Consumer Experience is the Key to Unlocking Profitability in Retail

Harsha Razdan, Partner, and Sector Head – Consumer Markets, Life Sciences and Internet Business, KPMG in India, feels that consumer experience strategy could be the key to unlocking profitability and scaling revenue growth. Though there is renewed focus on consumer experience, there still exists a huge gap in the market, says Razdan.  A KPMG report covering 85 countries and around 300 odd brands confirm this. There are around 200 billion dollars of uncaptured money lying on the table because of poor CX.

In today’s digital world of instant gratification, customer expectations are rising faster, and companies must invest in their CX initiatives to retain the competitive edge

Sukhleen Arneja, CEO, The Good Glamm Group, understand this as a direct consumer company. Arena says, “The relationship with a consumer begins the moment they read your content.” The challenge is how to get a consumer to break inertia and try a new brand. For a beauty brand specially, there are various intervention points in a consumer’s online journey that provide the opportunity to incentivize them, including virtual try-on at the click of a button to experience a product before buying.

Today, distribution is the biggest strength of any consumer-facing company, with omnichannel reigning supreme. Shankar Prasad, Founder, Plum, calls omnichannel “a necessity to capture the untapped consumer market”. The total percentage of revenues for most brands from online sales is somewhere in the range of 15 to at best 30% market. That leaves a large 70% market to still be captured. “Hence it is a no-brainer that a company needs to be present across channels,” he says. The two key challenges to solve in omnichannel are – customer experience which should be uniform across channels and second, price parity, which most brands struggle with given the discount culture. “If you can solve these two issues then you are set for better things to come,” Prasad emphasizes.

Amit Agarwal, Group CFO, Raymonds seconds the importance of omnichannel in the retail sector. “Omnichannel is the way forward today, especially as post-Covid lockdowns, people are flocking back to brick-and-mortar stores. “Shopping is an experience and often families spend more than two hours in stores,” he says.

Like Raymonds, Epigamia too started offline, says its cofounder, Rohan Mirchandani. Covid meant that like everyone else, Epigamia too went online. The one challenge for the brand was discoverability – “how do we get people to even hear about us”, says Mirchandani. With digitalization taking off, the friction on discoverability was reduced and now the brand has its own D2C channel which is one per cent of its total sales. “The jump to q-commerce allows consumers to discover a brand more easily and to experience it faster,” he says.

For a company that is spread across product categories, capital allocation across brands is a very critical decision. The decision involves assessing how to build on the combined strengths of store-first and tech-first retail, how much to invest in capacity building, channel building, wholesale, retail, e-commerce, etc. But the bottom line is that retailers must become customer-centric to reignite growth.

Agarwal explains that each of Raymonds' businesses has a separate P&L and cash flow and manages the latter on the basis of the strengths which they have. As regards the broader capital allocation, the company bets on the faster-growing businesses, for e.g., “FMCG is growing fast and so we are putting our money into it,” he adds.

Epigamia is also back to offline channel fully and though the conversion metrics are very low on D2C, Mirchandani finds conversion is still happening with prospective customers getting educated and wanting to experiment with the product and learn more about it. All these are helping the brand reach its consumers more easily than before.
Glamm is working on the vision to create a digital conglomerate and the journey is to go from online to offline creating an omnichannel experience. As regards scaling capabilities, Arneja believes that the holy grail is the product if you want consumers to repeat. Whether offline or online, the obsession has to be for first the product quality and second what differentiation you can offer consumers. “I think that remains the key endeavor for all of us,” she says.

Prasad cautions that while it may be tempting to enter various segments because you have the market mapped with database, insights, distribution, relationship, etc., however, “we are very careful to select where we go.” How to select this depends on two important considerations, first, what is the consumer asking for, which makes listening important and second, “do I have the right to win in that category”. Prasad calls this an easy question which is difficult to answer. While we may think that we can do everything, “there are certain strengths that you inherently code into the DNA” he explains. Prasad also emphasizes the importance of using consumer data coupled with insights to figure out what works for a brand. “It’s important for every founder and every team to realize that each brand has its own journey, and you can’t be copying.”

Data analytics and new-age techniques are becoming indispensable to driving a business. For traditional businesses like Raymonds, the challenge is to stay relevant to the younger customers – Gen Z. Agarwal says they are closely tuned in, and this is a big focus area. Raymonds is launching products more to the taste of the new generation of consumers and investing big in technology like digital supply chain to reduce inventory and ensure faster availability of products and fashion to the consumer.

The biggest decision dilemma that most FMCG companies are grappling with is whether to go for volume growth or value growth, especially during a rising inflation scenario. A price hike would lead to lower volumes whereas if prices are not hiked, it would impact profitability. Maintaining a balance between growth and profitability is thus a huge challenge. The best way to navigate this dilemma is to be authentic and communicate to the consumer truthfully about the challenges you are facing, advises Mirchandani. He is against shrinkflation, which he calls the old way. “Given the environment, it is important to protect our margins,” he says.

Razdan adds that cost is becoming critical with a global recession looming and it’s important to keep tight control on costs. “Many MNCs are investing in building strong capabilities and automation, which I think are critical levers to look at apart from the standard stuff,” he advises.

The one big concern for consumer companies is how to retain their customers. According to Prasad, quality and experience are important for it. Arneja lists innovation, differentiated experiences and convenience, while for Epigamia, honesty has played a big role along with innovation and quality. For Raymonds, trust in the product quality is non-negotiable, as also the availability of products at different price points. For KPMG, it’s about the experiences that clients have with them and the integrity of the brand.

 Moneycontrol journalists were not involved in the creation of the article.