2. CONTENTS
1. Synopsis..........................................................................................................................1
2. Organized Retail Penetration in India ........................................................................2
3. Growing Influence of Online Retail in India...............................................................3
4. Going digital is mandatory ..........................................................................................5
5. Need for Transition from Single Channel to Multichannel and finally
Omnichannel ......................................................................................................................6
6. Benefits to the Brands/Retailers conferred by Omni Channel Approach...............7
7. Benefits to the Customer conferred by Omni Channel Approach.........................12
8. Indian Retailers with Omnichannel Footprints ........................................................14
3. 1
1. Synopsis
Indian retail market is expected to be sized at USD 990 Bn by 2020 with rural population constituting about
48 per cent of it. Out of this USD 990 Bn market, mere 16.2 per cent is organized which takes 4.6 per cent
of its share from online retail.
Currently, 50% of the retail market is in rural India, which faces a broken supply chain and a paucity of
purchase options. Even, some of the most popular Indian retailers don’t have a presence beyond top 300-
350 cities. Which opens-up the latent demand of rural India to be captured by channels other than offline.
Online is expected to be an important factor due to limited organized retail penetration and limited supply
in Tier 2+ cities. Online retail penetration is expected to reach 18 per cent in the next 10 years. But the
offline retail is still expected to be a formidable force because of the customer preference of instant
ownership and a strong sense of trust in offline channel.
Even in cities where organized retail is well penetrated, a clear majority of urban customers interacting with
both offline and online channel before making a purchase, which underscores the need for offline retailers
to have a good digital presence.
Comprehensive digital presence brings them to the multichannel stage, which is a major step towards
customer acquisition and higher brand visibility, but both the channels work in silos. To kill these silos and
reach the full potential; brands need to continue their journey to omnichannel retail by seamlessly
integrating their customer experience, inventory and backend processes.
Some of the major Indian retailers have already realized these benefits and have started taking steps in the
right direction, but omni transformation has proved out to be a difficult process for a lot of brands and
retailers, with limited options of enabling partners in Indian ecosystem it becomes even more difficult
4. 2
2. Organized Retail Penetration in India
Indian retail market stands tall at USD 710 Bn as of 2017 and is expected to grow up to USD 990 Bn by
2020. 70 per cent rural population is responsible for almost half of the total demand while the rest of it
comes from the urban population. Demand from the rural population is expected to grow in the coming
years.
Organized retail penetration is mere 11.8 per cent and is expected to reach 16.8 per cent by 2020. Offline
retail is a major contributor to the organized retail sector, however online retail penetration has started to
pick up the pace.
5. 3
However, the supply from organized retail is limited and fragmented. Some of the most popular retail brands
also have their presence limited to the top 300 cities in India. Therefore, they have not been able to cater
to the major segment of the Indian population. There is an urgent need to expand operations, especially in
Tier 2+ cities to bridge the supply gap.
3. Growing Influence of Online Retail in India
Due to growing demand, especially in Tier 2+ cities, online retail is expected to be an important influence
in Indian retail. Tier 2+ cities are expected to become the highest contributor to the online retail sector in
India.
6. 4
Customer side levers such as ubiquitous internet, affordable smartphones and barrage of free information
are encouraging more and more customers to try online channels. In China, a similar market like India, the
online penetration has reached ~18% of the overall retail turnover. Indian retail penetration is expected to
follow a similar trajectory because of the following reasons:
Rising Disposable
Income
Social Media Influence Increased Adoption
of Products
Latent Demand
Fulfilment
Acceptance of
aspirational categories
as functional ones
Entry of International
Brands that command
high ticket price
1 2 3
456
7. 5
There is a huge disparity between the categories of products when it comes to online retail penetration.
Some categories such as smartphones have matured significantly due to increased adoption while others
such as FMCG are far from reaching their full potential.
4. Going digital is mandatory
Despite the increasing demand, limited reach of organized offline retail and increasing online retail
penetration, offline retail will continue to be the major channel for retail in India. A clear majority of customers
feel a strong sense of trust in offline retailers due to face-to-face interactions and the touch-and-feel
component. Customers are habitual of instant ownership which lags in online retail. For size-categories and
certain non-size categories, product trials are still key to product discovery and purchase decisions.
Realizing the importance of offline channel, several online players have started testing the offline waters.
