Do you have this feeling that 2018 went by a little too quickly? Well, however quick it seemed, it was certainly momentous for retail in India.

If 2016 was marked by the shock of demonetization, and 2017 by the pains of GST implementation, 2018 highlighted two threads – the obvious convergence of the online and offline world that had been ignored for far too long, and the interest of foreign capital in India’s consumer world.

Walmart bought India’s loss-making ecommerce leader for an eye-popping US$ 20.8 billion valuation, while ecommerce giant Amazon injecting equity into Shoppers Stop, bought Aditya Birla’s More grocery chain (49 per cent through a back-end entity), and held discussions with Future Group to acquire 9.5 per cent in Future Retail. There were rumours of a mega joint venture between Reliance Retail and China’s Alibaba, and media also reported Japan’s Softbank looking at ploughing US$200 million into Firstcry. Both rivals Amazon and Alibaba were reported to be looking at Spencer’s, one of India’s oldest retail chains currently owned by the RP-Sanjiv Goenka group.

Videos of the crush of curious crowds at India’s first, much anticipated Ikea went viral, and the company said it planned to open 40 locations over the next few years, upping its earlier projection of 25. Chinese retailer Miniso basically came out of nowhere and claimed to have clocked sales of ?700 crores in the very first year in the country.

But along with these cross-border “big bangs” we saw domestic confidence also quietly resurging. Indian retailers are not cowering before large foreign retailers and expensive ecommerce advertising splashes; today they are less defensive about their own prospects than they were two years ago. There is also a growing interest among entrepreneurs and corporates to create new retail businesses, which augers well for the diversity of competition and freshness of offerings in the market.

Going into 2019, one thing I can say with certainty is that the weather, economic and political – both in India and elsewhere – will be unpredictable, and might even turn stormy. Externally, retailers should “expect the unexpected”. To ensure that the business remains on track, however rough the track becomes, retailers must centre all major strategies and decisions on the customer. A theme that has been around for centuries, it is surprising how much it gets ignored in this most customer-facing business.

Retailers tend to divide customers into rigid segments. My suggestion would be to look at customers through the behaviour and experience lens and also recognise that the same customer behaves differently at different times and in different contexts – in effect there are no hard boundaries between “segments”.

It is often emphasised is that Indian consumers are “deal-seeking”. I don’t think we should treat this as a uniquely Indian thing: all consumers look for value-reassurance in unpredictable times and in uncertain conditions. Also remember that even in value-seeking, experience still rules. Retailers and brands that are solely focussing on price or price+feature comparisons are turning their business into a commodity. They are missing the long game: of defining the customer’s experience from the first moment of brand contact to the purchase and beyond.

In 2019, if you want to focus on a single competitive strategy, it would be this: for stickiness and sustainability, think about the customer’s experience, and actively design it, in every environment where the customer connects with you.

Lastly, technology is transformative, but tends to get restricted to being the contrast between ecommerce and physical retail. Indian retailers need to embrace technology in all forms, from using the zillions of transactions within the business and with the customer for developing actionable knowledge, to automating processes where unnecessary cost or time makes the business inefficient.

Having said that, keep the previous rule in mind when deploying at customer-facing technology – make customer-interfacing technology as invisible or intuitive as possible. When in doubt, learn from one of the leaders in the sector, Amazon: its 1-click ordering patent 20 years ago gave it a huge advantage over competitors, and it is now aiming to replicate the same seamless, friction-free behaviour physically with its Dash button. Or pick cues even from younger fashion businesses like Rebecca Minkoff, whose focus is on ease and convenience. The key reason for adopting technology is to remove friction for the customer and for processes that serve the customer.

I have no doubt that 2019 will be eventful – let the customer experience be the guiding light to keep our businesses off the rocks and afloat.

(Published in the Financial Express on 4 January 2019, under the title “Retail in 2019: Need for stronger brand-customer connections that go beyond purchase“)

In recent decades, the dependence on established medical disciplines has begun to be challenged. There is the oft-quoted dictum that healthcare sector tends to illness rather than health. Another saying goes that some of the food you eat keeps you in good health, but most of what you eat keeps your doctor in good health. With a gap emerging between wellness-seekers and the healthcare sector, so-called “alternative” options are stepping in.

