In an era of e-commerce, consumers and manufacturers have together redefined the shopping experience which earlier simply meant a visit to a physical store. Manufacturers no longer unilaterally decide where their products or services are to be distributed or delivered to the consumer. Instead, the consumer now decides how and where they will access products and services. In fact, 30% of the population in metros and tier-1 cities have migrated to organised retail for consumption across product categories.
Today, Amazon is in the forefront of supply chain innovation to deliver products to their customers at conveniently located kirana stores in case they are not at home. Amazon also made a strategic move into tier-3 towns and semi-rural markets which were hitherto untapped market segments. Over the years, consumer durables and non-durables have become available in almost all rural markets, blurring the distinction between rural and urban. That Amazon realised the dilution of this rural-urban distinction and capitalised on it is by itself a marketing transformation.
Amazon also uses cash-on-delivery to build trust with its clientele to encourage villagers shop for products online. The e-tailer’s ‘Project Udaan’ to connect with small rural provision stores enables market accessibility for almost every shopper within a few minutes. Meanwhile, advanced economies like the US are exploring the possibility of using drones for last mile delivery, Indian e-tailers like Flipkart are also considering such a technology-driven innovation, given the poor state of rural roads to cater to those market segments within the country.
The thrust is on customer convenience, and a pleasant shopping experience without having to wait in long lines for billing. Companies like Amazon and Walmart have invested heavily in advanced technologies to create automated outlets. For instance, Amazon Go is a new kind of store with no checkout required for customers. It created the world’s most advanced shopping technology as customers do not need to wait in line. It’s a ‘Just Walk Out’ shopping experience using the Amazon Go app to enter the store, pick up the products they want, and leave.
A checkout-free shopping experience is possible with similar technologies as used in self-drive cars, computer vision, sensor fusion and deep learning. Amazon’s ‘Just Walk Out’ technology automatically detects when products are picked up from or returned to the shelves and keeps track of them in a virtual cart. When a customer completes her purchase, she is free to exit the store. Thereafter, the purchase is billed to her Amazon account and a receipt sent to her cellphone.
In the evolving marketing space, distribution channels across the country are highly fragmented and owned and managed by both small and large independent businessmen. In the midst of these dynamic changes is the challenge to address the problems of conventional distribution channels. Moreover, India’s socio-cultural diversity brings into focus consumer preferences that are influenced by nationalism and ethno-centricism. In a sense, this explains the rise and rise of Baba Ramdev, who created Brand Patanjali over a multinational company’s products.
Consumers have become savvy and technologically inclined and experiment extensively to enhance their shopping experience. They move across all retail formats, from brick and mortar to online to mobile apps. This compels manufacturers to innovate and envisage newer ways to manage the value chain to create sustainable competitive advantage.
Manufacturers have begun to look beyond conventional distribution channels and multi-brand outlets. While the brick-and-mortar retailer has adopted online reach, e-tailers have added physical stores. All the actors are in pursuit of this elusive synergy of multi-market channels which enables them to extend their reach cost effectively, aimed at boosting the bottom line.
Key drivers of value chain optimisation are sourcing, supply chain efficiency and effective last-mile delivery. Process and technological innovations, investments in advanced technology such as machine learning and artificial intelligence are being integrated to bring in all-round internal efficiency as well as deliver customer value propositions.
Brands straddle multiple channels to indulge in deeper customer engagement and combine conventional distribution strategies with digital technology, social media platforms to ensure access to products and services aligned to consumer preference and convenience, and hybrid distribution models, wherein consumer online orders received are geographically directed to and pooled at conventional channels for execution.
It helps brands to reduce channel conflicts as well as optimise superior channel performance or point of sale output. Brands also deliver value to customers through the hub-and-spoke model to directly deliver to consumers from “distributed warehouses”.
Brick-and-mortar retailers also leverage their sourcing and supply chain efficiency, bargaining power, physical infrastructure, “distributed distribution centres” to strengthen their existing hub-and-spoke model to cater to a wide range of preferences of consumers who also use the online option.
This enables manufacturers to acquire new customers and increase their market shares. E-tailers have opened physical stores, create warehouse hubs to capture mindshare of all types of consumers. This includes those consumers who prefer touch and feel shopping experience as well as others who like the convenience and value for money products through online shopping channels. E-tailers like Amazon and Flipkart have created platforms for retailers and play the role of aggregators.
In an era of click and click, brick and click, and click and brick, only companies who can redefine and reimagine the fourth ‘P’ (place) of marketing can survive and achieve sustainable profitable growth in the long term. To do so, companies need to seamlessly integrate omni-channels and leverage these synergies to create a dynamic and robust consumer-aligned value chain.
(The writer is Associate Professor, Institute of Management, Christ (Deemed to be University, Bengaluru)
