Why hybrid retail formats are the future of retail in India

The retail sector has been completely upended by the Covid-19 pandemic, which has forced the closure of physical stores and raised questions about the future of the in-store experience. Many retailers are struggling to properly service customers through other channels as a result of these unexpected developments. Retailers that prioritized physical stores and face-to-face engagement above omnichannel strategies have found it more difficult to adapt than multichannel and digital-first retailers.

Retailers need to fully utilize technology in order to go into the future since consumers today expect more from retailers than ever before. Customers will want to purchase both offline and online in the future, so retailers must prepare for this hybrid environment.

Increased customer expectations, significant technological improvements, and the growth of omnichannel commerce are just a few factors that are changing the face of retail. These shifts can heighten cost pressures and uncertainty for retailers in a sector known for its narrow margins—all the while presenting considerable opportunities. In the face of change, conventional strategies will no longer be effective; now is the moment to explicitly articulate new ambitions, make significant adjustments to operational models, and reconsider retail. Those who act today might have a long-lasting edge in the future.

According to data from the EY Future Consumer Index, the pandemic has sped up certain fundamental shifts in consumer purchasing behavior.

• 44 % intend to combine their shopping trips and make fewer excursions overall.
• 36 % of consumers plan to limit their in-person shopping to establishments that offer wonderful experiences.
• 43 % want to spend more money at neighborhood small businesses.

There are several options available across platforms and purchasing experiences in our world; neither brick and mortar stores nor internet stores can totally replace the other. Consumers view these channels as diverse facets of their daily lives rather than as distinct or separate entities.

Future hybridization will allow for both channels to coexist, with less of a clear distinction between them. Digital technology will be essential in making purchasing possible, whether it happens online or in a physical location.

Digital and physical retailing won’t be mutually exclusive. Given this, it should come as no surprise that the EY Reimagining Industry Futures 2022 study supports the idea that outside forces have accelerated the speed of digital transformation in retail. Retailers, in general, are more interested than ever in 5G and internet of things (IoT) use cases that can enhance supply chain visibility and management, according to 71% of respondents. 75% claim that the Covid-19 pandemic has boosted their ambitions for digital transformation. India’s retail industry is expected to be worth US$ 883 billion in 2020, of which US$ 608 billion would be spent on groceries, according to Forrester Research. By 2024, it is expected that the market will increase to US$ 1.3 trillion.

Hybrid Model: The Solution to Optimal Retailing for Offline Retailers:

Access to the consumer as well as access to supplies were made difficult by Covid-19. Deeply impacted supply networks included smaller brick and mortar retailers in particular. Larger businesses had to adjust their working methods, develop processes, and transform operations by increasing automation and digitization in routine activities.

The concept of omnichannel retailing or a hybrid business approach gained popularity among offline merchants as a result of the businesses coming to a standstill. This hybrid structure is starting to take shape as the new face of retail due to the complimentary qualities of the physical and internet channels. The most widely shared example of this idea is how Kirana store proprietors have embraced digital technology, from online order receipt to hyperlocal order fulfillment.

The pandemic made it possible for the business to expand to Tier II and Tier III cities and villages. Rural areas of the country can now benefit from the amenities of a big city thanks to widespread adoption of digital technology. The amount of consumer spending from these locations has sharply increased, according to major e-commerce corporations. Additionally, in order for many brick and mortar stores to succeed, this has necessitated investments in a larger geographic area and better customer service.

With the proclamation from the Indian government permitting 100 percent FDI in the automated channel for online retail of goods and services. An encouraging increase in job prospects has been developed in this industry as a result of the increased focus on enhancing digital infrastructure in Tier II and Tier III markets.

Hybrid Model is the Future of Retail:

As a result of the pandemic, the business was able to expand its reach to Tier II and Tier III cities and villages. Rural areas of the country can now experience the benefits of a large city as a result of extensive digital adoption. Consumer purchase activity from these locations increased dramatically, according to large e-commerce corporations. Furthermore, this has necessitated expenditures in a broader geographic area and enhanced customer service, both of which are essential for many brick and mortar stores to get off the ground.

