In this piece I’ll just focus on one aspect of technology – artificial intelligence or AI – that is likely to shape many aspects of the retail business and the consumer’s experience over the coming years.

To be able to see the scope of its potential all-pervasive impact we need to go beyond our expectations of humanoid robots. We also need to understand that artificial intelligence works on a cycle of several mutually supportive elements that enable learning and adaptation. The terms “big data” and “analytics” have been bandied about a lot, but have had limited impact so far in the retail business because it usually only touches the first two, at most three, of the necessary elements.

“Big data” models still depend on individuals in the business taking decisions and acting based on what is recommended or suggested by the analytics outputs, and these tend to be weak links which break the learning-adaptation chain. Of course, each of these elements can also have AI built in, for refinement over time.

Certainly retailers with a digital (web or mobile) presence are in a better position to use and benefit from AI, but that is no excuse for others to “roll over and die”. I’ll list just a few aspects of the business already being impacted and others that are likely to be in the future.

1. Know the customer: The most obvious building block is the collection of customer data and teasing out patterns from it. This has been around so long that it is surprising what a small fraction of retailers have an effective customer database. While we live in a world that is increasingly drowning in information, most retailers continue to collect and look at very few data points, and are essentially institutionally “blind” about the customers they are serving.
   However, with digital transactions increasing, and compute and analytical capability steadily become less expensive and more flexible via the cloud, information streams from not only the retailers’ own transactions but multiple sources can be tied together to achieve an ever-better view of the customer’s behaviour.
2. Prediction and Response: Not only do we expect “intelligence” to identify, categorise and analyse information streaming in from the world better, but to be able to anticipate what might happen and also to respond appropriately.
   Predictive analytics have been around in the retail world for more than a decade, but are still used by remarkably few retailers. At the most basic level, this can take the form of unidirectional reminders and prompts which help to drive sales. Remember the anecdote of Target (USA) sending maternity promotions based on analytics to a young lady whose family was unaware of her pregnancy?
   However, even automated service bots are becoming more common online, that can interact with customers who have queries or problems to address, and will get steadily more sophisticated with time. We are already having conversations with Siri, Google, Alexa and Cortana – why not with the retail store?
3. Visual and descriptive recognition: We can describe to another human being a shirt or dress that we want or call for something to match an existing garment. Now imagine doing the same with a virtual sales assistant which, powered by image recognition and deep learning, brings forward the appropriate suggestions. Wouldn’t that reduce shopping time and the frustration that goes with the fruitless trawling through hundreds of items?
4. Augmented and virtual reality: Retailers and brands are already taking tiny steps in this area which I described in another piece a year ago (“Retail Integrated”) so I won’t repeat myself. Augmented reality, supported by AI, can help retail retain its power as an immersive and experiential activity, rather than becoming purely transaction-driven.

On the consumer-side, AI can deliver a far higher degree of personalisation of the experience than has been feasible in the last few decades. While I’ve described different aspects, now see them as layers one built on the other, and imagine the shopping experience you might have as a consumer. If the scenario seems as if it might be from a sci-fi movie, just give it a few years. After all, moving staircases and remote viewing were also fantasy once.

On the business end it potentially offers both flexibility and efficiency, rather than one at the cost of the other. But we’ll have to tackle that area in a separate piece.

(Also published in the Business Standard.)

In 2016, brick-and-mortar modern retailers seemed to have begun recovering their confidence, and cautiously investing in expansion. However, currency shortage has significantly dampened demand at the end of the year. The hangover would continue into the first half of 2017, and consumers could be muted overall on discretionary purchases, including fashion, mobile upgrades and out-of-home dining.

On the other hand, while digital transactions introduce a note of caution (friction) in the consumer’s purchase decision, for e-tailers they do reduce complexity, cash-handling costs and potential returns which could provide significant unexpected wins.

I’ve written about this for years, and don’t tire of reiterating: the retail sector must recognise that shopping is a unified activity for the consumer; physical stores and non-store environments are alternative but complementary channels. Brands can and must use whatever channel mix works for them, and brick-and-mortar retailers need to invest in creating an integrated growth blueprint towards “unified commerce”.

On their part, while e-commerce companies are constrained by FDI policy, they will need to invest more in developing “old economy” strengths – strong product differentiation and distinguishable brands. Fashion, accessories, home decor and other lifestyle products are strong drivers of gross margin for all multi-product retailers, and e-commerce players struggling on the path to profit would focus on these even more, as well as on private labels. They also need to have management teams that are able to cast their minds 3-5 years into the future, while keeping close watch on immediate cash flows. Capital is available, but turning risk-averse. All businesses need to focus on up-skilling their teams, retaining good people, improving processes and adopting technology. In recent years, growth in the retail sector seems to have been driven by a “spray-and-pray” approach, not necessarily management sophistication. Spending like there’s no tomorrow is a sure way to no tomorrow.

In short, 2017 could be the year where the entire retail sector grows up – a lot. We hope.

(This piece was published in The Hindu – Businessline on 29 December 2016).

When American fast food standard bearers McDonald’s and Domino’s Pizza stepped into India in the mid-1990s, the market was just ripe enough for take-off.

