Shambhavi Anand, Economic Times
New Delhi, May 24, 2023
Retailers and shopkeepers will soon not be allowed to seek phone numbers of their customers while generating bills, according to a diktat by the department of consumer affairs, a senior government official said.
Taking the numbers of customers without their “express consent” is a breach and encroachment of privacy, said the official, without wanting to be identified.
The official added that such a move will be classified as an unfair trading practice defined as any business practice or act that is deceptive, fraudulent, or causes injury to a consumer.
Most large retailers mandatorily take down buyers’ phone numbers while generating the bill for their purchases and use them for loyalty programmes or sending push messages.
The move has come after the department received several complaints from consumers about retailers insisting on getting their phone numbers. This will be communicated to all retailers through industry bodies representing retailers soon, the official added.
While the implementation of these new rules may require some adjustments and initial costs for retailers, it is seen as a necessary step towards protecting consumer privacy and ensuring fair business practices in the retail sector, said experts.
While retailers will have to rework their systems in case this becomes a regulation, this won’t stop them from asking for phone numbers of consumers as their loyalty programmes run on these numbers, said Devangshu Dutta, founder of Third Eyesight, a retail consultancy firm.
He added that retailers also use numbers for sending e-invoices and so this could have a cost impact and environmental impact.
(Published in Economic Times)
Written By Sangeeta Tanwar
Two of India’s leading retail chains are currently preparing the ground for their full-fledged e-commerce forays, albeit in totally different ways.
While the Kishore Biyani-led Future Group, which operates the popular Big Bazaar hypermarket chain, is busy listing its labels on Amazon, rival Reliance Retail is withdrawing its products from all e-commerce platforms, as parent Reliance Industries (RIL) gears up to launch its own online marketplace.
For both the traditional players, cracking online sales is important as they prepare for a future beyond high street retail.
Online sales in India will balloon from last year’s $18 billion (Rs1.25 lakh crore) to $170 billion by 2030, Jefferies India predicted recently. This potential aside, Indian e-commerce is still nascent and retailers are still perfecting their strategies.
“E-commerce is now a game of two dimensions, one of scale and the other of last-mile ubiquity. Whoever gets this right, will manage growth, revenue, and customer acquisition,” said Anil V Pillai, director of the independent marketing firm Terragni Consulting.
As for the Future Group, it thinks the best way to achieve this is by riding piggyback on Amazon’s proven capabilities in scale and last-mile delivery.
How the plan evolved
In 2016, the Future Group had made its first e-commerce acquisition by buying out the struggling furniture retailer FabFurnish from its German incubator Rocket Internet. Biyani had hoped to find synergies between the startup and his group’s furniture brand Hometown.
A year later, hit by heavy losses, FabFurnish was shuttered. Biyani downplayed the move saying his losses were “compensated” as the company had learnt “enough” from the episode.
The move now to partner Amazon seems to have stemmed from that learning.
Over the past month, the two have been trying to make joint plans, including in distribution, warehousing, and creating products for Amazon and its grocery format, Pantry. Also, Future group brands, including Big Bazaar, are being aligned with Amazon Now, which promises delivery of everyday essentials within two hours, suggest media reports.
A more serious handicap will be Amazon controlling Future Group’s data and customer relationships in the partnership. “In e-commerce, ownership of customer relationship and data, which offers consumer insights, is the real asset,” points out Devangshu Dutta, CEO of Third Eyesight, a consulting firm focussed on retail and consumer products.
Vianello agrees: “When you have your own e-commerce venture, as Reliance Retail plans, you are the owner of the data and you can slice and dice it to come up with exciting product offerings and improved service experience.”
This is one of the advantages that RIL might have seen in going it alone.
“Reliance Retail has taken a more integrated approach towards e-commerce,” observed Dutta. “The company is set to leverage its pan-India retail presence and Reliance Jio’s (RIL’s telecom business) data capabilities to roll out an e-commerce platform,” explained Dutta.
The synergy between Reliance Jio and Reliance Retail is a big advantage. The retailer has about 10,000 stores across 6,500 towns in India, while Jio has a subscriber base of 306 million. After bringing many Indians online with Jio’s affordable data offerings, Reliance now hopes to get most of them to start shopping online as well.
The challenge, though, would be in getting the last-mile delivery right. “Reliance Retail could be at a disadvantage here compared to the Future Group, which has its delivery mechanism in place courtesy its partnership with Amazon,” suggested Vianello.
Moreover, like with Jio, consumers will expect heavy discounts from Reliance’s e-commerce venture as well, which may be difficult to sustain given the initial investments. “Biyani’s (online) launch involves lower upfront costs, while Reliance Retail’s will be resource hungry since it’s an almost greenfield project,” pointed out Pillai, adding, “Reliance’s challenge is the overwhelming perception about the group being a price warrior and disrupter.”
