Future-Ready Retail with Direct to Consumer and Omnichannel capabilities
Blog: NASSCOM Official Blog
The world woke up to the monumental impact of COVID’19 since the beginning of 2020. As countries are trying to adapt to the new normal, the coronavirus outbreak and the lockdown in particular has, unsurprisingly, been good to the online space. Even before the lockdown, ecommerce was steadily becoming an inherent part of Indian households and what the pandemic did is to make e-commerce from an option to a necessity.
The share of e-commerce retail in total has increased by 1.5% in the first six months of 2020, with e-commerce being 4.5% of overall retail and prior to this 1.5% was added in a span of three years. It’s no mystery that the coronavirus outbreak has accelerated the digitisation of the world at all levels, from commerce, education to government and our work habits. At the same time, the pandemic has led to unprecedented changes in consumer psychology and has altered consumer’s buying habits.
Even as we are moving towards phase-wise un-lockdown in the majority part of India, due to the lingering fear of COVID-19, more and more people are opting to shop online. This is a great opportunity for brands to evaluate their sales channels and supply chain system to elevate online shopping experience of customers. Brands are now establishing their own websites to have a wider control over business operations and gather consumer insights and adopting omnichannel solutions to streamline supply-chain and have consistency in shopping experience across platforms.
The rise of Direct to consumer model
The maturing e-commerce ecosystem of India has given a significant push to companies to adopt a direct to consumer approach. Companies with strong online presence are establishing websites to develop a direct connect with consumers and offer a great experience to its patrons. With physical stores getting lower footfalls due to the COVID-19 impact, brands are now more than ever ready to build their online portfolio. Aside from the obvious advantage the model brings which is offering ease of shopping to customers, it also brings a host of other benefits such as better control on customer experience, having full visibility on customer data, direct access to leverage brand loyalty.
The lockdown has helped brands address the bottlenecks in supply-chain and re-build the missing connection with consumers. This consumer data is a gold-mine that plays a huge role in taking businesses to the next level by understanding the needs of the consumers. The consumer insight will help in driving customers back to the website, leading to repeat customer and strong brand loyalty. These patrons then further act as brand ambassadors on social media, leading to brand promotion with word of mouth.
As per the Unicommerce’s E-commerce Trends Report, brands which have already developed a good e-commerce website have been able to leverage the situation, with much faster growth than the brands with presence only on marketplaces. As per the trends report, brand websites witnessed 88% growth in order volume as compared to 32% growth on the marketplace. This clearly establishes that the consumer is getting mature and now looking to connect directly with the brands. After the lockdown was lifted in June, brands with their own website have done faster growth as compared to brands which are only selling on marketplaces
There are a lot of brands that have realized the immense growth potential of establishing online platforms and in the years to come, this will be considered as a turning point where the Direct to Consumer (D2C) model started to gain mass traction amongst brands across sectors. Brands have started their D2C journey by exploring immediate partnerships with companies that can help in last-mile delivery and reducing multiple layers in the supply chain. Now brands are developing their own web portals and apps to sell directly to the customer by removing all middlemen/intermediaries and having end-to-end control on the product’s journey. Large number of retail brands are now increasing their technology budget to invest in building their own websites, ensuring cost effectiveness by removing middlemen, faster product delivery through partnerships with logistic companies and at the same time gaining full control on the consumer buying process.
There is also an emerging trend of Neo D2C models, which is widely followed by big brands with strong brand value and connect with consumers. These brands work towards building the right mix of selling on marketplace and brand websites. The brand websites are a great platform to have a direct connect with consumers and marketplaces plays a crucial role in driving overall sales volumes. While the D2C model is gaining momentum, the volume of orders is still largely driven by marketplaces.
The use of such a support model helps companies to maximise consumer reach and create a 360 degree brand presence. Companies have started realising the fact that brand value plays an important role in the customer decision-making process and gives a competitive advantage to brands. This model is widely followed by electronics brands such as OnePlus, Apple, Samsung and Xiaomi. These brands have a strong online presence and they generally launch a product in an exclusive partnership with a marketplace, while also selling on their brand website. Gradually other categories are also experimenting with the same model, such as: H&M has Myntra as its online partner, while the company also sells and extensively promotes its own website and app.
Overall the demand for D2C brands is expected to increase in the near future as the digital transformation expands across industries and companies of varied sizes and nature. With social distancing being the mantra of living, and majority consumers still not ready to visit physical stores and outlets, more and more companies are adopting and leveraging the power of technology to solve supply chain challenges and improve the overall customer experience.
The rising affiliation towards omnichannel approach
The pandemic has led to increased familiarity of digital commerce amongst consumers and they are no more restricted to just physical stores. Today consumers are not just looking for the perfect product that suits their needs, but they are also demanding a seamless experience of buying that product. Now, e-commerce is not just about discounts anymore, it’s more about convenience, wider product availability and experience. The accelerated online growth has also given an opportunity for brands to adopt omnichannel solutions. Brands are now investing in digitization to meet the demands of the evolved consumers.
We are entering a world, where shopping will be an amalgamation of online and offline platforms and this will be true across categories. Once the pandemic is over, offline will regain the lost momentum, but there will be many online habits that will stick amongst consumers. The adoption of omnichannel solutions will help brands to ensure seamless shopping experience for consumers. The brands are focused to target the right individuals at the right time to have maximum impact. The omnichannel approach allows brands to have fully integrated data-driven insights for brands to offer a personally compelling experience for each individual at every touchpoint.
Prior to pandemic, omnichannel was largely about “Endless aisle”, where customers in stores could virtually browse products that are either out of stock or not sold in-store and have them shipped to the store or their home later. However post COVID-19, there are increasing use cases of “Ship from store”, which means companies are using these stores as warehouses to deliver online orders received by the brand. This not only reduces the logistics cost for the brand, but also ensures that the customer is able to receive the product in a much shorter time, which is critical in these uncertain times. Omnichannel is enabling the brands to fully leverage the supply chain, and offer a faster delivery and with better inventory utilization, which is critical especially in today’s time where logistics is stretched due to limited workforce. In fact it’s not just brands, marketplaces are also investing in becoming fully omnichannel to provide a wider assortment and enhanced shopping experience to their customers. The marketplaces are collaborating with brands to list their store catalog (which is typically fresh season stock) and also enable them to “ship from store”. It’s a win-win situation for both marketplace and a brands, as brands whose offline stores are running at low capacity are able to clear inventory and marketplace are able to fulfill orders at a much faster pace by shipping orders directly from the nearest brand store, besides providing a richer assortment to the end consumers.
While the adoption of Direct-to-consumer and Omnichannel solutions is increasing at a rapid pace, a large number of brands are adopting a combination of D2C and omnichannel models. With COVID-19 impact, brands have realised that it’s impossible to maintain business efficiency without integrating inventory across online and offline sales platforms. As we step into a post COVID-19 world, it’s safe to expect that the D2C model and omnichannel will continue to gain mass popularity as companies increasingly look to invest in a superior technology and offer a customised shopping experience along with close monitoring of the supply chain and reducing the overall business operation costs.
By Kapil Makhija, CEO Unicommerce