New  O4S is now a Great Place To Work Certified™ Workplace!   Read More

Indian Economy Towards Digitalization and Its Impact on Retail

Ever since the evening of November 8, when PM Narendra Modi announced demonetization to curb black money, digitalization has become a talking point. However, it is essential to understand that digitalization has been around for over a decade, and it does not only mean financial digitalization. From ordering food to shopping for your kid’s next birthday gift, everything can now be done digitally. India is rapidly moving into digital space with 460 million people connected online which is second only to China. In Q1 2018, 30 million units of smartphones were sold in India, resulting in an approximate addition of 20.5 new mobile users every second. Indian users consume 76 PB of data a year which is 1.1x that of China and 1.7x of the USA. With 12 billion mobile app downloads a year, India is only a step behind China in terms of app downloads.
The digital revolution is expected to create over USD 1 trillion digital economies by 2025 as per an IT Ministry report. In the fiscal year 2017–18, the digital economy generated about USD 200 billion of economic value which was about 8 percent of India’s GVA. Digitalization is prevalent in every sector in India, from agriculture to banking. According to a study conducted by Assocham & EY, 16.9 million tons of farm produce worth USD 6 billion was sold via e-NAM (National Agriculture Market) platforms in 2017–18, while railways have installed Wi-Fi in over 675 stations. Moreover, e-commerce is expected to grow at a CAGR of 23% by 2021, and the mobile wallet transactions have reportedly increased 40 times in comparison to 2013.
The Indian economy is fast pacing towards digitalization and bringing huge opportunities for several stakeholders. However, digitalization is a cross-industry and cross-company process that requires changes on a broader scale. The government of India over the last couple of years has pushed schemes such as “Digital India”, Aadhaar, Jan-Dhan Yojana, DigiLocker, and PAHAL, all of which focus on promoting a digital economy. While these schemes may have been created to ensure benefits reach poorest of the poor, it has transformed rural and semi-urban citizens’ approach towards technology. These new users equipped with a smartphone are changing the trends of several industries including that of retail.

Major Changes in Retail

Digitalization has not only changed the customers, but it has also impacted the operating standards of retail companies. Retail companies have been rapidly adopting digital ways to keep pace with the fast-changing retail space in India. Some of the top changes that digitization has brought are as following:

Price Sensitivity

The digital transformation has ensured the customers can compare the products with a single click and see through any price discrepancy. Top retailers have been historically charging higher due to the convenience and customer service offered in the store. The advent of digital e-commerce has made these traits obsolete, at least in the minds of the customer. Today, the customer thinks if they can get the same product for a lesser price by ordering it from the comfort of their home, then why should they go to a physical brick and mortar store.


Since everything is now digital from customer information to logistics, a large quantity of data is generated daily. E-commerce companies can know exactly what the customer browsed, which product they added to cart and deleted later, which other product a customer searched, and what they purchased, and time spent on the site. These huge chunks of data need to be analyzed and turned into actionable insights. These insights will then help the retailers in modifying their actions to customize their offering to improve sales. Digitalization has ensured that data has become an extremely vital parameter for retail companies.

Logistics Optimization

With everything else from product pricing to website layout open to being copied by your competition, logistics can set you apart from the rest. Digitalization has had a huge impact on the logistics industry which was earlier at the mercy of transporters. Today, retailers can track every movement from the time a product leaves the factory to it reaches the customers. This ability to track the product empowers retailers to optimize the logistics to improve delivery time and delight their customers. The optimized supply chain also results in monetary savings.

Product Authenticity

While digitalization has introduced several benefits in the retails industry, there have been a few downsides. The most concerning part has been the introduction of fake products in the supply chain. Several instances have surfaced wherein customers received a fake product or did not receive any product at all. Fake products could enter your supply chain due to prevailing untraceable return management systems. There is always a possibility that some bad actors in the supply chain such as super-stockist, distributor, or any other stakeholder will replace the original product with a counterfeit product.
Even though not all companies have employed an easily available solution, some of the early adopters have introduced product verification features. The supply chain tracking applications are equipped with features such as product serialization, control procedures, return restriction, etc. which enable you to prevent counterfeit products from entering the supply chain. It also allows the customer to scan the products and verify whether the product is original or counterfeit. This gives ‘peace of mind’ to your customers and turns them into your brand ambassadors.

What Next for Retail?

The changes that digitalization will bring in retail are inevitable, and it will change the game for brick & mortar retailers too. The concept of a convenience store that offered products at slightly better rates is in need of a serious overhaul. Retailers need to shift the focus on their strengths and provide an unbeatable in-store experience to the customers. This could be in the form of interactive screens, providing theme-based shopping experience, and using technology to improve the shopping experience further. Retailers can also embrace digitalization and become part of promotions, research projects, and trading expos held by several brands. This would allow you to compete with digital platforms while still retaining your USPs and playing on your strengths.
Digital transformation is disrupting industries and forcing companies to innovate business models. Depending on the present stage of the company, some of the newer business model that can be followed include subscription model, hypermarket model, experience model, on-demand model, freemium model, and the pyramid model, among others. It is essential to understand that digitalization will change all aspects of retail, be it strategy, front-end, or back-end. It falls on the modern retailers to be agile in responding to changing retail space, and lead rather than play catch-up.


O4S raises Series A investment. To be announced soon. Read More