Experts highlight that the pace of AI adoption in 2024 will be much faster than earlier, but it will depend on certain factors

 

New Delhi: Indian retailers are hoping to ramp up their spending on AI (Artificial Intelligence) in 2024. They seek to achieve stronger client relationships with anticipatory analytics reshaping demand forecasting, and refining inventory management.

The rapid pace of adoption and the increasing areas of operations are owing to the successful implementation of AI in customer management, personalised offerings, ease of finding products and result-oriented productivity that retailers saw in previous years.

IndiaRetailing had earlier reported on how retail companies globally leverage generative AI’s potential in their daily operations and offerings.

These daily operations included AI-based visual searches; ad creation; image, text and video generation for marketing campaigns; supply chain management and many other areas of operations.

Data from Fortune Business Insights show that retailers spent $5.50 billion in 2022 on AI-led automation and projects and this spending is projected to jump by 34% compound-annual-growth-rate (CAGR) to reach $55.53 billion by 2030.

The report further said that India is expected to register the highest CAGR in the adoption and implementation of AI in the Asia-Pacific (APAC) region because of its high demand for automation tools.

While companies used it to boost productivity and to smoothen their daily operations in 2023, they are expected to take the usage to the next level by facilitating training for employees, increasing their spending and also enhancing the areas of operations.

“Retailers who adeptly utilise AI will emerge as the clear winners. There is a significant opportunity for retailers to enhance the accuracy of their services, and many are already advancing rapidly on this path,” said Kumar Rajagopalan, chief executive officer, Retailers Association of India.

Kumar Rajagopalan also explained the impact AI will have on consumers saying that consumers can expect a notable elevation in retail standards. “The integration of AI in retail is more than just an operational upgrade; it’s a strategic move towards creating more customer-focused and efficient retail experiences,” he added.

Areas of focus for AI in retail

According to experts 2024 will witness much broader and more impactful applications of the technology, but the focus areas will depend on industries and other factors.

“Retailers are now embracing AI not just as a tool, but as a core component of their business strategy. The ability of AI to process and analyse vast datasets provides retailers with unprecedented insights into consumer behaviour. These insights enable retailers to develop highly targeted strategies,” Kumar Rajagopalan of RAI said.

AI could be used for enhancing a host of services, from the overall customer experience to security aspects, according to Santosh Reddy, chief technology officer, ShakeDeal, a procurement-focused B2B e-commerce platform.

“2024 signifies a pivotal leap in B2B e-commerce, showcasing AI’s transformative prowess in enhancing customer experiences, operational efficiency, and cybersecurity, and we look forward to it,” Reddy said.

Kartik Narayan, chief executive officer of TeamLease Services, a staffing firm says that personalisation, customer experience, inventory management, demand forecasting, customer service automation, data analysis, market insights, automated warehousing and fulfilment will be the key areas where the retail sector is more aligned to use AI in 2024.

Another area of focus is analysing customers’ patterns and reducing manual work.

“People will use artificial intelligence to study consumption behaviour patterns and flag inconsistencies that will reduce a lot of manual and mundane work,” said Madhav Kasturia, founder, Zippee, an e-commerce fulfilment platform.

“AI will also boost the efficiency of last-mile infrastructure by examining data and compiling patterns. AI will essentially replace data analysts to start with,” Kasturia added.

Factors like supply chain, customer experience, inventory management, demand forecasting, service and warehouse automation will all be the areas that are going to witness more advancements in comparison to 2023.

“In 2024, AI algorithms will revolutionise the landscape of retail through hyper-personalised support, product recommendations, and targeted marketing,” said Sheshgiri Kamath, chief executive officer, Kapture CX, an AI-driven Customer Support Platform for Enterprises.

Kamath adds that AI tools will extend their reach to employee training, workforce management, and productivity enhancement, leveraging analytics for optimised staffing and operational efficiency with a focus on supply chain optimisation, fraud detection and security and price optimisation.

This aligns with findings of a recent survey by hiring and job search platform Indeed, which found that around 59% of employees in India are ready to use and embrace the potential of artificial intelligence and generative AI-based tools in their daily work.

