Enough of online vs. offline, brick vs, click and the brunt of eCommerce as the retail today is heading towards de-polarization of both the domains. Until now, the online platforms have proved their mettle and as per a survey by Nielsen India and American Express, 97 per cent of internet users use internet for online shopping.
On the other hand, though physical stores have defined (or re-defined) their identity by creating experience stores and earned their spurs by differentiating themselves from their online cousins, but in the next stage of evolution, they are looking to either subsume competition or at least start working with them.
Recently, World’s fifth largest watchmaker Titan announced to acquire the Chennai-based online jewellery store CaratLane in an all cash deal. Also, Arvind is speculated to acquire majority stakes in online T-shirt portal Freecultr.
Over the past year, several such takeovers have made to headlines, including that of Meragrocer.com, a hyperlocal food & grocery e-tailer, by Spencer’s Retail and Mahindra Group’s acquisition of baby products e-commerce firm, Babyoye.com, Naturals Salon and Spa taking controlling stake in Vyomo - an aggregator of beauty salon doorstep services, and latest Kishore Biyani led Future Group taking over online furniture portal Fabfurnish.com.
These announcements echo the increasing appetite of retailers for a greater chunk of eRetail in India, which is expected to jump from $30 billion in 2016 to $120 billion in 2020, growing at an annual rate of 51%, the highest in the world, according to a joint ASSOCHAM-Forrester study paper.
This also reflects the need for quicker transitions to online channels rather than creating one right from the scratch. This nature of acquisition makes more sense for brick and mortar retailers to acquire a readymade model as it can be integrated into its existing structure.
One of the many strategies physical retailers worked on initially was to develop own online platform which fall flat in most cases. Now they are acquiring rather than building of their own.
While brick and mortar retailers enjoy front-end expertise, customer connect and brand value over the years; technological and back-end expertise are where they lack. On contrary, online startups have inherited tech-support and back-end expertise right at the time of inception.
As Krish Iyer, President and CEO, Walmart said at the 5th Indian eRetail Congress, “Consumers are changing in the way they shop, regardless of the channel. Eight out of 10 use phones while shopping in-store. Hence, the need of hour is to blend seamlessly the way consumer shops.”
“The brick and mortar stores are good at profitabely delivering consumer experiences, while digital platforms are great being customer responsive with the aid of technology. Considering both, future belongs to those who swear by Omni-channel,” Iyer further added.
Therefore, such acquisitions offer an ideal opportunity to marry both and reap the benefits.
Although it remains to be seen how two incongruent business structures blend seamlessly and profitably for the long term, for the time being, the cash-strapped start-ups are getting scale and funds to run their business and physical retailers are enjoying speedy entry into the omni-channel trajectory.