Some of these alternatives actually existed as well-structured and well-documented traditional medical practices for thousands of years before the introduction of more recent Western medical disciplines. This includes India’s Siddha system and Ayurved (literally, “science of life”), which certainly don’t deserve being relegated to an “alternative” footnote. Ayurved is also said to have influenced medicine in China over a millennium ago, through the translation of Indian medical texts into Chinese.

Other than these, there are also more recent inventions riding the “wellness” buzzword. These may draw from the traditional systems and texts, or be built upon new pharmaceutical or nutraceutical formulations. Broader wellness regimens – much like Ayurved and Siddha – blend two or more elements from the following basket: food choices and restrictions, minerals, extracts and supplements, physical exercise and perhaps some form of meditative practices. Wellness, thus, is often characterised by a mix-and-match based on individual choices and conveniences, spiked with celebrity influences.

A key premise driving the wellness sector is that modern medicine depends too heavily on attacking specific issues with single chemicals (drugs) or combinations of single chemicals that are either isolated or synthesised in laboratories, and that it ignores the diversity and complexity of factors contributing to health and well-being. The second major premise for many wellness practitioners (though not all!) is that, provided the right conditions, the body can heal itself. For the consumer the reasons for the surge in demand for traditional wellness solutions include escalating costs of conventional health care, the adverse effects of allopathic drugs, and increasing lifestyle disorders.

After food, wellness has turned into possibly one of the largest consumer industries on the planet. Global pharmaceutical sales are estimated at over US$ 1.1 trillion. In contrast, according to the Global Wellness Institute, the wellness market dwarfs this, estimated at US$ 3.7 trillion (2015). This figure includes a vast range of services such as beauty and anti-ageing, nutrition and weight loss, wellness tourism, fitness and mind-body, preventative and personalized medicine, wellness lifestyle real estate, spa industry, thermal/mineral springs, and workplace wellness. Within this, the so-called “Complementary and Alternative Medicine” is estimated to be about US$200 billion.

There are several reasons why “complementary and alternative medicine” sales are not yet larger. Rooted in economically backward countries such as India, these have been seen as outdated, less effective and even unscientific. In India, the home of Siddha and Ayurved, apart from individual practitioners, several companies such as Baidyanath, Dabur, Himalaya and others were active in the market for decades, but were usually seen as stodgy and products of need, and usually limited to people of the older generations and rural populations. In the West they typically attracted a fringe customer base, or were a last resort for patients who did not find a solution for their specific problem in modern allopathy and hospitals.

However, through the 1970s Ayurved gained in prominence in the West, riding on the New Age movement. Gradually, in recent decades proponents turned to modern production techniques, slick packaging and up-to-date marketing, and even local cultivation in the West of medicinal plants taken from India.

As wellness demonstrated an increasingly profitable vector in the West, Indian entrepreneurs, too, have taken note of this opportunity. Perhaps Shahnaz Husain was one of the earliest movers in the beauty segment, followed by Biotique in the early-1990s that developed a brand driven not just by a specific need but by desire and an approach that was distinctly anti-commodity, the characteristics of any successful brand. Others followed, including FMCG companies such as the multinational giant Unilever. The last decade-and-a-half has also brought the phenomenon called Patanjali, a brand that began with Ayurvedic products and grew into an FMCG and packaged food-empire faster than any other brand before! While a few giants have emerged, the market is still evolving, allowing other brands to develop, whether as standalone names or as extensions of spiritual and holistic healing foundations, such as Sri Sri Tattva, Isha Arogya and others.

An absolutely critical driver of this growth in the Indian market now is the generation that has grown up during the last 25-30 years. It is a class that is driven by choice and modern consumerism, but that also wishes to reconnect with its spiritual and cultural roots. This group is aware of global trends but takes pride in home-grown successes. It is comfortable blending global branded sportswear with yoga or using an Indian ayurvedic treatment alongside an international beauty product.

Of course, there is a faddish dimension to the wellness phenomenon, and it is open to exploitation by poor or ineffective products, non-standard and unscientific treatments, entirely outrageous efficacy claims, and price-gouging.