Pace of implementation

While the adoption of the technology is evident, the pace depends on factors like the cost of technology, customised tools for companies, Large Language Modules and their accuracy among other conditional factors.

Kasturia of Zippee said that e-commerce will be one of the early adopters of the technology.

Narayan of TeamLease Services adds that the pace of integration will likely be rapid. The adoption pace will also be influenced by the increasing availability of user-friendly AI tools, enabling even non-technical employees to utilize AI in their daily work.

“The rapid integration of AI is poised to grant a competitive edge to companies. The pace of this transformation may be influenced by regulatory factors, ethical considerations, and the availability of skilled AI professionals,” said Kamath of Kapture CX.

“The pace of AI integration in the D2C market is accelerating rapidly. As technology advances, the potential for increased efficiency and innovation in D2C through AI is significant,” said Deep Bajaj, chief executive officer, Sirona Hygiene, a company that sells feminine hygiene products.

Retailers across categories are lamenting sluggish sales over the last several months. Here’s what they are saying…

New Delhi: Retailers and restaurants across the board have been reporting sluggish sales in the last six months or so and this persisted even during the crucial Diwali season.

Now, fashion brands have advanced their annual end-of-the-season sales (EOSS) by about two weeks in a bid to liquidate their unsold inventories and shore up their coffers. “The last seven months have been a disaster for retailers,” said Kirti Khosla, director at Ark’s Consultancy, marketing agent for Milan-based Pianoforte, which sells lingerie brand Yamamay and Carpisa luggage and bags in India. “Even Diwali was not good this year.”

A chief executive of a global fashion giant said the overall consumer sentiment is playing on the business this year.

“Retail inflation has gone up so much, salaries have not gone up much and high interest rates are not helping,” he said asking not to be named. “It’s not just a slowdown for us, it’s a very bad slowdown,” he added.

Restaurant operators, from Jubilant FoodWorks Ltd. to McDonald’s South and West India franchisee Westlife Development have reported a drop in their same-store sales in the latest quarter.

Jubilant FoodWorks, which operates Domino’s Pizza and Dunkin brands in India, saw a 1.3% decline in like-for-like sales (a retail barometer to gauge sales growth/decline for stores that are open for a year or more) in the second quarter of this fiscal year compared the previous year.

Similarly, Sapphire Foods India, the India franchisee of Yum Brands, reported a like-to-like sales drop by as much as 20% this quarter at Pizza Hut India restaurants amid poor consumer sentiment.

“The first six months of the year wasn’t great and it was a complete washout if I would have to put it,” said Sagar Daryani, co-founder of Wow! Momo Foods Pvt. Ltd. that operates Wow! Momo, Wow! Chicken and Wow! China. “It’s quite shaky and quite topsy turvy,” he added.

IndiaRetailing spoke to a broad spectrum of retailers to gauge the reasons behind the slowdown. Here are the four that stood out:

End of the revenge-buying spree

Top executives at brands said Indian consumers went on a revenge buying spree post-Covid in 2021 and 2022 and are saddled with more products than they need. They therefore don’t see any urge or reason to purchase more stuff as their wardrobes are already full.

High inflation

Many retail executives cited persistent high inflation as one of the culprits behind the slowdown. Government data shows that retail inflation in India, measured in terms of the consumer price index (CPI), jumped to 5.5% in November, up from 4.8% in October. India’s CPI has been rising in the last two years—from a low of 4.06% in January 2021 to the current level of 5.5% and that is also denting sales of goods from food to fashion.

High-interest rates

The Reserve Bank of India (RBI) has raised short-term lending rates by 250 basis points (bps) since May 2022 amid surging inflation. However, since February, the RBI paused its rate hike spree and has maintained the repo rate at 6.5%. Due to high-interest rates, equated monthly instalments (EMIs) for consumers on their housing and automotive loans have gone up, forcing them to cut household budgets and avoid discretionary spending.

