their customers. If they don’t want to get left out in the cold, they will need to accept the new realities of the retail industry and make changes to how they do business.
The retail industry would benefit from some automation and predictive analysis. Automating the replenishment part of the business will allow for a more agile and resilient supply chain. The software will consider key metrics such as existing stocks and daily sales across all platforms of the company and can reorder based on requirements. The use of real-time data makes a huge difference to ensure there are no bottlenecks in the supply chain.
Digitalization also helps companies figure out which of their products are selling well and those that are not. Excess inventory is a drain on the company’s finances. The longer these products remain in the warehouse, the more the costs of keeping them increase. Also, over a period, the value of the inventory diminishes too.
It also becomes easier to find out areas of weakness in the supply chain so that companies can take proactive actions. For instance, if a supplier has repeatedly been unable to meet the order requests, steps can be taken to find different suppliers.
Going digital helps companies plug loopholes in existing infrastructure and enhance the overall throughput. This, in turn, leads to increased sales. In fact, it is estimated that companies can increase their annual earnings growth by more than 3 percent.
Digitalization helps companies and retailers ensure that the right product is available in right place in line with customer preferences. Otherwise, the customer simply ends up buying from a competitor with better digital infrastructure.