DR. PRADEEP SALGAONKAR elaborates on key points that a retail business should follow in order to be successful
Basic human needs and retailing business have a very close relationship for centuries. Retail business in India has taken off in leaps and bounds in the last few decades. Presently India has the largest retail store density in the world. With just about 9-10% organised retail stores, majority of retailing i.e about 89-90%, remains in un-organised sector with variety of formats. According to Global Retail Development Index (GRDI) 2021 report by Mc Kinsey, India is the second most potential country in the world for retail business, only after China.
Development and growth of India as a country, better infrastructure, improved transportation facilities, rapid urbanisation, better employment opportunities, increased disposable incomes, changing consumer trends and behaviour, and higher penetration of internet and smartphones are fuelling the growth of organised retail in metros and tier 1 cities, as well as in tier 2, 3 cities and beyond. From grocery to fashion and personal care products, established retail giants to new-age D2C retailers, B2B2C, all are focusing on this growing retail demand opportunity. They want to take the first mover advantage and achieve higher market shares and establish their brands in the untapped hinterlands of India.
Critical factors in retailing success
For retail business to be successful, it needs to meet and manage a few critical factors. Some of the most critical ones to which every retail business online or offline, must give serious attention are discussed below:
(a) Location of the Store:
Once Sam Walton was asked what is the most critical aspect behind success of Walmart and he replied ‘Location, Location, and Location’. Well a good location is always a positive factor contributing to a stores success, because location determines the footfalls of customers to the business. A good location is one which is easily accessible, clearly visible, and logistically good, has good traffic flow, and ample parking space.
In the present day technologically influenced world, one would argue that location does not matter much as most business happens online and digitally, and the physical store and location really makes no difference. Yes, that is true, but the consumer purchasing studies show that a large section of customers, though want the convenience of ordering online, also want to see, touch and feel the product before purchase and get the happiness of being there and doing the purchase. Once 100% online businesses like Dell, Amazon, Pepperfry etc. setting up their physical stores, and the emergence of phygital and O2O is a testimony to the fact that physical does matter and hence the location of the store is an important factor.
(b) Inventory Management:
The second most critical factor is the inventory management. For a customer, availability of the product when s/he wants it and on time delivery in case of online purchase is the most important part of a shopping experience, many a times over the price. As such availability of goods in the store is very critical for which a robust inventory management system has to be in place. Having too much inventory or too less inventory is bad and thus neither overstocking nor understocking is good for the store, as both have lost opportunities. Overstocking will eat into your profit by way of locked in capital and understocking results in lost sales and customers and many times losing customers for life.
(c) Technology and Digital interface:
Creating an ecosystem that is convenient and comprehensive thereby digitally connecting customers to business using technological advancements like data analytics, cloud computing, AI, ML, VR, MR, mobile technology, fintech and convenient virtual payments will boost a business’ performance and profitability. Any business that is not agile and does not adapt to the changing tech environment will find its survival very difficult.
(d) Logistics and Supply Chain Management:
Logistics and SCM in retail business are critical from the point of inventory management ensuring availability in brick and mortar format and on time delivery in case of online retail. The importance of availability of a product as and when desired by the customer needs no mention. And this is largely dependent on excellent logistics support and appropriate SCM management. Technologies such as RFID, automated fulfilment, cloud-based logistics technology, last-mile delivery solutions, distributed logistics, predictive planning, inventory visibility and movement tracking, same day or same hour delivery solutions are all tools available for assisting better logistics and SCM. Effective last mile delivery in case of online and correctly filled and on time delivery for retailers in space of home delivery format are critical.
(e) Online – Offline touch-points:
Retailers today need to operate in a mix format touching both online and offline platforms to provide convenience and value to customers. A retail business operation in combination of physical and digital formats give ample opportunities and touch-points for connecting with tech savvy customers. Whether a retailer deals in grocery, garments, fashion products or personal grooming brands they all need to have presence physically as well as online for wider connect with customer.
(f) Customer Expected Content:
‘Content is king’, and new retail requires a constant flow of it 24×7. Content is critical to creating the experience called ‘retailtainment’ that makes shopping part of a lifestyle that is pleasurable.
Besides getting necessary information about the products, consumption of this content is also very exciting and engaging. Retailers therefore need to create and circulate relevant, exciting and entertaining content among its customers on a regular basis.
Success is not a problem for any retailer that follows above mentioned simple yet effective critical points.
The writer is Founder Director, Saldots Academy, corporate trainer and facilitator. He is former Chairman, Goa Management Association. Email: pradeepsalgaonkar@gmail.com