So, which strategy will triumph? Everything comes down to execution. “Success in retail, including e-commerce, is about more and more customers choosing to transact with you repeatedly. Achieving this is a difficult and ongoing process. There are no guaranteed or permanent winners,” says Dutta.
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.
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.)
Aggregator models and hyperlocal delivery, in theory, have some significant advantages over existing business models.
Unlike an inventory-based model, aggregation is asset-light, allowing rapid building of critical mass. A start-up can tap into existing infrastructure, as a bridge between existing retailers and the consumer. By tapping into fleeting consumption opportunities, the aggregator can actually drive new demand to the retailer in the short term.
A hyperlocal delivery business can concentrate on understanding the nuances of a customer group in a small geographic area and spend its management and financial resources to develop a viable presence more intensively.
However, both business models are typically constrained for margins, especially in categories such as food and grocery. As volume builds up, it’s feasible for the aggregator to transition at least part if not the entire business to an inventory-based model for improved fulfilment and better margins. By doing so the aggregator would, therefore, transition itself to being the retailer.
Customer acquisition has become very expensive over the last couple of years, with marketplaces and online retailers having driven up advertising costs – on top of that, customer stickiness is very low, which means that the platform has to spend similar amounts of money to re-acquire a large chunk of customers for each transaction.
The aggregator model also needs intensive recruitment of supply-side relationships. A key metric for an aggregator’s success is the number of local merchants it can mobilise quickly. After the initial intensive recruitment the merchants need to be equipped to use the platform optimally and also need to be able to handle the demand generated.
Most importantly, the acquisitions on both sides – merchants and customers – need to move in step as they are mutually-reinforcing. If done well, this can provide a higher stickiness with the consumer, which is a significant success outcome.
For all the attention paid to the entry and expansion of multinational retailers and nationwide ecommerce growth, retail remains predominantly a local activity. The differences among customers based on where they live or are located currently and the immediacy of their needs continue to drive diversity of shopping habits and the unpredictability of demand. Services and information based products may be delivered remotely, but with physical products local retailers do still have a better chance of servicing the consumer.
What has been missing on the part of local vendors is the ability to use web technologies to provide access to their customers at a time and in a way that is convenient for the customers. Also, importantly, their visibility and the ability to attract customer footfall has been negatively affected by ecommerce in the last 2 years. With penetration of mobile internet across a variety of income segments, conditions are today far more conducive for highly localised and aggregation-oriented services. So a hyperlocal platform that focusses on creating better visibility for small businesses, and connecting them with customers who have a need for their products and services, is an opportunity that is begging to be addressed.
It is likely that each locality will end up having two strong players: a market leader and a follower. For a hyperlocal to fit into either role, it is critical to rapidly create viability in each location it targets, and – in order to build overall scale and continued attractiveness for investors – quickly move on to replicate the model in another location, and then another. They can become potential acquisition targets for larger ecommerce companies, which could acquire to not only take out potential competition but also to imbibe the learnings and capabilities needed to deal with demand microcosms.
High stake bets are being placed on this table – and some being lost with business closures – but the game is far from being played out yet.
If you’re planning to develop a mall, here’s a short-list of key issues you must address:
Fail-proof the business plan by focussing on the customer: Focus on the development of retail brands and not solely on quick returns on investment. The primary responsibility should be that of catering to the consumer catchment and driving footfalls for the retail occupants. The other requirements follow from this simple premise. Also, a tenant-unfriendly revenue model that overloads the tenant with a high rent (whether fixed or as a percentage of sales) leads to a churn in tenants, and in combination with other factors, keeps the best tenants out of the mall making it unattractive to customer as well.
Do a thorough recce of the catchment: Ask questions like “can the catchment support the development in terms of consumer footfall and spending?”, “Is there a connect between the needs of the immediate catchment and the occupants of the mall?”, “Are there too many malls in the catchment area?”
Offer a good occupant mix: You cannot have mall occupants who have little relevance for the target consumer. Also, the retailers must complement each other in a healthy way rather than cannibalise customers and sales from each other.
Ensure good access: Accessibility and connectivity to get the traffic smoothly in and out of the mall is a must; ensure there is adequate parking space.
Avoid undersizing: A small-sized is a straight handicap because it will lack variety, and you run the risk of getting dwarfed by the next big mall that throws its hat into the ring. [However, the specific size can vary depending on the state of development of your own catchment.]
Focus on design: This involves making the mall brands ‘visible’, ensuring appropriate ‘zoning’ in terms of entertainment, multiplexes, kids’ areas, food courts etc. This will result in better customer flow management. Bad design and poor customer flow management within the mall leaves large parts of mall “invisible” to visiting consumers, or improper zoning that confuses customers and breaks up the traffic.
Finally, remember, it’s not so much about the “square feet”, as about the feet that will occupy it! Focus on the consumers that you want visiting the mall and why they should return again and again.