Cautious Consumer Sentiment

All the above factors are weighing in on the consumers’ psyche and they are cutting their non-discretionary spending. Fashion brands have unleashed their deep discounting this month to lure consumers and liquidate their unsold stocks. While Puma has started a flat 40% discount, ethnic brand Kazo has started the EOSS with up to 70% discounts, giving a peek into the state of affairs.

More such insights at India’s biggest retail intelligence event–Phygital Retail Convention 2024.

New Delhi: Shailesh Chaturvedi, managing director (MD) & chief executive officer (CEO), Arvind Fashions said the company is cautiously optimistic and that its focus on profitable growth will continue this year.

Chaturvedi added that there are a lot of smart execution plans with a focus on building categories and opening bigger and better-looking stores.

“We are revitalising the growth of our brands, and we have done well as a company last three years or so and we hope to continue doing that,” Chaturvedi added on the company’s past performance.

Speaking about the outlook for 2024, Chaturvedi added that the the focus of industry should be on profitable growth. Adding on to the expectations from the upcoming Phygital Retail Convention to be held in Mumbai in May 2024, Chaturvedi again pointed out that the above-mentioned things should be the central theme of PRC with a focus on how businesses can grow profitable.

Steady and focussed infrastructure development of Northeast India is opening up the region to increased penetration of organised India, helping retailers meet the rising customer aspirations

In the last four years, more than 120 stores have been opened in the Northeast by leading retailers including Landmark Group, Tata Starbucks, McDonald’s, Forever 21 and Avantara by Trends. Out of these 100 have been opened by leading value retailers—Style Baazar, Baazar Kolkata, V-Mart, M Baazar, City Kart and Vishal Megamart. The last two months have seen around six store openings in the region by brands like Samsonite India, Chaigram, Domino’s, Balenzia, Nature’s Basket and GKB Opticals as per IndiaRetailing Insights.

Currently, northeastern cities are bustling with consumerism which was unthinkable even a decade ago.

However, just a decade or so back, things were very different and many states of the region were plagued by insurgency and related violence. “Penetration of organised retail in Northeast was a big problem due to supply chain issues,” Shreyans Surana, founder and managing director of Baazar Style Retail Ltd., which runs a value retail chain Style Baazar that has 155 outlets across 9 states in East India.

Flashback

Seventy-year-old retailer K Dasgupta remembers a time when he had to pull the shutters of his small electronics store in Dibrugarh and rush home before sunset. Come 6:00 pm, and the streets would be deserted, with people preferring the safety of their homes for the fear of insurgents. That was back in the 1980s and 1990s.

Not just Assam, the entire Northeast region—consisting of Manipur, Mizoram, Assam, Arunachal Pradesh, Meghalaya, Sikkim, Nagaland, and Tripura—was plagued by political instability and imbalanced development, affecting trade and commerce.

“The demand was always there but there was a huge lack of good road and other infrastructure which led to supply chain disruptions,” added Surana, who has stores in Assam and Tripura.

The rugged hilly terrain, landslides and earthquakes the hill-locked region is cursed with, further hampered trade.

As a cumulative effect of these factors, the region that occupies 8% of India’s geographical spread and is home to 4% of the country’s population, remained politically, commercially and culturally isolated from the rest of India for several decades.

“After 2000 and 2005, things started changing. Stability started coming in, people started to venture, a lot of infrastructure development came in,” said Vikram Bothra, Managing Director of Chandan Retail that runs Askaran Binjraj, a 50,000 sq. ft. standalone fashion lifestyle department store in Dhekiajuli, Assam. The Bothra family has been in business in the region for the last 200 years and has been an integral part of the region’s transformation.

But the major thrust came after 2014. “That was when the complete business environment, new retail brands, new retail services started coming into Northeast.”

The Big Change

“Organised retail penetration is increasing and the retail landscape is transforming, it’s developing into a bigger market. In the last two years, we have opened more than 20 stores in the Northeast,” said Surana.

