Though 2016 was anticipated to be the year for mobile shoppers by many industry pundits, but proving them wrong, the online shopping industry seems to be facing a lot of questions on viability. The eCommerce industry, these days, has seen some change in trends which might later turn into opportunity that these businesses can benefit from. But as of now, the trends have surely made eRetailers revamp their business models.
This cut short, if exploited aptly, can help brick-and-mortar retailers to bounce back and cement a pole position in the retail industry. As mounding losses have forced many online marketplaces to disdain deep discounting to shore up finances, this is the right time for traditional retailers to take the edge and bring back that lost consumer trust. Discounting, a lethal weapons for eCommerce is now under investor’s radar as its increasing the cash burn.
Commenting on the same, Kishore Biyani, CEO, Future Group said, “The competition intensity has no doubt reduced vis-a-vis online. This is just the beginning of their downfall since the ecommerce model of discounting was never there to stay.”
Brick and mortar retailers have already started capitalising on the trend and have secured tremendous hikes in terms of sales and revenue. Sales figures of leading fashion retailers, Shoppers Stop and Future Lifestyle scaled around 18% in the quarter from the year 2015, the maximum in past four years. Lifestyle International, Arrow and Flying Machine too nabbed 12-15% hike.
Some of country’s eCommerce majors such as Myntra and Jabong have now cut down on the discounts on their products due to the accumulating year-on-year losses (Indianretailer reported earlier). This is surely a sharp U-turn from the trend which started in 2014 when brick-and-mortar stores reported huge losses as heavily funded online marketplaces were able to lure customers with attractive deals and discounts.
Stepping out from the odds, offline market, with a well prepared strategy hopped into the festive season last year to fight back against their peers and it turned out positively for them. “The festive season, especially in the east, was pushed to this quarter, which added to overall demand. Also, brands where we ran promotions did well and growth was what we had seen two years ago,” said J Suresh, MD of Arvind Lifestyle Brands.
Though online retailers have still managed to do well and claimed it to be the best ever festive season since its inception in the country, but the side effects have hit their pockets big time. Entry of various well known international brands such as H&M, Zara and GAP etc was too one of reasons for the downfall as all of these brands were overwhelmingly welcomed by Indian consumers.
If we look at the combined losses of leading three online marketplaces Amazon, Flipkart and Snapdeal dipped to 5,052 crore in FY15 as they sought to attract buyers offering huge discounts. Defending the above, Sudhanshu Gupta, VP, Paytm, said, “average cashback offers to consumers have dropped. Brands are actively coming forward to fund cashbacks, in some cases fully. That has meant Paytm's contribution coming down.”
No doubt eCommerce and mobile shopping will still play a pivotal role in retail space, but Investors in are now worried about slipping further down, hence want their borrowers to work on their balance sheets and start making profits. We at Indianretailer think that it is an apt time and opportunity for brick and mortar retailers to bounce back as the market leaders.
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