The Great Indian Lock-down - Diary of an Online Grocery Retailer

We are completing three months of a nation-wide lock down. All of us witnessed this phenomenon differently. Some locked-up inside their houses, and some others weathering this storm out in the open keeping essential services going. Eventually we all learnt to live with this so-called ‘new normal’. And hence, it is probably an apt time now to look back and see how the lock down changed us as consumers, and as retailers serving those consumers.

Being a retailer in the essential services domain, I got to experience a very unique side of this frenzy. As the customers got restricted within the four walls of their houses, suddenly the only shopping channel left open was shopping online. And this, is what started the story of Indian grocery retail going berserk online. There are 3 main characters in this story, and we will talk about them one by one.

Customer - Always First.

In retail we classify the consumers or their shopping destinations into 3 broad categories - (i) Those who shop at traditional mom-n-pop kirana, (ii) Those who shop at Modern trade stores like a Supermarket or a Hypermarket, and (iii) Customers who shop online. The decision to shop at one of the above 3 channels is determined by a variety of factors like pricing, assortment, store location, shopping experience and product quality to name a few.

Now what did the lock down do to these consumers? Well, it pushed all the customers to shop predominantly at only one channel, i.e. Online. At least initially, till some stores opened up for limited operating hours. This was a forced shift with a complete disregard to all the shopping decision making factors mentioned above. All customers were now uniformly shopping at online stores irrespective of prices (read savings), brand or pack-size preference, delivery timings, or most importantly, the comfort or discomfort of making a food and grocery purchase on an electronic device without touching and feeling the product. The panic made the customers shift brands very easily, buy larger packs, and prioritize the spend on essential grocery, pushing the luxury categories like apparel and lifestyle to backseat. Most customers also made their first ever digital payment, something they had not done even during demonetization.

While this shift caused a discomfort initially, a compulsion to repeat it next month, and the following, made many customers realize that after all it is not such a bad idea to skip that weekend trip to a crowded store every month and let someone else carry those heavy packs for you and deliver them at your doorstep. Meanwhile, some other customers continued to visit the stores physically and stood in long queues outside. And who did this consumer behavior impact the most? It was..

The Retailer - Our second character

On the eve of first lock down on 24th March, this character was caught absolutely unprepared with what was to come in the next 3 weeks, and subsequently extend to over 3 months. The retailer had invested in building stores, had bought stocks and employed people to serve the customers. From a complete shutdown, to operating only through online channel with home delivery, to opening the stores for limited hours - the lock-down brought hardships for stores and those running them. Lack of public transport made employees walk for miles to keep their jobs. While essential commodities were selling, the factories manufacturing them were largely shut. This, coupled with panic buying and hoarding of essentials soon resulted in empty shelves and stocked out stores. The fixed cost of running the store such as rent, electricity and wages did not reduce much, but the sales dropped significantly, to almost half in some cases. Not because the customers didn’t come, but because the operating hours reduced, social distancing norms permitted only a handful to enter the store at a time, and the shelves went empty due to supply shortages and restriction of movement on goods. Running stores actually started proving loss-making for most retailers, but the tight cash-flow demanded running the operations in the hope of covering at least a portion of fixed cost. While the stores struggled to cover costs, huge back-end costs still remained under-leveraged. The grocery stores, being essential commodities were better placed to fight the sustainability war, whereas fashion and lifestyle saw a complete shutdown of business right from manufacturing to sales.

Soon the retailers understood they can not just rely on customers coming to stores. They had to explore alternate channels and reach out to customers at their doorstep. In a frenzy, every retailer was working with technology providers to build sales platforms that supported online sales via WhatsApp, web links, online shopping apps, and by partnering with food delivery or cab service providers. I think a book can be written on the chaos that ensued in rapid development of platforms like this, with detailed chapters on managing inventory availability online with parallel offline sales that were super erratic, building and scaling up the last mile delivery network when labour was scarce and on-road movement restricted. Imagine all this being done with the strategy and leadership teams meeting only online. Apps were being developed, alliances were being forged, SOPs were being created, all working from home. Yes, the Retailers who always said work-from-home was a thing for tech and consulting firms, were and are living this New Normal.

And then she entered - The Technology.

Initially tech firms thought of themselves as the saviors for these retail damsels in distress. Every tech finger was writing codes overnight and creating solutions to harness this blessing in disguise. And I must say - those who understood how Indian environment worked, and were agile in their thoughts and actions were able to crack this code quickly. While not all were successful in cashing the opportunity quickly, those who did, actually catapulted their businesses multi-fold within days. Some even did an impressive job of serving hundreds of thousands of orders daily, despite same challenges of stock availability, requirement of increased fleet of delivery boys and vehicles and enabling their on-road movement, and a rapid tech development that was customized to this changing environment. Soon the country saw various modes of online shopping right from WhatsApp to web pages to apps. Be it small kirana shops or chain of hypermarkets, everyone was reaching out to customers online. There was an interesting fusion race to reach the customer. Offline retailers were setting up their stores in apartment complexes and colonies, while online players were building new models and serving customers both individually and with consolidated Society Seva orders.

But many of them miscalculated the whole situation. While food and grocery appears to be a recession proof and repeat purchase business model, running a retail business also comes with challenges of working on wafer-thin margins, huge fixed operating costs, dependency on talent, and creating a synergy between multiple moving parts like supply chain, store operations, merchandising and food safety etc. Some techies did a superb job of quickly creating a platform but could not crack how it will integrate with a running store for order collection, product picking, substitution of alternates, billing and dispatch. This resulted in retailers rejecting these platforms completely. On the other hand, retailers made some mistakes too. In a hurry to go online, they went live with platforms that were'nt fully adept to managing nuances of online inventory replication, complex pricing and offer management, or tied up with delivery partners that weren't compliant delivering temperature controlled categories like chilled, frozen and Fresh. Obviously, it didn’t work out either. Anyway. Supplies improved, shopping frenzy reduced. Business started stabilizing and soon came the Unlock 1.0

So now what?

Well, I think there is good news. The urgency that got created 3 months back is slowly returning to normalcy. But this way of conducting businesses is here to stay. This presents us with an opportunity to review what we created in a jiffy and course correct. This is a time to learn from those who succeeded and more from those who didn’t. This is a time to think out-of-the-box and join hands with people who share the common objective, that is - leverage infrastructure and resources and reach out to consumers through new alternate channels.

But having said that, some of my key learning are –

1. Do what the business needs, and be agile doing it.

2. Measure the right metrics. They may not be what you always thought they were.

3. Worry about delivering to customer what matters to them, and not what will please the perfectionist in you.

4. You may be an expert in what you do, but you will not succeed if you do not understand how things work on the other side. Be humble and learn.

5. Your People are your best assets. Take care of them. This is THE TIME to do it.