The 'e' challenge to physical retail

A lot of retail brands have started their online division, but they have failed to garner the much needed response, unlike the web-only players.
The 'e' challenge to physical retail

Several attractive changes are currently underway in India that will primarily transform how Indians will shop just a few years ahead, and thereby, irrevocably alter the composition of various formats of retail businesses in the country.

Organised Brick-and-Mortar (B&M) retail is concentrated in the top 25-30 cities in India and most retailers and brands are unable to meet the rising aspirations of smaller cities across India.

Hence, this incline of retail presence in cities, is fuelling the demand for brands, and retailers are ready to embrace the online channels due to their wider reach which also help them in delivery to smaller towns, where establishing physical stores are either not viable or will take years to reach. The novel entry in the bandwagon of brands going online includes many names like Biba, Raymond, and Shoppers Stop, among others.

However, there are a lot of retail brands which have started their online division, but they have failed to garner the much needed response, unlike the web-only players. And this is because of the following reasons.  

Novel concept to pick up

E-tailing is still a nascent market comprising 0.4 per cent of retail in 2014. Initially, it was viewed with skepticism and was touted as just a youth-centric passing fad. However, with e-tailing gaining pace in India, many brands have started focusing strategically on the online channel, only, in the last two years.

Commenting on the same, Arvind Singhal, Chairman of advisory firm, Technopak, said, “From an attitude of skepticism and from using the online form as a liquidation channel until a couple of years ago, these brands are now embracing the online channel, which is reflected in having dedicated personnel or teams, as well as by making the online channel an integral part of their strategy and planning cycles. Several players are trying to have distinct strategies for the offline and online channels to leverage the two without conflicts. This will expectedly grow further in the years to come.”

Physical stores are facing the challenge of being able to showcase only a limited assortment and face competition from web-only players, which gives better access to consumer data and allows for experimentation with products, pricing, and promotions.

However, as Rajiv Bhuta, Senior Director, Product Management, JDA Software, said, “Most of these brands are yet to focus on their own online portals because the market is growing disruptively, and hence, they are still in the learning phase.” Therefore, although setting up own portals give brands more margins, flexibility and instant consumer feedback, there is a need to address multi-channel consumers with shifting preferences aligned with changing market dynamics.

Failure to address multi-channel retail

At present, multi-channel play is just one per cent of Indian e-tail and can go up to 10 per cent by 2020. Significant capabilities in technology fulfillment and processes need to be developed for e-tailing, especially for working on a larger scale.

With the advent of mobile commerce, an investment in responsive design site and app development is also imperative. The quandary with the premium brands and retailers is their failure in investing in the multi-channel play.

In this regard, Nitin Chhabra, CEO, Ace Turtle, a company providing promotional consultancy services to eCommerce players, said, “At this point of time, B&M and online businesses are more often than not operating as independent models. Most retailers are yet to successfully integrate the two models to leverage the benefits offered by each of them. Besides, for a successful, integrated multi-channel retail, the efforts of both retailers and brands are required to be centered on balancing the facets of offering a seamless consumer experience across the physical and virtual formats, attaining real-time tracking of the stock across channels, and keeping pace with the movement of consumers across channels. This makes the case for an integrated business model more complex and challenging to implement.”

High competition from web-only players

Now is a period of competitive intensity among the well-funded, leading eCommerce players like Flipkart, Jabong, Snapdeal and Amazon, which are offering rewarding promotions, fast deliveries, easy returns and a host of other services to consumers.

Singhal, said, “Many of these brands are present on portals deriving high traffic and this has given them significant volumes and sales. Brands on their own will need to make momentous investment and effort in customer acquisition. Furthermore, their range on their own portals will need to be differentiated from other multi-brand portals. If, they too, offer significant promotions on their portals, they run the risk of channel conflict with the offline partners. Again, if they remove their products from other multi-brand portals, they run the risk of losing the share of online pie sales to other brands.”

Yet, these are still early days of e-tailing, and brands we can say are still in prep mode. It may not happen in the short term, but in the long run, most of these brands and retailers will try and push their own portal sales more aggressively.

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