From slow demand to rising discount, how 2020 will pan out for retailers

Updated: December 27, 2019 8:18:13 AM

Devangshu Dutta talks about how 2020 could see retailers get inventive to drive footfall and sales

In many minds, 2019 may be the ‘Year of the Recession’, plagued by discounting; but that demand slowdown has been brewing for some time nowIn many minds, 2019 may be the ‘Year of the Recession’, plagued by discounting; but that demand slowdown has been brewing for some time now

Remember the year 2000? After Y2K passed safely, that year some optimistic analysts predicted that India’s modern retail chains would reach 20% market share by 2015. Two years after that, another firm declared that modern retail will be at around that level in 2020 — but wait! — only in the top nine cities in the country. Don’t hold your breath: India surprises, constantly. As many have noted, “predictions are tough, especially about the future!” What we can do is to reflect on some of this year’s developments that could play out over the coming year.

The discount wave
In many minds, 2019 may be the ‘Year of the Recession’, plagued by discounting; but that demand slowdown has been brewing for some time now. However, there’s another under-appreciated factor that has been playing out: while small, independent retailers can flex their business investments with variations in demand, modern retail chains need to spread the business throughout the year in order to meet fixed expenses and to manage margins more consistently.
To reduce dependence on festive demand, retailers like Big Bazaar and Reliance have been inventing shopping events like Sabse Sasta Din (Cheapest Day), Sabse Sachi Sale, Republic Day/ 3-day sale, Independence Day shopping and more for the last few years. In e-commerce, there’s Amazon’s Freedom Sale, Prime Day, and Great India Festival; and Flipkart’s The Big Billion Days sale. This year, retailers and brands went overboard with the Black Friday sale, a shopping event concept from the 1950s in the US linked to a harvest celebration marked by European colonists of North America.

We can only expect more such invented and imported events to pepper the retail calendar, to drive footfall and sales. The consumer has been successfully converted to a value-seeking man-eater fed on a diet of deals and discounts. With no big-bang economic stimuli domestically and a sputtering global economy, we should just get used to the idea of not fireworks, but slow-burning oil lamps and sprinklings of flowers and colour through the year. Retailers will just have to work that much harder.

Cracking e-commerce
E-commerce companies have been operating for 20 years now, but the Indian consumer still mostly prefers a hands-on experience. The lack of trust is a huge factor, built on the back of inconsistency of products and services. The one segment that has been receiving a lot of love, attention and money this year (and will grow in 2020) is food and grocery, since it is the largest chunk of the consumption basket. Beyond the incumbents — Grofers, Big Basket, Milkbasket and the likes — now Walmart-Flipkart and Amazon are going hard at it, and Reliance has also jumped in. Remember, though, that selling groceries online is as old as the first dot-com boom in India. E-grocers still struggle to create a habit among their customers that would give them regular and remunerative transactions, and they also need to tackle supply-side challenges.

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Average transactions remain small, demand remains fragmented, and supply chain issues continue to be troublesome. Most e-grocers are ending up depending on a relatively narrow band of consumers in a handful of cities. The generation that is comfortable with an ever-present screen is not yet large enough to tilt the scales towards non-store shopping, and convenience isn’t the biggest driver for the rest. So, for a while, it will remain a bumpy, painful, unprofitable road.
Where we will see rapid pick-up is social commerce. Both in terms of referral networks as well as using social networks to create niche entrepreneurial businesses, 2020 should be a good year for social commerce, including a mix of online platforms, social media apps and offline community markets.

In the last eight to 10 decades, globally, fashion has become an industry living off artificially-generated expiry dates. But consider this: if consumption falls to half in the next five years, and you still have to run a profitable business (obviously!), how would you do it?

Plenty of clues lie in India. We epitomise the future consumers — frugal, value-seeking, wanting the latest and the best, but not fearful about missing out on the newest design, because it will just be there a few weeks later at a discount. If you can crack that customer base and turn a profit, you would be well set for the next decade or so.

The author is founder-chief executive of Third Eyesight

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