McDonald’s and later Domino’s Pizza can be credited with not just growing the consumer appetite for fast food but also for fostering an entire food service ecosystem, including fresh produce, baked goods, sauces and condiments, and cold chain technology.

India has been typically difficult for business models driven by scale, replicability and predictability. The customer is price sensitive, operating costs are high and non-compliance of business standards is a frequent occurrence. In this environment, these brands have reinvented the meaning of meals, snacks and treats.

Their growth has set the stage for other international players and also set business aspirational standards for Indian food entrepreneurs and conglomerates alike.

Product experimentation has also been an important part of their success; it keeps excitement in the brand alive and help improve footfall. However, how far a product sustains and whether it becomes a menu staple can’t be predicted accurately. New products also need significant investment in both supply chain and front-of-house changes in standardisation-oriented QSRs, so the new product launch cannot be undertaken lightly. This is one reason these successful QSR formats don’t overhaul their menus drastically but make changes incrementally.

For these market leaders, future scale and deeper penetration is only feasible with higher visit frequency. For growth in middle-income India, they need to become a significantly cost-competitive option to be seen as more than a ‘treat’ or celebration destination.

So, while both McDonald’s and Domino’s Pizza have invested significantly in Indian flavours and menu offerings, perhaps it’s also best for them to reconcile with the fact that there will be a significant part of the consumer’s heart, stomach and wallet that will remain dedicated to indigenous offerings.

In a global environment that’s turning hostile to fast food, India isn’t a quick-fix growth market, but it’s certainly one to stay invested in, for the longer term.

And I have no doubt that as much as these companies aim to change India, over time India will also change them.

(Also published in Brand Wagon, The Financial Express)

Suparna Goswami, Forbes India
Bengaluru, 22 November 2016

After a successful stint online, e-commerce companies in India are now venturing into a world they thought they would drive into extinction: the brick and mortar space. Lenskart (online eyewear shop), Zivame (lingerie e-commerce player), and Pepperfry (online furniture company) are among the players to have opened a physical store in India, a country where e-commerce spend is still less than 2% of total retail spending, according to a study by Deloitte.

This is at a time when every industry is trying to make its presence felt online. And e-tailers certainly enjoy some clear strengths. For instance, a web store is always up and available, its reach unlimited by geography. However, online firms have found it hard to grow beyond a certain number in terms of customer acquisition, which is making it more and more necessary to have a brick-and-mortar store along with online presence.

A physical store is a great brand building exercise since it has high recall value for a customer. “The brand experience that one gets in a store is incomparable as there is a touch and feel element to it. Also, stores are a good place to bring on board a customer who has never shopped online,” says Ankur Bisen, senior vice president at Technopak, a management consulting firm.

Of course, there are products that could be picked off a website with little consideration to the retail environment, like a pair of headphones or baby diapers. But some products such as clothing or jewelry have a touch-feel element where a physical retail environment can complement the product.

Case in point, online lingerie retailer Zivame which so far has opened eight stores across the country and plans to have 30 more by the end of March 2017. “Since we are in the lingerie space, we know for a fact that most women in India wear ill-fitted bras,” says Richa Kar, CEO of Zivame. “With only an online presence it was difficult for us to guide them. We piloted the concept in our office where many women walked in and expressed their concern surrounding the lingerie issues they were facing. This probed us to take the next step and establish Fit Studios across the country.” Kar believes this has helped the company attract customers who would be hesitant shopping online because of issues over fit.

India’s top online fashion portal Myntra has its own reasons to venture offline. It is confident that this is an important step in strengthening the online fashion segment. “Fashion is a touch and experience based category,” says Ananth Narayanan, CEO at Myntra. “In order to initiate more shoppers to try fashion online, we are looking at an omni channel distribution approach that allows us to create multiple touch points for customers.” The firm’s tech-enabled stores, which is expected to open in the next two quarters, will have digital walls to help customers navigate and browse products.

It’s a global phenomenon

The trend is not unique to India. Globally, players like Amazon, Birchbox and Bonobos in the U.S., Spartoo in France, Astley Clarke in the UK and Alibaba in China are all expanding beyond just the online space. Although Amazon is an established player in the global retail e-commerce market which is expected to reach $2.5 trillion by 2018, e-commerce still represents less than 10% of the global retail market. Hence, even for these global players, offline presence is inevitable if they wish to attract more customers.

Devangshu Dutta of Third Eyesight, a consulting firm focused on the retail and consumer products ecosystem, says online companies so far have presented themselves dramatically different from offline players. He sees this as a mistake. “I do not see online separate from offline. Customers may want to interface a brand at different places and hence it becomes imperative for them to provide a seamless experience.” For instance, a customer might seek initial comparative information online, step into a department store to try a product, pay for it online and have the product delivered at home. Consequently, companies need to make sure that the experience is uniform across channels.

Online and offline both are essentially aimed at expanding reach and engaging with shoppers in more customized ways, thereby providing convenience. This is an emerging trend which will play an important role for online retailers in the days to come, for those who choose to embrace the backwards step.

(Published in Forbes)

P. Karunya Rao of Zee Business in conversation with Devangshu Dutta, Chief Executive, Third Eyesight and Narayan Devanathan, Group Executive & Strategy Officer, Dentsu India, about festive discounts, the evolution of ecommerce and retail business in India.