Retailers operating in the region attribute this change to the focused efforts of local as well as the central government in developing the region. From 2014 to 2022, 1,350 projects worth Rs.15,867 crore have been sanctioned under the schemes of the Ministry of Development of North Eastern Region (MDONER), and North East Council (NEC) in the North-Eastern States, Union Minister of State (Ind. Charge) Science & Technology, MoS PMO, DoPT, Pensions, Atomic Energy and Space, Dr Jitendra Singh while inaugurating the ‘Purvoday’ in July last year.

From 8,480 km in 2013-2014, the total length of National Highways in the North-east region increased to 15,735 km in 2022-23, showcasing a growth of 85.55%. Since 2014-15, Rs 19,855 crore was spent on developing new tracks and doubling the existing lines of the railways in the northeast region. The number of airports and waterways increased from 9 in 2014 to 17 and 18 respectively, the minister added.

“Railways now go straight up to Itanagar, the capital of Arunachal Pradesh. States like Nagaland, Manipur, Mizoram now have good rail, air and road connectivity,” Bothra said.

Current scenario

While there has been a dramatic transformation, supply chain challenges persist, due to the terrain and climatic conditions.

“Navigating the challenging landscapes of Northeast India comes with obstacles like landslides and intense monsoon rains, particularly during peak seasons. Additionally, this region faces unpredictable weather conditions and a persistent landslide risk, setting it apart from other parts of the country,” shared Amarnath Banik who is the Amazon Trucking partner for Northeast India. As Amazon’s trucking partner, Banik oversees the delivery of Amazon packages through three established routes in Northeast India, covering 13 cities in the region, including Guwahati, Tinsukia, Shillong, and Kohima.

“We can’t fight Mother Nature—there is still rain, landslides and earthquakes, Northeast is still under seismic zone 5—but today, the buildings being made are earthquake proof. The number of incidences has decreased as the government is investing in geo-seismic infrastructure so we don’t have the kind of casualties we had 10-20 years,” Bothra explained adding that this has translated into improved sourcing and replenishment.

The internet connectivity in the region has improved too in the last six to seven years with national players like Reliance and Airtel offering lightning-fast services. Rs. 3,466 crores have been spent under 10% Gross Budgetary Support (GBS) and upgradation to 4G connectivity in 4,525 villages in the region. The region now has optical fibres.

Players like DHL, Blue Dart, Shiprocket and Delhivery have started offering services here, which has improved deliveries. Delhivery alone has reported an increase of 30% in its Northeast business in the last four to five years, a source with access to the company’s report told IndiaRetailing.

“Businesses like Amazon too have contributed to improving the logistics landscape in Northeast India,” Banik said, who was able to grow his trucking fleet from 50 trucks and 60 drivers in 2019 to 200 trucks and 250 drivers in 2024.

Banik shared that Amazon successfully addresses hurdles in the region by developing robust transportation networks, establishing alternative routes, and prioritizing local connections.

“Our reliance on strong local ties, skilled drivers, and a well-structured contingency plan has proven effective in navigating the demanding landscapes of the Northeast and ensuring timely deliveries,” Banik said.

The Amazon way

Amazon provides extensive recruitment and training to drivers as well as regular health check-ups and comprehensive accident insurance to drivers to ensure their safety.

Technology plays a crucial role in enhancing operational efficiency. “We make use of Amazon’s diverse range of technology-driven products and value-added services (VAS),” Banik explained.

“The Relay app, which includes Relay for Carrier and Relay for Drivers, offers real-time visibility into trips and performance while streamlining check-in and checkout processes. These tools facilitate immediate communication during contingencies, ensuring smooth operations and support,” he added.

Additionally, Amazon integrates GPS monitoring into its technology platform for vehicle execution and surveillance. It is integrated with every vehicle responsible for transporting goods, and offers detailed insights into various parameters, facilitating the tracking of package movement. It also helps dispatch a replacement vehicle and arrange for repairs in case of a breakdown.

With the infrastructure boost continuing and giants like Amazon contributing to the region’s development, retailers expect the supply chain scenario in the region to further improve. “In the next five years, I see a traction of good, organised retailers in NE India,” said Surana.

Did you know?

