Business Today

From 'What' To 'How' Of Consumption

"Back-end technologies are changing traditional business models. The 'connected consumer' is changing the way purchase decisions are made."
Anand Kripalu | Print Edition: January 13, 2019
From 'What' To 'How' Of Consumption
Illustration by Ajay Thakuri

We have indeed come a long way since inserting a floppy disk into our computer. That was then just a simple data storage device. Today's back-end technologies like quantum computing, artificial intelligence, advanced machine learning, blockchain, virtual and augmented reality, and robotics are disrupting traditional business models, creating new demand segments, eliminating the profiteering middlemen and changing the very relationship between brands and consumers.

Historically, businesses have always relied on economies of scale as a competitive advantage. In fact, scale and distribution was a key barrier to entry. With the advent of technology, suddenly, this is no more a sustainable defence. The 'Economy of One' is now eminently possible - and profitable too.

A gestalt shift has occurred. The convergence of technologies, with data at its heart, will present new possibilities and solutions to improve lives.

Cab-hailing aggregator apps like Uber have changed the way we commute and altered the narrative for car ownership. Airbnb has disrupted the hospitality sector. Warby Parker provided a new model to order eyewear online. These are all digitally native businesses made for the new world order. But the reality is that the need for the good old toothpaste, the shower gel, the silky chocolate, or that special whisky is not changing. What's changing is the way consumers make purchase decisions (they search online before buying), where they will buy (omni-channel), how they will buy (e-wallets or Net banking), how the company makes it, and how the company supplies it - because technology is disrupting all of that.

This is the connected age and we are witnessing the rise of the "connected consumer", who will demand and seek frictionless experiences.

We all feel proud that our country is embracing technology like never before. India has jumped from the 155th position to No.1 in mobile data consumption. By 2022, there will potentially be 50 million broadband households and nearly 500 million smart phone users. This would be fertile breeding ground for technology to disrupt existing business models. From fintech to agritech, the start-up ecosystem is buzzing with innovation.

While the government's efforts to create smart cities, smart public places, smart schools, and e-bill payments (Bharat Bill Payment System) are progressive, from a consumer goods perspective, two future hunting grounds will become super critical - connected homes and connected retail stores.

Connected Homes

The idea of home is transforming. Ten years back it was about family and soap operas. Now it is about SOHO (Small Office Home Office); and being connected. Future homes will be intelligent; everything within a home will be connected - light bulbs, washing machines, health trackers, security systems and even the toothbrush! One could be 1,000 miles away from home and yet be at home. Most of these devices will get activated through voice technology assistants. This intra-home connectivity will re-define the way business serves consumers. For example, an IoT enabled whisky bottle pourer, which can pre-order Johnnie Walker. How cool would that be?

Connected Retail Store

India is home to over nine million retail (kirana) outlets spread across cities and remote villages. As we speak, the very definition of retail is transforming. A decade ago, international retail meant super and hypermarkets, as exemplified by Wal-Mart and Tesco. Now, retail is about logistics and consumer access. Wal-Mart's strategic buyout of Flipkart at a whopping $16 billion is understandable. In the next 10 years, retail will be a 'tastemaker of experiences' offering even more boutique services.

However, the real technological disruption will happen when the local kirana stores get connected to PoS terminals and do cashless transactions. Imagine a shopkeeper in, say, Bhagalpur, who will maintain his inventory online, keep daily sales record online and make friction-less money transfers through a mobile phone. This would be revolutionary. Brands would then need to re-look at how they show up in these formats. Can there be digital tokens to drive brand purchase? The good news is that discussions on this ecosystem are already at an advanced stage. Consumer companies are forging partnerships with mobile companies - alliances that were unheard of before.

Data as Responsibility

Finally, as consumers switch to digital, they would leave a lot of their intent, purchase behaviours and preferences as digital data footprint. This is of immense value to every business. With the General Data Protection Regulation (GDPR) rollout in Europe, it's a matter of time that India regulates how businesses use this data. To me, the 'R' in GDPR doesn't stand for regulation, but for 'responsibility'.

It is upon big businesses to set up governance protocols and be responsible corporate citizens. The true owners of data will be consumers, and we, as marketers, have to respect that. The downside risk for noncompliance will become very harsh - in India like in Europe.

So the future for consumer goods is around the corner. Connected consumers, connected retail stores and responsible data governance. And while a lot of the 'what to do' will stay the same (strategy, consumer understanding, product development, advertising and positioning, etc.), the 'how to do' will need to transform.

Just as in the floppy disk days, we sometimes had to re-boot our computers. Today, consumer companies may have to re-boot their operating models.

The writer is MD & CEO, Diageo India

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