The personalized experience, digitized operations, integrated supply chain, and fintech functioning as the backbone of the O+O framework are the components that are driving the rapid change of the offline retail sector. Large-scale personalisation in the retail industry has been made possible by the use of cutting-edge technologies like AI and Cloud as well as the vast data-driven insights. The back-end systems, which include inventory management, are coupled with the operations and in-store experience.

The change of the offline retail industry has greatly benefited from additional factors such as improved connection, the growth of digital transactions, and the widespread adoption of contactless payments.

The retail business has created a significant opportunity for the nation to seize over the next ten years, which will have an impact on the expansion of the retail sector and increase employment possibilities in both the organized and unorganized sectors.

Additionally, as the industry transitions to digital, tech talent will be in high demand in the upcoming years. The retail industry is predicted to offer additional job options for gig workers. The retail industry is predicted to prosper for workers with modern capabilities including communication, big data, cybersecurity, and artificial intelligence. Millions of employment should be created in this industry.

In the coming years, the hybrid business model is anticipated to increase online-driven exports.

Key Benefits of Hybrid Mode:

• Less marketing spends and Customer Acquisition costs, higher sales:

Due to the fierce competition in the online retail business, eTailers must spend money on various forms of advertising and plan events to attract customers. These will raise the ongoing expenses.

On the other hand, there are ongoing expenses associated with maintaining a physical store. The market budget, however, can significantly decrease as a result of reducing advertising expenses.

• Consumers enjoy experiential shopping as well as Touch and Feel of Products Before Purchasing:

Etailers have understood how crucial it is to give customers a “touch and feel” buying experience if they want to fully tap into the untapped e-commerce market.

Leading online merchants are opening physical locations with this in mind. The distinction between online and offline selling has become more hazy as a result.

• Improves Capacity Planning:

Proper inventory management is a never-ending difficult endeavor. These days’ consumers demand a wide selection of products. Large numbers of things are returned because buyers don’t like them, especially those who bought something online but wish to go back to the store. These returns are very expensive for e-retailers in absence of hyperlocal micro fulfillment centers.

Even the most sophisticated planning and forecasting technologies occasionally fall short of balancing inventory. To accommodate client demand in this situation, retailers will need to strategically develop, purchase, or acquire new distribution centers. This is where hybrid stores or an omni-channel retail strategy becomes very cost efficient.

• Higher customer trust and brand visibility:
  Customers are more likely to order from an e-retailer, if the e-retailer has physical locations. Over the past ten years, e-commerce has expanded quickly, and all kinds of shops have enthusiastically embraced it. The pandemic has caused the trend to accelerate. E-commerce has a significant drawback in that it struggles to physically engage clients, a task that traditional storefronts excel at. This functionality is essential since many products require physical interaction before a buyer can decide wisely and accurately. Retailers who only sell online miss out on this chance to increase customer profitability. This may help to explain why some online retailers are expanding their physical storefront presence. Customers may have a concrete, tangible, multi-sensory shopping experience at a physical store, which is exactly the kind of physical interaction that deep products demand. Customers discover that the shop enables them to choose products more wisely, improving their purchasing power.

Conclusion:

Technology had a significant role in the retail industry’s transition to hybrid business models. It aided shops in supplying customers with real-time information so they could switch brands immediately if their needs weren’t being satisfied.

While incorporating the hybrid retail model that is related to shop layout, e-commerce, and product availability, it is vital to take the convenience of the customer into account.

In addition to the finalization of the National Retail and E-Commerce Policy, this will be a significant step in realizing the sector’s full potential over the course of the next 10 to fifteen years. The best course of action for offline merchants is to accept the new normal in the retail world and to develop a long-term strategy for an online business as the retail sector moves toward digital transformation.

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