States in Northeast India are referred to as Seven Sisters and a Brother. While Manipur, Mizoram, Assam, Arunachal Pradesh, Meghalaya, Nagaland, and Tripura are the seven sisters, Sikkim is referred to as their brother.

More such insights at India’s biggest retail intelligence event–Phygital Retail Convention 2024.

Vineet Gautam, chief executive officer, Bestseller India, hopes 2024 will bring better business prospects than 2023, a year that witnessed a slowdown for retailers in India.

He feels that the business has learned from their mistakes made in 2023 and is trying to correct them. He is though optimistic about the long term business potential of India and feels that the business will start to pick up in the next two quarters. “The industry is going to witness a much better positive vibe in the country post the election,” he said.

Speaking about Bestseller India’s focus in the year he said: “Emphasis will also be on the products and consumer journey in the stores. On the digital side, we are trying to see how we can bring a lot more fashion to consumers online rather than just discounted product lines.”

Since there is a clear distinction between an online and an offline consumer, understanding how brands cater to both these consumers differently and create cohorts and keeping products accordingly is important, he said.

On the expectations from the upcoming Phygital Retail Convention 2024 (PRC) to be held in May in Mumbai, Gautam added that there has been a lot of discussion going on online and omnichannel.

“I think the PRC should talk a lot about physical retail because I think if you look at it post-COVID, physical retail has started to become strong. And I think a lot of D2C brands are also realising that physical is the next word. Let’s spend more time on the physical retail part, how to improve experiences, and how to win back consumers for physical retail,” said Gautam.

RS Sodhi, President of the Indian Diary Association said that the Indian consumption story is growing at a faster pace compared to other parts of the world.

Speaking about the reasons for the same, Sodhi further said that the inflation in India has been much less as compared to other parts of the world.

“The way we are growing in terms of income and economy as we crossed a $4 trillion makes us not only the biggest consumer economy but also the fastest growing,” said Sodhi.

We have already crossed the tipping point of explosive growth according to him. “So now it is up to the individual Indian companies how much they can exploit, and how much they can meet the market requirement,” added Sodhi.

Speaking about consumers he said that Indian consumers are different and companies should understand the Indian consumer’s psyche.

Commenting further on the key focus areas of 2024 in dairy and food companies, Sodhi said, “Companies are sitting at the centre of the world’s biggest food and dairy market that is also fastest growing and also comparatively less organized. The sky is the limit. Companies should come out with a good product, efficient value chain and own the whole supply chain,” added Sodhi.

Sodhi also gave insights into the expansion of companies and said that they should not focus on spreading all over India, rather they should at least have a double-digit market share in one geography, one state, one district and then spread.

Speaking on the expectations from the upcoming Phygital Retail Convention (PRC) 2024 in May, Sodhi said that there needs to be an approach from the retail and corporates on how they can innovate and give products and services to the lower end of the consumers as that is the segment with more opportunities.

New Delhi: Anurag Katriar, founder and managing director of Indigo Hospitality, said that since the Phygital Retail Convention has emerged as a prominent platform to discuss the retail industry, should place a special emphasis on the HoReCa (hotel, restaurant, catering) industry as well. He added that such conversations in the convention can help set agendas and broaden the scope of the discussions.

“I think maybe there is a time now to do a little more  HoReCa-centric communication at the PRC where we don’t only discuss what’s going on, we discuss and set agendas for the future and let the world know this is how the larger leadership team of the restaurant industry is looking for the industry to grow,” he said.

Discussing the 2024 outlook for the hospitality industry he said there could be a substantial increase in the number of restaurants over the years. “More and more people are coming out to dine out and I feel with the sustained GDP growth that India has, this isn’t going to change anytime soon,” he said.

He called the restaurants in India “lowest hanging fruit” due to the disposable income available for spending. This tendency fosters industry growth and facilitates business expansion, he said.

He emphasized that, in the aftermath of the Coronavirus pandemic, it is essential to stay faithful to products, explore new product lines, and prioritize substance over style.

PRC will be the ultimate platform for powerful predictions, discussions, and insights by leaders of retail. To learn more about the event or to register, click here