These players come with a wealth of user behavior information such as Customer Personas, Buying Funnel
and Digital Touchpoints. Once available offline these players become the preferred choice for their online
ease and new-found offline trust. Hence offline players must go digital save their current pie and to acquire
new digital customer. Digital channel imparts 3-5X benefits to offline players, not only by generating sales
but also by trapping customers in the brand/retailer ecosystem and hence plugging the offline revenue
leakage.
8. 6
5. Need for Transition from Single Channel to Multichannel and finally
Omnichannel
73% of the urban customers interact with both online as well as offline channel before making a purchase.
Customers have come to demand online ease with offline trust from the brands and retailers and expect a
seamless experience in both the channels. A combination of one or more of these factors has irreversibly
changed the shape of customer buying funnel. It is no longer linear and in fact, it is so dynamic that
companies should not assume anything other than the fact that it has a customer at the centre of it.
Major international retailers have started to realize the importance of adopting a multichannel approach to
retail to fulfil growing consumer demand. Recently, Amazon has acquired offline chain, Whole Foods, for
gaining offline footprint; while Walmart has acquired online portals like Flipkart and Bonobos to gain online
might. Majority of Indian retailers operate through a single channel. However, the Indian retail market is
more than ready for a multichannel experience. A few of the offline retailers to step into online retail have
been able to significantly broaden their customer base. Similarly, online players to step into brick and mortar
retail have been able to boost their sales by in-store product trials. The opportunity to operate through more
than one channel in the Indian market comes with a significant value proposition.
A multichannel approach to retail is a major step towards acquiring more customers, boosting brand visibility
and understanding consumer behaviour however it does not let the brand realize the full potential of
operating through both online and offline channels. It focuses on customer delight features in store and
online but in silos.
A typical digital journey starts from a single channel and transforms to multichannel before becoming truly
omnichannel. Each stage offers incremental benefits till the full potential is reached by adopting
omnichannel stage.
9. 7
6. Benefits to the Brands/Retailers conferred by Omni Channel Approach
a Acquire new customers
and deepen loyalty
CRM data, online customer data and loyalty program
data helps brands:
• In opening stores where the demand is high
• Acquiring new customers across platforms
• Deepen loyalty by serving the customer with offline
trust and online ease
Omnichannel approach helped one of the early entrants in omnichannel retail
in the US acquire loyal customer at faster pace with improved contribution
10. 8
b
Delivering a personalized
experience across all
channels
Brands should personalize their offerings and
services with the help of advanced analytics:
• Customers should be offered bits of advice and
service suggestion on the basis of past purchase
history and online browsing patterns
Ulta delivering a personalized experience through omni channel approach
11. 9
c
d
Offer relevant, innovative,
and often exclusive
products
Grow stores and e-commerce
to reach and serve more
customers
Brands should provide relevant and exclusive products
in the stores and online by using cross-channel insights:
• Integrated data across online and offline channels
help the brand create a unified customer profile for
cross-channel personalization
• In-store associates can provide better in-person
service with access to shopper’s online profile
• Insight generation across channels can pave the way
for personalized recommendations and offerings to
customers
• Successful omnichannel analytics can help brands
achieve ~70% of sales from ~25% most famous
products
360o view of the sales can help brands find their
demand centre and let them open stores and dark stores
at the most relevant locations:
• Online sales can help brand pin-point the location of
their next stores and dark houses
12. 10
e One single view of
synced inventory
Omnichannel allows a single view of synced
inventory
• Once stores and e-commerce business share the
same inventory, it results in min stock-outs and
same product exposure at both the touch points
Growth in offline channel has been driven by store expansion and consistent store sales growth
even after the launch of online platform for one of the largest BPC retailers in the US
13. 11
f 360o
Customer View Omnichannel allows 360o customer view:
• Online customer browsing data, offline transaction
history and loyalty data of the past, all are
combined to provide customized experience with
both online & offline
• Store associates can make product
recommendations to in-store shoppers based on
customer’s online shopping behaviour
14. 12
7. Benefits to the Customer conferred by Omni Channel Approach
Amongst fierce competition in both offline and online retail, seamless customer experience has become a
key differentiator. Retailers have started to focus more on delivering a perfect experience online, in-store
and through call centres. Not only do these channels need to be optimised but also integrated to provide
seamless, consistent and personalized consumer experience. Omnichannel retail is a single stop solution
to bridge consumer experience gaps.
a Shopping Convenience In today’s fast-paced world, shopping convenience is
the leitmotif of the customer expectations from brands
and retailers. More than ~40% customers want to have
the freedom of return and exchange at the channel of
their convenience.
