In a panel discussion at the Amazon Smbhav summit recently, speakers talked about the importance of the Open Network for Digital Commerce (ONDC) and how technology and digitisation were key to enable the next phase for offline retail growth.
Opening the discussion, Anil Bharadwaj, Secretary General, Federation of Indian Micro, Small and Medium Enterprises, said, “During Covid, MSMEs or entrepreneurs who were working in a very informal setting suddenly found that they could leverage technology and reach out to a very large number of buyers and customers with little of additional costs. So, it boils down to a question of mindset, preparation; and one could jump on the bandwagon and reap the benefits that e-commerce offers to almost all segments of MSMEs.”
Elaborating on this, Vinod Nambiar, Managing Director of More Retail Limited, said the first big challenge was transitioning from an offline into an omnichannel work space. “Technology advancements are rapid, and can scare people. Whether we’re talking about a shopper’s path to the purchaser or about inventory management, supply chain solutions, I think adapting technology is a real friction point. Learning about very rapid and evolving customer expectations. Customers today have a choice, whether its category choices, assortment choices, speed choices, fulfillment choices. Retailers, like us, have to learn how to adapt to those choices and make that work. A big change and friction point is price discovery. All retail and channels have to learn how to adapt.”
With the aim to make micro, small and medium businesses tech savvy, the Ministry of Commerce and Industry had launched the ONDC programme. It aims to democratise ecommerce just like the UPI changed the payment system in India.
The Ministry of Commerce and Industry had launched the ONDC programme with the aim to make MSMEs tech savvy.
“In retail, we expect to reach a broader cross section of small and medium enterprises and help them to come on stream. We think that we’ll be able to let loose the imagination and creativity of a broad cross section of startups to come together and have an equal play in the market. That’s the present strategy,” said T Koshy, CEO, Open Network for Digital Commerce.
Technology in FMCG sector
Local kirana stores are today a hotly contested space. New-age digital-first companies believe that this large unorganised mass of over 10 million retailers is in dire need of efficiency-led disruption. These stores haven’t been effective in anticipating consumer needs or understanding consumer orientation. Two things have rattled them: revenue maximisation through assortment selling at optimum price and how to keep themselves relevant when consumers shift their shopping preferences.
“To resolve these issues, we need a demand capture method, which is the ability to attract shoppers to the store and sell at the optimum price to maximise revenue,” said Kedar Lele, Executive Director-Customer Development,
. “Their catchment is not going to grow and the idea should be how to serve as many needs as possible and optimise that through indigenous knowledge and deployment of technology to anticipate demand. As consumers don’t walk into the store anymore, kiranas can offer last-mile delivery at an effective price. This is called demand fulfillment.”
Talking about her foray into e-commerce, Divya Arora, Director, Kesar Sweets, said, “The initial stint with e-commerce happened in 2019, just a few months before Covid hit. We were expected not only to create high-profile products, but also to deliver them to the doorsteps of our customers in the most
way. Customers were demanding more value and innovation than ever, at prices, which we had not thought of, and our profitability was shrinking. We realised that transformation was the key. So, while use of technology and data were once enablers of efficiency and cost cutting, we recognised that they had become engines of innovation and revenue growth, offering us opportunities to develop new products and reimagine our business in totality.”
While earlier Kesar Sweets thought of expansion based on brick-and-mortar models, now it thinks differently. “We are accessible to the entire world because of digitisation. Competition and customer needs are changing at a very fast pace which has led us to innovate and pivot constantly. We had to upskill our chefs because our recipes had to be redefined as we had to maintain a certain quality during transportation. We had to adapt to technology, so that our sweets could remain fresh for a longer period of time. We never had a packaging unit for ecommerce earlier. We did not make bills in a certain way earlier. The inventory for packaging had to be redesigned. All this made us more structured and process oriented,” she added.
Digitisation means to make sure that the entire value chain works smoothly.
Roadblocks for small retailers
There are several areas where some kind of competency is required if one wants to be a seller through e-commerce. One should be ready to accept different customer opinions. The ability to factor in the returns, processing orders in time, packaging and creating an “aha! effect” on the customer is required.
The moment a business wants to join e-commerce, it needs to get GST registration and all the compliances that come with it. This becomes a challenge for micro-operations.
Digitisation is more than selling online, it can bring efficiencies across the value chain. How can offline retailers leverage technology to make all aspects of store operations geared towards providing a superlative customer experience? Responding to this, Nambiar said, “Three years ago, most offline retailers were doing fledgling online businesses. In the last two years there has been an acceleration of a shopper habit which has led to omnichannel shopping.”
Over the last few years, HUL also has been driving digital first within the organisation and with those they work with. For kirana stores, HUL’s sole objective is to make them future-fit in a fast-changing world. HUL has pioneered the FMCG analytics that allow them to offer customised product recommendations to each of the stores.
“So, 2.1 million outlets that we directly go to, with various offerings that we have, depending on the need, season, affordability, locality and the type of the store, every salesman has a customised list of products that he makes an offer. Our Shikhar B2B has over 800,000 stores and with the app, every retailer has access to HUL product portfolio 24×7 and can order and can get it delivered 24 to 48 hours. We support this app with a distributor inclusive model. We’ve been able to use the sales trend to provide attractive credit facilities for these small stores,” said Lele.
GST registration and other compliances can be a challenge for micro entrepreneurs.
According to Nambiar, Indian retail is going to come of age in 5-10 years. Technology is going to touch every aspect of a retail, supply chain and the payment systems by giving much easier credit. “One area that is going to change is B2B and I think there will be multiple Shikhar opportunities in this country, where things will get upstream.”
Lele was of the view that the tech adoption rate was going to grow further in a few years. “Traders, retailers and the business community have understood that it’s better to adopt the GST regime and do formalisation of business than keep a separate khatabook. This will allow small retailers also to have access to capital. And they will start buying what they can sell, instead of buying what they can afford. And that’s a big change that would come in their lives. With urbanisation happening in many cities, with rural consumption, growing and adoption of technology, I do believe that there is life for retailers in the future. And we will see the expansion happening around us,” he said.
Bharadwaj of the Federation of Indian Micro, Small and Medium Enterprises said digital technology would formalise businesses. “With greater formalisation and process-driven systems in place, you will have a large number of financial service providers coming in and filling the gaps.”