Time to hit reset and accept the new normal. Our series of in-depth stories and analysis on the changing dynamics of India’s tech landscape in a post-Covid19 world — from how industries and sectors are transforming to new opportunities, evolving consumer behaviour, the new rules of venture capital, M&A and more.
In the consumer tech space, the biggest shift to come because of Covid-19 and coronavirus quarantines is that the only way for brands to reach consumers is through online discovery and doorstep delivery. There’s no store footfall any more. However, one man’s loss is another man’s gain. Lockdown has made more and more consumers realise that they can order groceries with the same ease as ordering food, said Siddharth Talwar, cofounder and partner, Lightbox.
Talwar was speaking to Inc42 cofounder and CEO Vaibhav Vardhan and our viewers in the fifth edition of our ‘Ask Me Anything’ series under the #StartupsVsCovid19 platform. He spoke about the change in the consumer mindset which will be apparent in the post Covid-19 market in India, as well as the new fundraising environment in India’s consumer brands, products and services.
While it’s very early to say whether we will change in consumer behaviour or not, learning from the developments in parts of China, we could definitely see that coronavirus will force behavioural changes to happen.
Consumers Adapt To The Covid-19 Effect
“In the same manner that Domino’s took us out of the restaurants, and food delivery companies took you outside of telephone calls, Coronavirus is accelerating the change in behavior patterns of how people buy groceries and essential items for everyday use,” – Siddharth Talwar
He added that people are now realising that any basic item that they need in life to sustain themselves is essentially available within a 3 Km radius of their house and can be delivered to them very quickly. I think the other thing that’s really coming out is the realisation that one does not need to have warehouses to deliver groceries quickly, instead, the country’s existing network of kirana stores can be tapped to meet the local demand. This also mitigates the loss that retail store owners may face.
Another major consumer trend that Talwar noted is there will be a rise in cloud kitchen orders, as people become more comfortable with ordering food. In these times, what people want is trust and quality in the food outlet. They want to be able to trust the system and feel safe that the establishment has the capacity to maintain that quality in their operations. “The only way restaurants are really going to be able to do that is to be able to process standards in place. But no restaurant will be able to do that as fast as cloud kitchens can,” Talwar added.
Earlier in our first AMA session, POSist’s CEO Ashish Tulsian has also noted that delivery kitchens and cloud kitchens are going to jump back immediately as the lockdown opens. “We can clearly see that delivery restaurants are still running in some or the other fashion, they’re not still making money, but it is going to happen. It will take time for things to come to normal, but delivery businesses are gonna thrive immediately,”
Will Omnichannel Models Fade Away?
Even when the lockdown ends, the biggest question is when will consumers feel safe enough to venture out to retail spaces such as malls, markets and restaurants again. Recession or no recession, the fear will linger long after Covid-19.
Talwar said all large brands and medium brands have to shift to a direct-to-consumer approach. This could result in an explosion of digital platforms. They will have to rethink how their forward supply chain works and they would want better control and understanding of their customer.
“Now when they are struggling in people getting access to their products, or their distribution chains are breaking — they will want to control their supply chains themselves. There will be a lot more competition in DTC brands. It’s not going to be offline vs online play anymore. Now everyone is online and can you compete in that environment.” – Siddharth Talwar
Further, the biggest impact of the economic slowdown will be the growth of furniture rental businesses. That’s if the rental companies manage to survive this lockdown phase. “In a recession, the biggest concern people have is that they don’t want to put large amounts of money down. And other than homes and cars, the majority of cash where you put money down at one time is on furniture or household equipment.”
Changes In Funding Patterns
According to Talwar, growth stage investments (Series B, Series C rounds) will see a slump during this period. “I think the reason is that there’s fear, it’s not that there’s no capital. There’s capital there’s just fear of the unknown. We don’t know what’s going to happen next. So it’s not a money problem as much more to do with other factors,” he added.
Further, in terms of early-stage funding, he said that depending on the kind of businesses, certain businesses might get funding. However, he also added that usually early-stage businesses are funded by high net worth individuals and their liquidity as well might be a bit challenged for the short term, so that could become a problem.