The complex store operations of offline retailers is the real challenge and not the Online retailers

E-commerce has disrupted every industry in developed nations like US and Indian businesses are witnessing this disruption now. The valuations of e-commerce companies, the frequent showdown of the founders on social media fuels the news headlines. E-commerce started in India with books, took over smartphone market and now is reshaping the grocery market.

There are around 40+ start-ups engaged in online grocery segment. The total investment in these start-ups must be more than 1 Billion USD. Some of the start-ups have been acquired by Brick and mortar retailers and some are acquired by peers. Yet, I believe the real threat to traditional retailers is from their operations and not from online retailers. In other words, the challenging store operations impact the customer experience and this gives an edge to the online retailers. 

Why store operation are the threat?

I have been a regular customer at one of the leading large retailers of India. And I was at the store recently.  There was something wrong with my bill and I was supposed to get a credit note. I got the credit note, the staff was very cordial and supportive. But it took almost 45 minutes to get the credit note. While I was waiting, I was observing the store operations and the running around of the support staff. This post is a try to answer why it took 45 minutes to get the credit note and thus unearth the real challenge for brick and mortar retailers. Let's see why…

 -- Manpower management

It was a weekend and so the store was jam packed. The support staff was running here and there. The customer desk was overwhelming the PAS system relaying announcements calling support staff of various sections continuously. The support staff had to attend the announcement leaving their counter. The support staff was clearly were over stretched. And so it took 45 minutes to issue me a credit note. 

The store operations are damn complex. The store is full on weekends but dull on weekdays. And so staffing is always a challenge.

If I compare this situation with an online retailer, the complexity of managing store operations and handling customers is totally zero. A brick and mortar retailer has to manage the inventory, the delivery and store operations. Whereas for online retailer its only Inventory and Delivery. 

The store operations are customer touch points and any gap here results in customer dissatisfaction. The customer is and should not be bothered about the complexity of store operations. There are many reasons to go for shop grocery online, the discomfort caused in store adds one more reason to the list. The customer who has not tried online grocery shopping wants to do it now. The online retailers get a chance to step in. 

 -- Legacy IT backbone

The online retailers are Tech driven companies. Their business model is powered by strong IT backbone. The online retailer have invested in this segment heavily and they do not have the burden of legacy system. Hence they leverage Automation and E2E integration across various processes better. Using Analytics for cross-sell, personalization is easy. 

The physical stores also have IT backbone but its legacy. They started operations at least a decade back and the aspects of mobility, analytics, automation were not prevalent then. The offline retailers have invested in IT systems and upgrading it to match the online retailers is costly, complex and time-consuming. 

So if online retailers do good, its will not simply because they are good. Its because brick and mortar stores cannot get away with their operations complexity.

What are your thoughts about the online grocery segment...do share your inputs.

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