Retail sector is evolving dynamically. Trends are transforming and consumers are changing their buying behavior by shifting to online shopping. Retail efficiency can neither come overnight nor does any business in this sector merely grow to be a slick by following few management theories. Several assumptions on the factors that contribute towards evaluating the efficiency in this business keep popping up with time and age. Two key determinants for retail efficiency include agility and timing. Businesses that are not rigid with these two factors are sure to get that “Winner Effect” always. Although a typical business cycle comprise of growth, peak, recession, trough and recovery, there are several other factors that contribute towards shaping the success of business. Strategising with the right insight can help to expand or compress every stage of this cycle or even freeze a specific stage of this cycle. Managing this business cycle is a skill. Again timing is tricky.
Challenges to Efficiency
Any successful retailer undergoes several changes. Amazon for example, has continuously re-invented to fall within the brackets of next generation demands and has always been a front-runner to satisfy the end users seamlessly. Seamless experiences are delivered at the right time. The company stands today as one of the top winning retailers globally. In fact, several start-up entrants are looking at Amazon with an inspiration to “follow-the-leader.”
Peter Ducker, the man behind several management theories said in one of his teachings that a leader is the one who knows the importance of picking the best people; focuses on opportunities and not problems; gets on the same side of the desk as their customer; has the capacity to understand their competitive advantages and is open to refine them.
Whatever it is, the adoption of new philosophy is always essential for any business, be it even to re-imagine.
Learning Lesson from Snapdeal
Snapdeal’s recent retrenchment reminds us the Adage “Even an Elephant Can Slip.”
Snapdeal decided to lay off nearly 600 employees on Wednesday, 22nd February 2017. The company declared that there could be more to come in the following days.
Online retail in India has been seeing tremendous growth in the recent five years. Launched in 2010 by Kunal Bahl and Rohit Bansal as a daily deal website, this online retailer stands today as one of the top online retailers in India with approximately three lakh sellers and a wider reach across the country.
Back in 2016, the company was showing signs to potentially merge with its bigger rivals Flipkart and Amazon. Although the news waded slowly settling the speculation for some time, this recent retrenchment arrives as a big surprise to all other start-ups who are venturing into ecommerce /mcommerce business. While Snapdeal is reviewing its benefits by taking such measures, speculations looming around the backdrop of the market are sending ripples. Whether this move of Snapdeal is the first change in the bubble burst or is the company hit badly by economic downturn or has it flawed with its strategies; or is it planning something bigger to balance with the new guidelines for FDI in Ecommerce issued by the Indian Government on March 29th 2016 and so on.
Snapdeal defended its decision by declaring that it had to take such measures just to see profits in the future and to stand as the number one online retailer in India. The company said in a statement that it is planning to cut down its employee force by 30% in the months to come.
Is the situation a reflection of “Two step forward and one step backword?”
Here, again lean can be a clear strategy, a balance to get closer to customers!
“In 2017, leaders will devolve operational controls downward to get closer to their customers. This will be a balancing act so as not to fragment the business or destroy margins,” stated a prediction report from Forrester. Is Snapdeal following this? Again, timing is a tricky element. It can work in fovor or backfire too. We need to wait and watch.
Tackling Regulatory Framework & Funding
Understanding regulatory framework is essential to operate and sustain in any business. Snapdeal’s current business model is Marketplace based one where in the company act as an IT platform, a facilitator between buyer and seller. The Company has been making few remarkable changes right from the day when the new guidelines were implemented by the Indian Government. The company is said to be seeing complications in terms of investment, funding, logistics and discounts.
High valuations and burn rates for retailers is leading to a slowdown in funding as well as cost cutting by online retailers, remarked Satish Meena, Forecast Analyst at Forrester Research.
Snapdeal’s retrenchment can also be a clear-cut example of how regulations or reforms brought in by a Government can have direct impact on the businesses and their strategies. Several existing players in India are looking at overhauling their strategies and approaches.
The current employee layoff declared by Snapdeal need not necessarily hint that it has lost appetite for risk. Sure, the company must be seeing systematic approaches to scale in a meaningful way. Again, we need to wait and watch.
Online retail is a long term play. Against the backdrop of ever rising innovations, customers demand a state of constant improvements. Efficiency comes with clear insights. Winners are those who understand what is needed in this customer-centric and digital-oriented set up. The following are the key factors that winners of this space have considered so far;
- Deliver seamless shopping experience
- Understand and Personalize
- Adopt marketing strategies that work well with the customers
- Leverage technological innovations
- Understand regulatory framework
- Be ready to transform existing business model
By embodying the above mentioned tips, retailers can easily manage the complexity associated with this business. Overall, the basic fabric is timing. Creating signature moments can only help the players win the hearts, mind, wallets of customers. The rest, there is nothing called “Zero defects.” Whether it is dramatic breakthroughs or mediocre improvements, businesses should have an urge to out-compete and should be willing to play the game in a refined and re-imagined way always.
This post is part of our contributor series. It is written and published independently of TNW.