To remain on course and strengthen, the wellness movement will need structured scientific assessment and development at a larger scale, a move that will need both industry and government to work closely together. Traditional texts would need to be recast in modern scientific frameworks, supported by robust testing and validation. Education needs to be strengthened, as does the use of technology.

However the industry and the government move, from the consumer’s point-of-view the juggernaut is now rolling.

(An edited version of this piece was published in Brand Wagon, Financial Express.)

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.)

Third Eyesight’s CEO, Devangshu Dutta recently participated in a discussion about the phenomenal growth of the Patanjali brand, from yoga lessons to a food and FMCG conglomerate taking well-established multinational and Indian competitors head-on. In a conversation with Zee Business anchor, P. Karunya Rao and FCB-Ulka’s chairman Rohit Ohri, Devangshu shared his thoughts on the factors playing to Patanjali’s advantage. Excerpts from the conversation were telecast on Brandstand on Zee Business:

Shinmin Bali, Financial Express

Mumbai, 21 February 2016

Having created quite a stir at the time of their launch, hyperlocal companies are now witnessing a dampened mood. While several have folded up operations in some cities, others have downsized staff, tweaked the services they offer and even made alterations to their business models. A recent example is Grofers shutting down operations in Bhopal, Bhubaneswar, Coimbatore, Kochi, Ludhiana, Mysuru, Nashik, Rajkot and Visakhapatnam.

TinyOwl last year was in the news for a poorly-handled downsizing operation in Pune, with a dramatic hostage situation involving its co-founder Gaurav Choudhary. PepperTap also recently shut down operations in six cities.

Ironically, giants like Amazon have not only aggressively entered the hyperlocal space, they are building on it. Amazon is currently offering the service in Bengaluru, Amazon Now, after running a pilot project, Kirana Now, in 2015.

The investor sentiment in India is also on a decline, as was reported earlier this year. Investments by venture capitalists have dropped from $2.12 billion (October-December 2014) to $1.15 billion (October-December 2015), according to a report by CB Insights and KPMG International. This leaves an even shorter window of opportunity for players to retain investor interest.

Albinder Dhindsa, co-founder, Grofers, states that differing levels of technology literacy among the majority of merchants and consumer adaptation to the online platform are concern areas for the company. In 2016, the company is looking to bring over one lakh merchants aboard and ensure that turnaround time stays under an hour. Grofers delivers more than 35,000 orders per day on average. In Q4 2015, the firm acquired teams of SpoonJoy and Townrush to bring dynamic learning to the table.

For Swiggy’s co-founder Nandan Reddy, the focus is currently to grow the market, while catering to a wide demographic of consumers. He admits that in the early stages, the brand had trouble educating even its partners. Furthermore, operating a delivery fleet in an on-demand service offering sub-40 minute deliveries is a challenging task, given that there are at least 15 points of failure in an average order. Swiggy currently owns a delivery fleet of 3,800 delivery executives. The brand’s repeat consumers contribute to over 80% of orders.

Debadutta Upadhyaya, co-founder, Timesaverz, says some of the major challenges in a hyperlocal market are optimum resource utilisation and matching locations, price points, and other specific requirements to customer needs. Timesaverz currently has a service range spread across 40 categories, aided by a network of over 2,500 service partners across five metros. Its revenue model is commission based, where 80% of earnings from consumers are shared with service partners.

Vinod Murali, MD, Innoven Capital, points out that as the hyperlocal industry is in its nascent stages, it needs a fair amount of time to grow. “One aspect to keep in mind is that a large sized equity cheque does not imply that a company has achieved operational maturity or robust business metrics, especially in this segment,” he notes.

Given the recent consolidation in this category, the survivors have the opportunity and time to focus on improving unit economics and demonstrate that their businesses are viable and valuable.

Devangshu Dutta, CEO, Third Eyesight, is of the opinion that hyperlocals make the mistake of borrowing business models and terminologies from Silicon Valley, without adequately understanding the real context of the Indian market. “Is there an existing or even potential demand for the service claimed to be provided? Or are you just going to introduce an intermediary and an additional link in the chain, with additional costs and unnecessary administration involved?” he asks.

(Published in Financial Express)