The traditional Diwali shopping season in October was a disaster for modern retail, while it was an enormous boom time for online sellers.
I got started with eCommerce sometime in 1996 when I was part of the team that helped design, launch and market Amazon. And it was perhaps the same year, or the next, that I spoke at the Internet World in Chicago and made some sort of silly pronouncement that retail would soon be in trouble because people would walk into stores, see something they liked, use a special portable device to find the best price for it elsewhere online, and then walk out without buying from the store.
I was wrong on several counts. First, it took 18 years for that to happen, not 8 or 10 years as I’d thought. And also, it wasn’t an Internet-enabled barcode scanner that would do the damage, as I’d imagined, but the mobile phone of today.
‘Showrooming’, it’s called that gives this disturbing notion to retailers that people are walking in, checking out stuff at their stores, and then simply looking up prices on their mobile phones to buy them elsewhere.
And we’re seeing very disturbed discussions among CEOs already. Its common knowledge, in India at least, that the traditional Diwali shopping season in October was a disaster for modern retail, while it was an enormous boom time for online sellers. But in the midst of all the teeth-gnashing, the fervent pleas to lobby ministries to stop FDI in e-tail- that anyway has come into India circuitously and the fact that salaries and hiring has ground to a halt in traditional retail - is a simple set of notions. No matter how many restraints on trade you may put in place for the online guys, people will buy where they find stuff for less. And, given the relative cost structures, online is likely to always be cheaper than offline.
Two, but does this mean the death of on-ground stores? Actually, no. Not if you move quickly to re-invent your business. The point is that there is a value to what on-ground gives the consumer - and it’s just that you haven’t charged for the value you’re offering.
The first differentiator is own-brand stores. If you’re Ikea or Zara, and you make your goods and you sell them, and people have to come to only your store to buy it, suggests that you have a bit of a protective moat. You can’t control the online challenge.
But most retailers sell the same things others sell - and those things are cheaper sold online - and that’s the problem case we’ll discuss here. The value that’s being left on the table by on-ground is one of several. A sense of community is one. The rise of the coffee shops is not really about a sudden desire to drink an extract from ground beans – but it’s about our need to connect with people in places outside of the home and outside the place of work or study. The “third place theory” as it’s called.
Bookshops that are only about selling books are doing badly and have almost vanished but those bookshops which are less about discounted prices and more about fostering a sense of community between readers are thriving and their revenue mix is changing from just margins on books, though those remain – to a mix that includes event revenue and yes, cash from coffee and snacks.
But there are more touch-and-see advantages that consumers get from shopping on ground. I believe I’d find it hard to buy a TV, without checking out the screen and sound in person. Or for that matter, to buy a jacket from a brand I haven’t owned before without trying it on first. I imagine there would be many women who understand that size 7 means different things for different shoe brands, and know the importance of trying before buying.
But is there so much of an advantage that people will pay you more for the product on-ground? I think not. But there’s still a way to profit from the value you bring as a retailer to this transaction.
Think of yourself as a brand promoter and less a brand seller. There’s a nice business to be built here. Brands – whether it’s a Samsung or a Sony or a Steve Madden, need you to show their products to their customers and to
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