Omni enabled brands are meeting these expectations
by seamlessly integrating online and offline channels
b Consistent Experience Customers want consistent product & pricing
experience across channels. More than ~50% of the
customers want consistent promotions, prices and
product assortment across channels.
Omnichannel approach enables a brand to keep their
online and offline offerings and services in sync.
15. 13
c Relevant Interactions With the data deluge of current age, customer demands
relevant interactions with the brands. They want
suggestions and recommendation tailor-made for them.
More than 45% customers are comfortable sharing their
personal data for better insights. ~35% approve of data
sharing with the third party.
Omnichannel approach enables relevant interactions by
providing comprehensive insights on the combined data
of online and offline
Customer Empowerment Customer expects a brand to empower them for better
decision making through relevant content and
recommendation. Leading omni brands earn 80% of
their revenue from 20% of their loyal base by
empowering them for decision making
Omni enabled brands are empower their customer
through tailor-made insights and recommendation
d
16. 14
8. Indian Retailers with Omnichannel Footprints
The value proposition that comes with omnichannel retail has lured some of the major Indian retailers to
set into it. Both online and offline players have taken initiatives towards adopting omnichannel retail.
Adidas
Adidas has integrated about 200 stores with
‘Endless Aisle’ technology where shoppers are
equipped with iPads to browse and order items that
are not in stock at the physical stores. The
technology allows Adidas to have a single view of
inventory across stores. The products which were
earlier not accessible to all the customers are now
available to them at their door-step thus enhancing
customer experience to a whole new level.
Shoppers Stop
Shoppers Stop is one of the early adopters of
omnichannel retail in India. They started with
redesigning and launching a new website in 2015
followed by Android and iOS apps. The company
also set up anchor stores on e-tailing platforms
such as Snapdeal, Flipkart, Amazon, Jabong and
PayTM. Customers can shop across platforms and
can avail ‘Click and Collect’ features. Shoppers
Stop is aiming to corner 10% of its total sales from
online omni channel by 2020. They are also
expecting 100 per cent sales growth in FY’18-19.
Better Responsiveness Customer expects a brand to be responsive and
transparent in their communication
Omni enabled brands uses both online and offline
channels to communicate to customers effectively
and urgently
e
17. 15
Soch
Women’s ethnic wear brand Soch is another
player which has invested in omnichannel retail
adoption. Soch has integrated inventory across
all its stores. The endless aisle technology was
staff facing but customer-facing endless aisle has
been rolled out in selected stores.
Lenskart
Lenskart is one of the early online players to adopt
omnichannel retail by opening about 100
franchised stores where customers can try on
different frames before placing an order online.
Lenskart focuses on maintaining a ‘Single view of
Customer’ across channels thus helping them
retain more customers by providing a seamless
experience. Lenskart reported a revenue of INR
179 Cr in FY’17, an increase of 79%. Shipping,
Collection and Packaging costs also went down
by routing all local orders through stores.
Omnichannel retail rollout has helped Lenskart
come closer to achieving profitability.
19. 17
Shubham Anand
Lead- Retail & CPG
shubham@redseerconsulting.com
Shubham is leading Redseer`s growth into verticals like Retail-CPG.
He has an in-depth understanding of India`s changing retail landscape and has worked with
brands and funds across fashion, lifestyle, & electronics domain along with big conglomerates
with multi-industry focus in their growth journey.
He is an IIM Lucknow alumnus
Pankaj Sing Bhati
Consultant
pankaj.singh@redseerconsulting.com
Pankaj is a Consultant with RedSeer and has 4+ years of experience in strategy creation in
retail & omnichannel enablement.
He has an in-depth understanding of omnichannel and has worked with brands and funds
across beauty and pharmaceutical industries.
He is an IIM Kozhikode alumnus
Siddhant Kalra
Business Analyst
siddhantk@redseerconsulting.com
Siddhant is a business analyst with RedSeer and has 1+ years of experience.
He has worked on assignments covering market sizing and competitive benchmarking
in retail industry.
He is a BITS Pilani alumnus
Authors
