Difference between digital, physical retail networks will vanish in 5 years: Kishore Biyani

From online grocery shopping to services like food delivery and furniture rental, all retail markets are feeling the heat of technology disruption. Given the rising user bases of platforms like Amazon, Uber Eats and Alibaba, one would think the fears that physical stores will be redundant are fully justified. But are they? Amid all the speculation about disruption in the global retail market, Future Group founder and chief executive officer (CEO) Kishore Biyani explains why he’s placing bets on layering technology over his brick-and-mortar store network. Edited excerpts:

What is the future of retail?

Consumption will always happen. Every generation consumes more than the previous one. For me, the new way of doing retail is all about speed, velocity, and building deeper relationships with customers through data.

The future of retail will be driven by data science and customers experiencing a seamless journey between the physical and digital worlds. We call it Retail 3.0, a high-tech and high-touch environment. The first phase was about high-touch physical stores. Then came the conventional, pure online models.

The world is now moving towards New Retail. China has taken a lead with Alibaba, Tencent, JD.com—all leading major investments in layering technology over physical store networks. It is happening in the West with Amazon, Walmart, Kroger and others. And we believe, we are well placed to lead this transformation in India.

Could you give us a timeline for the short-term and long- term evolution of retail?

Shopping is an experience. There is a discovery during shopping as well as human interaction. Nobody can take away that physical experience of retail. Even in the US or any developed market, physical stores still capture more than 90% of sales. However, there is no denying that technology and data science will play a transformative role going ahead.

Data science and artificial intelligence is transforming the way we engage with customers and the way we fulfil orders. Every product or brand a customer chooses tells a story about the customer. Every day, on an average, there are almost one million customer transactions that take place across our businesses. Customers buy food, grocery, fashion and home products from us. They visit us multiple times, often within a month.

The cumulative data thus generated is huge. We are using data science, machine learning and artificial intelligence to help make faster and more accurate decisions for our business. It is helping us forecast demand more accurately, source products in the most optimum quantity, design stores and plan merchandise.

How are you incorporating these new ideas into grocery retail?

Grocery retail is extremely important as it is the most frequently purchased item and gives the richest source of data. Our neighbourhood store networks—EasyDay in North India, and Heritage Fresh, Nilgiris and Foodworld in the South—are entirely focussed on food and grocery retailing. The store operations and the consumer interface are being moved into digital platforms. The more the members shop with us, we are able to customize the stores and personalize their journey. This is possible due to the technology and data capabilities we have built.

What is your view on hyper-customization and on-demand services?

We have developed multiple proprietary tools that help us understand our customers in the catchment areas around each of our stores. We are layering these proprietary tools with algorithms and artificial intelligence (AI) capabilities. The objective is to have a single view of every customer and treat her or him as an individual, rather than as a part of a larger cohort of customers.

The more we are able to personalize the experience for the customer, the more he or she will be willing to spend the entire wallet with us. We want to be so good to customers that their entire spend on food, grocery, fashion and homeware is with us.

What are your three predictions for the evolution of retail over the next five years?

Over the next five years, you will find the difference between digital and physical retail networks vanishing. You will notice retailers building large ecosystems for new businesses in and around their areas of operations.

Could you expand on how big the role of physical and digital interaction will be?

Technology will create velocity, build relationships with consumers, and deliver personalized experiences. Physical will bring the human touch, the excitement across all the five senses that only stores can deliver, and the opportunity to discover the new. Physical will play a large role in ensuring delivery of orders and ensuring that customer acquisition happens at the lowest possible cost.

Do you have an example which has been used in the West that can be replicated in India? Is disruption by technology a challenge to your business?

Increasingly, the best examples of what the future of retail looks like comes from China. They have a lot of advantages in terms of size and scope of the market and didn’t have the legacies that the West has. New Retail chains similar to HEMA from Alibaba or Bailian Group’s Riso are what we will see in future. In China, Walmart is collaborating with JD.com and Tencent with Carrefour to layer technology over physical networks. We are learning from every experience and building future scenarios wherein we can play a major role in shaping the future of retail.

What does the future of the supply chain look like?

There will be a big shift in terms of the speed, velocity of business, and the freshness of products that will come into the supply chain. We are present in food and fashion. We operate factories, have design and sourcing functions, own the logistics and distribution, and finally the brand and the retail network. Technology is allowing us to see this entire value chain as a flow of data from making the product to the person consuming it. Consumer data from our stores is helping us manufacture or source in more efficient ways, move goods at the optimal pace and quantity, and increase productivity and efficiency of all our resources. This will reduce the prices consumers pay, and increase freshness at the point of consumption.