India is definitely the fastest growing e-commerce market right now. However, it is getting tougher for the online players to establish themselves in the vast herd of e-commerce firms trying to grab a piece of this market. With competition rising, several reputed and established e-commerce companies are opening physical stores to stand out in the already over flowing retail space and to add credibility to their business. Online players opening offline stores is the new trend which is becoming prominent right now and will remain so in the years to come as it provides an opportunity to their customers to touch and feel their products in the real time and take a better informed decision about their purchase. However, these trends are not overruling the presence of online stores but are advocating a more ‘hybrid’ model of retail which asks a retail firm to have both online and offline presence.
According to experts as well, companies are realising that for a lot of product segments like apparel, spectacles and jewellery, customer acquisition can increase with a physical store. Moreover, it also helps in creating more brand awareness.
Factors Driving this Trend
The reality remains that online is still only a fraction of the overall retail and it is going to be the same way for the next few years to the least. Majority share of the overall consumers still prefer buying offline, or at least for the bigger ticket items they generally look for a physical store and that is one major reason why especially the online players who are into higher ticket items like jewellery, furniture, etc. are going offline. Atul Sinha, Senior Vice President - Marketing & Retail Sales, CaratLane, maintains, “Caratlane started with a mission to democratize jewellery. We started online because there are many benefits of having a store online as people from anywhere in India can get access to our jewellery and we didn’t have to incur the cost of a retail set up and therefore we could keep our costs low. But as we went along this journey, what we found out was that there were many customers who would add an item to the cart but they would stop from making the payment. This got us into thinking that we should open our offline retail store and we then realized that most of our customers would begin their journey with shortlisting the items online and then go on to make the transaction at our offline store.”
Besides, a large section of buyers are more comfortable shopping for even a category like fashion only after experiencing it through touch and feel. This call for a clear and pressing need to build a bridge between the e-commerce and retail space and O2O or online to offline seems to be the new buzzword in the digital space. Essentially, it’s all about leveraging the digital and mobile medium to drive sales through the offline platforms. Ananth Narayanan, CEO, Myntra-Jabong, affirms, “Fashion is one of the largest and fastest growing categories in e-commerce. Yet, it accounts for only 5 percent of the total fashion market currently and this is expected to reach 11 percent to 12 percent by 2020. The segment therefore has a huge potential ahead and one of the strategies that we are looking at in order to bring more and more offline buyers into the online fold is, omni-channel. The primary reason for us to consider physical stores is to allow a large section of buyers who are comfortable shopping for fashion only after experiencing it through touch and feel and experience our products before making the transaction. Then, upon experiencing the brands and their attributes, they can comfortably shop both online and offline. We have created such an experience zone for one of our leading in-house brand, Roadster, in Bengaluru, which not only offers products, but incorporates class leading multimedia technology, leaving a lasting impression on the visitor.”
While for Voylla, the problem lies in customer acquisition. Voylla is a fashion jewellery brand that started operations in 2012 as an e-commerce venture. Voylla later realized that there were two big hurdles for an online brand – one was logistics and the other was customer acquisition cost. Vishwas Shringi, CEO and Founder, Voylla, maintains, “Given the rising aspirations in the tier -II and -III cities and lack of logistics support, Voylla needed to go offline in order to grow fast and to have a good market share.” The fashion jewellery brand opened its first store in December 2015 and today is present in 250 retail locations across India. Sharing the similar view on huge customer acquisition cost, Puneet Chawla, Co- Founder and CEO, Jaypore.com, apprises, “Though Jaypore is only online right now, the brand is aggressively looking at expanding through offline stores. The primary reason for an offline expansion is that the cost of acquiring customers for a small online player has become prohibitive. You have to keep an eye on every rupee you spend on acquiring customers and see if it is giving you ROI and the fact is that this investment doesn’t really make sense for online because cost is very high and customer loyalty in e-commerce is very low.”
Going forward, it is believed that not one channel is overpowering the other or downplaying the other, but its more about syncing of the two channels. Agrees Atul Sinha from Caratlane, “I think the discovery process still very much resides in the online space whereas in the final transaction process, both online and offline complement each other depending on how comfortable the customer is in the online space. And particularly for high value item, the retail environment plays a big role.”
Having said this by the majority of e-commerce firms, it is important that both online and offline players pull their weight and play to their full strength and capabilities in the emerging Indian retail landscape. For online players, it has to be reduced customer acquisition cost, wider assortments and right price points. For retailers, it is trust, instant gratification, service and environment. Bringing both together can create a solid customer proposition in place.
Talking about the trends being practiced for an offline store design by a former online player, Atul Sinha asserts, “For e-commerce players, to be able to offer a service and brand interaction which the customer sees online in the retail stores as well remains a key because if the customer is experiencing one kind of service in the online and when they go to the stores, they experience a different kind of brand, it would definitely not work for the brand. The second thing is that online and offline need to get more integrated.”