Expert View
Why a shift towards ‘consumer commerce’ will take centre stage in 2023
In 2022, the industry also saw massive consolidation and capital markets frenzy
India today is a consumption hub that is dominating the future global retail trends. In the medium and long-term, we believe that a stronger domestic demand will help India ride on the growth wave.
Some of the aspects that were witnessed in 2022 would be growth drivers in the coming year. For instance, India is strongly positioned for supply chain opportunities backed by strong macro-economic fundamentals, skilled labour pool, young demographics, large English-speaking population, and high levels of consumption. Moreover, initiatives taken by the government to enhance ease of doing business and to liberalize FDI have, in turn, helped India to position itself as an important player in the supply chain.
Meanwhile, thanks to the pandemic, businesses have increased the scope of their digital offerings to give customers a more distinctive and personalized shopping experience. This shift has made customer experience increasingly more critical for sustained growth, forcing businesses to revisit their CX strategy and adopt smarter means of engaging with their customers.
Another key trend that has gained prominence over the last few years is the popularity of D2C brands. A few consumer companies are working on an “influencer-first” strategy through various online social channels. This fresh and mounting wave of social media marketing can resonate well with the younger generation as they enter adulthood and impact consumption in the economy. Amid this online delirium, the younger generations continue to influence demand.
Interestingly, in 2022, the industry also saw massive consolidation and capital markets frenzy.
At 265 deals, Indian consumer and retailer M&A had a good year—with 19% increase in deal volume and 47% increase in deal value to $13.6 billion. Retailers are using M&A to enhance capabilities in certain areas, such as strengthening their logistics and technology infrastructure to tighten up last mile. There will be activity in the capital markets via IPOs, particularly for technology-enabled consumer companies.
As we move into 2023, here are some trends to watch out for—price hikes have been undertaken in the last two quarters by most FMCG companies due to commodity fluctuations and rising inflation. Hence, they’ll need to go deeper to evaluate newer ways to turn profitable. For example, investments in new technologies to improve the efficiency of supply chain or investments in payment tools to reduce friction in customer purchases. Automation and efficiency could be critical levers for companies to focus on as we will still see price led growth dominating volume led growth.
Meanwhile, with the advent of q-commerce and other new models, supply chain digitization and addressing talent gaps is critical to success. Data-driven personas are also being generated by using analytics and helping companies deliver more customer-centric products.
The omnichannel revolution is inspiring deals as both online and offline players seek to rationalize portfolios and expand into new channels. Casting our eyes forward to 2023, financial investors, including private equity players, are expected to be the major force behind consumer M&A.
While there is widespread consumer expectation that shopping online should save them money, many are prepared to pay some premium for services that offer additional convenience.
The recent KPMG in India-Equitor research report highlights that customer experience plays a critical role in generating sustained value for businesses, indicating many successful companies that are performing exceptionally well are offering a superior customer experience.
Additionally, increasingly consumers are becoming climate conscious and aware and eco-friendly products and packaging are only accelerating the demand for environmentally friendly alternatives.
They are likely to drift from economical products to eco-friendly products that would promote sustainable living.
I believe that 2023 will see consumers take centre stage, with a large transition from Retailing to ‘Consumer Commerce’, where increasingly, retailers will offer products and services without the need for a physical store legacy.
Therein, lies a unique opportunity to reimagine the shopping experience entirely, with a customer-centric approach and a business model, thereby allowing them to stand out and build a loyal fan base.
Harsha Razdan is partner and head, Consumer Markets and Internet Business, KPMG in India.
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First Published:29 Dec 2022, 11:19 PM IST
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