Responsible retailing: The next big growth driver

Updated: October 17, 2021 10:15 AM

In order to tap into this potentially huge business opportunity, retailers will need to move fast on multiple fronts

As per an IBM report, 70% consumers are willing to pay a premium as high as 35% for brands that are sustainable and responsible

By Gaurav Manchanda

The Covid-19 pandemic has had an unprecedented economic impact on the retail industry. The food retail sector, especially, has witnessed sea changes. Consumers started shopping from retailers with hyper-local presence, and what they picked off the shelves became a lot more purpose-driven. The transformation can be attributed to several factors, including greater focus on nutrition and health, growing affinity towards brands that care about the larger good, as well as a sense of community towards all stakeholders in the value chain.

Retailers who were able to deliver on these newer consumer preferences saw a definite surge on all fronts – sales, high-value purchases, and repeat customers. And it is quite likely, given these are conscious buying decisions that this evolution in consumer preferences isn’t going to peter out once the pandemic ebbs; it is here to stay and grow.

In fact, an Accenture report on ‘How is COVID-19 changing the retail consumer?’ found that a whopping 89% of consumers who are making more environmentally friendly, sustainable or ethical purchases, are likely to continue doing so post the global crisis.

Strategic shift
This change in consumer behaviour signals a need for a strategic shift in how retailers approach their entire value chain. And it’s not just the big players – even medium- and small-sized retailers also need to acknowledge that responsible retailing – a business approach that prioritises responsibility to the people and planet – will be the key to unlocking and sustaining holistic business growth.

While the concept of clean eating – or focusing on whole grains, fruits and vegetables while minimising consumption of highly processed foods and foods laden with chemicals and preservatives – isn’t new, it was initially largely restricted to select consumer communities.. In fact, some retailers viewed the trend as a fad and attempted to jump onto the bandwagon by changing product marketing and labels while they struggled to transform their supply chain and the end product.

However, today this focus on prioritising clean, chemical-free food seems to be here to stay. As per market research firm IMARC, the Indian organic food market reached a value of $815 million in 2020 and is expected grow at a CAGR of 24% from 2021 – 2026.Consumers are more aware of the ground realities, largely due to the open exchange of information on social and digital media. Irrespective of the price brackets, they expect brands and retailers to be upfront and authentic not just with facts about their products, but also about the products’ impact on people’s health, livelihoods, and the planet’s resources.

Immense opportunity
There’s no denying that rebuilding the entire ecosystem around a responsible environmental, social, and governance (ESG) framework with transparent marketing and healthy living as key pillars isn’t the easiest of tasks. However, contrary to popular perceptions, the endeavour doesn’t require retailers to reverse the traditional pyramid which put emphasis on profits. It essentially calls for an all-inclusive outlook that includes the people and the planet too.

The good news is that both consumers and investors are willing to pay what it takes to build such a business. As per an IBM report, 70% consumers are willing to pay a premium as high as 35% for brands that are sustainable and responsible. Clean products is the top priority that drives the demand for such responsible retail among Indian consumers. Investors too are prioritising funding for responsible retailers since in the long run they realise that it makes for better business.

In order to tap into this potentially huge business opportunity, retailers will need to move fast on multiple fronts – right from local sourcing and providing healthier alternatives to fair trade pricing and sustainable packaging. However, this doesn’t need to to be driven single-handedly, especially when it comes to small-sized retailers or those with hyper-local presence. Farmers, packaged food manufacturers, artisanal food businesses, as well as packaging start-ups are already responding to the new market demand.

Be the change
Retailers across the board need to be ready to embrace the fact that responsible retailing isn’t an idealistic goal. It is, in fact, the key differentiator and driver for businesses as a whole in the future. It is an essential demand for most urban consumers, even in markets such as India, which have traditionally been value-driven and price-sensitive.

As consumers continue to spend more time cooking, working, learning, and simply being at home, retailers can expect to interest them in healthier, high-value, and sustainable alternatives by investing in consumer education. Such engagement will be critical to unlocking high growth along with a fundamental shift towards responsible retail.

As responsible retailers, we will not just have to offer our consumers a wide range of better alternatives, we will have to guide and educate them through this new journey. The mission is to empower consumers to make healthier, cleaner, mindful and more sustainable choices.

(The author is founder director, Nimida Group and managing director, The Organic World.)

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