Convenience overtaking discounts in online shopping: BCG report
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Mumbai: Indian consumers are increasingly drawn to online shopping for the convenience it offers rather than discounts, according to a report jointly written by the Boston Consulting Group (BCG) and the Retailers’ Association of India (RAI).
In the report, titled Decoding the Digital Opportunity in Retail, based on a study, 55% of the consumers said they shopped online because it was convenient, while 52% said it was because e-retailers offered the highest discounts. For the 2014-16 period, it was for the first time that more consumers cited convenience over price.
The study, called BCG CCI Digital Influence Study, was conducted over 2014-2016 with a sample size of 18,000 per year.
“We’ve found this reported consumer preference all over India, although of course it is more in the metros,” Abheek Singhi, senior partner at BCG India who leads consumer and retail practice, said on the sidelines of the RAI’s Retail Leadership Summit on Wednesday. “However, you should note that the stated intent of the consumer may not always be equal to their actual behaviour,” he added.
E-retailers in India have long been wooing customers with hefty discounts on products, leading to a money-burning race. In January this year, Mint reported that Flipkart, the country’s top e-commerce website, made a consolidated loss of Rs2,850 crore.
The BCG report also maintained that retailers should begin digitizing their entire value chain—from collecting real-time granular data from their points of sale, to using insights from this data right at the product design stage.
“For franchisee based retailers, this might be harder because their distribution network is not directly under their control,” Singhi said. “But even these businesses are making sure data from points of sale comes to their servers for analysis. The technology to achieve this is all available.”
Apart from detecting customer trends in real time, BCG recommended retailers use technology to make their supply chain more efficient, with warehouse automation, for instance. It also recommended digital marketing to rationalize spends, targeted promotional offers using in-depth data of each individual customer, and optimizing inventories based on the profile of the customers who walk into a store. The report predicted that these measures could increase revenues by 15-20% and margins by 3-8% by bringing down inventory costs by 15-25%.
Singhi added that businesses in certain categories may find it more challenging to collect data and implement it in the supply and distribution networks. “The biggest challenge is for companies that sell products with a short product life cycle and a short shelf life, like fruits and vegetables,” he said. “However, it is still not difficult to collect data and monitor distribution in a locally set up network, which most fruits and vegetable companies do.”