Skip to main content

Traditional Retail is the Next Big Business Transformation Story, and Oops! We almost Missed it!!

For way too long, observers in business transformation space have kept their telescope intently focused on large, billion-dollar enterprises. The unintended consequence of this telescope vision is that small enterprises, that are all around us, have been missed. We can contend that maybe something akin of a ‘periscopic view’ that allows for a 360 scan of the neighbourhood is required to observe something remarkable that is taking place next to us.

However, to understand this in proper context, we must step back and look at the waves of technology adoption and its impact on the businesses. In the initial years of IT adoption, or computerization as it was called then, was primarily a functional level adoption in large organisations in the West, be it Banks (transactional data of customers), Hospitals (patient records management), Manufacturing (production planning or inventory) or Insurance companies (claims processing). It was all about efficiency. In the next wave, organisations took to interconnecting different department level ‘computerisations’ and removed several redundancies under the larger umbrella of ERP – more efficiency. For instance, when a customer placed an order for a car at a dealership, it was queued up in the manufacturing system, which aggregated orders for identical cars and triggered a batch order for the components from the downstream suppliers, often directly posting such orders in the production systems of their suppliers (“external enterprise”) and tracking the delivery of such components in line with their production schedule. The third wave is the ‘business transformation’ wave, currently underway, under which the businesses critically are relooking at their business model itself, in the larger context of their internal and external ecosystem and the available information technology.  It has thus become possible, at least theoretically, for instance, to operate a large hospital and have no doctors on their permanent rolls but manage their operations using technology with a large pool of generalists and specialists, who are available for deployment in the external ecosystem, know their availability and call them as needed. This is the view from the telescope.

The periscope, however, shows a different view, particularly in traditional retail. India has very amorphous retail - estimated one retail outlet per hundred residents, which is among the highest per capita retail density globally. What’s more, the shops are much smaller than those in the ‘matured markets’ - the West primarily – and therefore, can stock much less inventory. Their working capital is very modest too. This is only the product retail. Add the service retail – restaurant, barber, pharmacy etc, one gets a significant addition to the numbers.

Covid was supposed to be the doom of physical retail and the windfall of warehouse driven ecommerce. It is this layer that is surprisingly giving a stare-in-the-face to ecommerce, using at least partly, the same tool that is the backbone of ecommerce – technology. It is here that the silent business transformation that is taking place. First, there is an integration with the suppliers. If the neighbourhood grocer is falling short of bread in the middle of the day, they can call in more supplies using phone call or WhatsApp (backward integration) – nothing spectacular here. Second, the product or service retailer – they have adapted to deal with the faceless customer (forward integration). WhatsApp a grocery list and get the supplies at the door in no time. Nothing spectacular still. Get the payment using a UPI based app. The restaurants have not caved into the ‘cloud kitchens’ but adapted and quickly reoriented to order aggregators such as Swiggy and Zomato. The barber has become mobile again (roving barbers have been the norm in India traditionally, but last few decades getting a haircut meant visiting a barbershop). Only now, he uses technology to get connected to a platform such as Urban Company, and offers doorstep service, and gets paid electronically. Book shop owners, listed in multiple ecommerce platforms(“multi-tenant”) in publishing centers such as Meerut don’t wait for walk-in customers, but look at the screens for orders received from across the country and race to pack them before the rider arrives from the courier company to pick up the package. They go nowhere to collect the money -it comes into their bank account through automated settlements. Suddenly, the retailer with an adverse location has achieved parity with one who has a great corner location. Why are we calling it has business transformation and not mere technology adoption then? Because the retailer has made one fundamental change to their businesses – redoubling the service component to themselves. It is this twin adoption – technology and service component that has silently ushered in our country’s best kept secret – the business transformation of retail.