Credit: V. "Paddy" Padmanabhan

INSEAD experts and industry executives drill down to the basic human needs driving changes in retail.

To the untrained eye or casual observer, the retail sector in recent years can seem like a blur of dizzying change. From experiential stores, virtual reality dressing rooms, voice commerce, anonymous shopping, to “online-native” brands opening brick and mortar shops, even pundits are finding it hard to keep up with innovations in the sector.   

But whatever guise it assumes, successful innovation is based on real needs or deep insight into human psychology – think smartphones, ride-hailing apps and social media. The companies that can harness those desires while staying on top of operational exigencies including costs, even if that means disrupting themselves in the process, are the ones that will be able to prevail over the sea change churned by digitalisation.

That was the main takeaway from the 4th Annual Emerging Markets Conference held at INSEAD’s Asia campus in June. Industry executives from Deliveroo, Dole Packaged Foods, Electrolux, Johnson & Johnson, and INSEAD Associate Professor of Technology and Operations Management Sameer Hasija highlighted the latest innovations and disruptions in retail. They agreed that trust, personalisation and customer experience are the cornerstones of the industry in the digital age. Trust, in particular, is the linchpin for the growth of retailers, from mom-and-pop stalls to Alibaba.

“The big movement in retail is to capitalise not so much on technology as trust,” said Hasija. “What I see in emerging markets as an innovation is that companies are creating scale, they are creating networks, they are creating trust. Then they move into other verticals to try and monetise that trust.”

Trust deficit

E-commerce giant Alibaba, for example, launched a health mutual insurance plan in China’s competitive insurance landscape under its Ant Financial Services Group in October 2018. Fifty million people  enrolled in the plan in the span of just six months. Demand was so hot that Ant announced last April that it hoped to sign up 300 million customers – or a fifth of China’s population – in two years. All this would not have been possible had Alibaba not established an authentication system for its e-commerce platform merchants early on, thus establishing trust in its products. In other words, said Hasija, Alibaba’s latest vertical is built on trust and network size. “Combine both of them and you create a very winning position,” he said.

The sharing economy is another flourishing example of the potential of trust, or what Hasija termed return on trust capital. Worth more than US$400 billion in China alone, the sharing economy is picking up fast in emerging markets, whether it’s in food delivery, home-sharing, luxury goods and apparel, beauty and grooming products, childcare products or even pets. Affordability aside, said Hasija, trust in the system is key to growth. In the second-hand goods market, for example, companies like LuxTag offer blockchain-based systems that enable consumers to ascertain a branded handbag’s provenance, say, or ensure that that expensive watch is not a fake. The resale clothes market in the United States alone has grown 21 times faster than retail sales of new clothing in the past three years, to about US$24 billion. About one in four consumers who buy luxury clothes brand new also purchase cast-offs.

In the fast-moving consumer goods (FMCG) sector, a “trust deficit” is also roiling the market and forcing established players to change, said Ashvin Subramanyam, Vice-President of Marketing and Innovation at Dole Packaged Foods Asia and one of the panellists at the INSEAD conference.

The trust deficit in FMCG “is touching everything,” Subramanyam said. “It’s touching traceability…The way we’re trying to address it is formulation, authenticity on blockchain so that consumers can track (our products).”

At Johnson & Johnson, trust is embedded in a rainbow-coloured code, said Jyoti Jain, the company’s Director of Advanced Analytics, Asia-Pacific. “Typically you have those barcodes on products, now that is going to be a rainbow-coloured code, which to a consumer would mean that it's authentic product, and we won an industry award on that,” said Jain. “That's how we are actually changing our product and that is a response to a deep human insight on trust.”

Customise, or die

Trust aside, retailers in the digital age ignore personalisation and the customer experience to their own detriment, as brand loyalty gives way to convenience and novelty.

Take Britain’s Marks & Spencer. In May, the 135-year-old multinational retailer of apparel and food products announced it had invested in Russian start-up Texel, whose technology scans and measures people i