From a market size of $2.5 billion in 2009 to $15 billion in 2014 e-commerce has traveled a long way in last five years.The world now is termed as the ‘global village’ and has gone about bringing both business and customer closer than before. India is a very young country and aspirations are extremely high amongst the youth of today, who is always connected to the internet. According to the latest figures of ASSOCHAM, the nation’s e-shoppers spend was $16 billion in 2013. That’s a rise of 88 percent from the $8.5 billion figure in 2012.
It is not surprising today, how e-commerce has become an integral part of the whole shopping experience for Indians. Way back in 1998, when Abhay Deshpande had started the first angel-funded e-commerce site for ethnic Indian products called, Malamall.com, most Indian consumers did not even hear of e-commerce. Today e-commerce has created huge opportunities in India by challenging the players in increasing their product reach & sales. The digital savvy consumers of today access information and content from many sources making physical visits to the stores a formality and more of showrooming. “Googling it” is very simple answer – they can share / ask for opinions and feedback and finally are fully empowered to make an informed decision. “For such a connected consumer it is very important for brands to be consistent in their approach – omni channel allows this flexibility and consistency – importance is given to brand and not the channel. Your pricing , promotions , merchandise is independent of a channel. A consumer might try product online and can later shop for same product on mobile or web portal” says Peyush Bansal,CEO & Founder, Lenskart.com.
So far, all over the world, brands were first built offline and then gradually moved online. For GKB Opticals it has been a gradual shift primarily due to stiff competition and the potential opportunity of online presence. “E-Commerce platform is a key for our business which strongly supports our bottom line. We generate almost 10% of our sales from e-commerce though pretty less than our brick and mortar stores but quality of traffic on the website speaks volumes about the potential and opportunities yet to be tapped” says M Rahman, Sr Manager -Marketing. However, it can be the other way round as well. Brands could be built online primarily and offline could play the supporting role of being another access point for consumers. Many brands in the US are being built online first, e.g. – Warby Parker in eyewear and OneKingsLane in home decor. In the same way, it is a great opportunity to build brands the online way in India, especially in categories like furniture, where the unit economics of offline is very poor due to large space requirements and high rentals. “In fact, even for traditional offline brands, we could see that they could pivot to being more dominant online. Many brands are realizing the same and focusing hard on their online presence. says Vikram Chopra, CEO & Co founder Fabfurnish, India. “Our primary product is furniture and home decor, which is mostly a high value purchase for a customer who also likes to feel the product before buying. Due to the nature of the product category E-Commerce platform is a little tough selling proposition. But it is surely assisting the Brick and Mortar store” says spokesperson from Mobelhomestore.The brick-and-mortar business gives the maximum revenue from stores in West Bengal and Bangalore. However, the E-Commerce store gives a chance to reach out to a nationwide audience.
“After tasting success at 19 EBO’s and 350 MBO’s, the launch of the online shopping website (successonline.co.in) which is an independent mens fashion brand, is an extension of the great service we strive to offer in our numerous offline stores every day of the week” says Rajnish Sethia of Agwani Fashions & Founder Success (Premium Mens wear). Online platform for a menswear brand adds to the convenience of the buyer to shop sitting back at home or on the run through a smart phone. He further believes “that the hassle for the customer is less as sizes and fit are standardized and the look and feel of the product is evident from HQ images and detailed descriptions on the website”. Though a recent initiation they still have to adapt and see how the online store performs but any medium which is easily understandable and within reach of the consumer base will prove as a popular platform for any brand.
There are some fundamental needs that people have while shopping, especially for clothes, and it’s the “touch, see, feel” experience. It’s a whole journey of trying on something and thinking about it, and then trying it on again, and customers should be allowed to go on to that journey.
Also, with the bulk of retail sales still happening offline, the rational for e-commerce companies to consider physical stores is compelling. It is here that the retailers need to understand, adopt and enable omni channel presence to enable shoppers a range of platforms to shop at i.e. mobile internet devices, computers, bricks-and-mortar, television, radio, direct mail etc. “It is both hard and expensive to get noticed online now, but if you spring up offline – even for a short time via a pop-up shop – shoppers will love the interaction and potentially share their experience by tweeting or instagramming an image, which can help drive interest and also sales. Shopping and discovery are important parts of the buying experience for consumers, and local stores will play an important part in Stylista’s strategy moving forward. So while the heart of our business is online, we are now adopting a channel agnostic approach, which is where the world is headed” says Avnish Chhabria – CEO Stylista.com.
TyreOnWheels has already shifted the very offline buying activity to the online space, giving the customer an option of buying car tyres from the comfort of their homes. Additionally company has opened up offline retail presence in Delhi, Ghaziabad, Noida, Greater Noida and Faridabad. A recent development indicates Myntra’s plans to open physical brick and mortar shops in different parts of India to promote its flagship private label- Roadster.
DoneByNone, online fashion retailer, estimates 50% of its sales will come from offline stores in the next 5 years. Its first shop will be opened in Delhi, followed by shops in Mumbai and Bangalore. Even in a mature market like US, many fast-growing online retailers like Warby Parker(eye-wear), Birchbox (cosmetics brand), Bonobos (apparel brand) etc. have opened physical stores to connect with customers. “We wanted to nail the first thing that prevents people from buying spectacles online. One of the reasons we found is that they want to get their eyes checked, lack of precision about their power and doubts about how the pair of eyeglasses would look on their face. Our offline stores serve both the needs of our customers as they offer the physical advantages of buying a product along with the option of finding other options online.” So we opened 20 offline franchise stores where people could get their eyes checked. We are mainly expanding these stores to tier II and III cities where there are not good eye check-up facilities as well as a good range (of specs) for customers to choose from” says Bansal. About 10 per cent of GMV comes through offline stores for Lenskart.
The click and mortar model of transaction goes beyond traditional retail by merging the best of offline and online retail. It reinforces the trust factor with the physical feel of products along with the convenience of access to a larger inventory online. Pepperfry wants to expand the overall reach of the brand and planning to open 20 branded offline concept stores across various cities, including the six metro cities like Bangalore and Mumbai. These offline stores will have large format kiosks with touch screens and iPads to allow consumers to browse and experience the merchandise and are primarily meant more as a brand building platform and not as sale points
As a brand, it is essential to provide a holistic experience to consumers, and offline stores help is doing the same . Hence for many brands being present in the offline medium will also be an integral part of their aspirations to build customer trust by being there with them physically. Chopra says “FabFurnish’s offline stores are 5-10K sq ft concept stores – much smaller than typical furniture stores of 30-50K sq ft. We display a limited inventory at the store, but it’s good enough for consumers to get confidence on our quality and brand value to buy anything from us”.
The brick and mortar stores (100+ stores) still constitute close to 98% of Presto’s total sales. Hence online has a long way to go for but the beauty of the business is that there are almost no overheads and growth is close to 25% per year. E Com contributes only 2% of our total business but we expect it to contribute close to 10% in next 5 years.
For Bewakoof.com advent of smartphone and mobile apps has been a game changer. After being virtually non-existent initially, nearly 10% of our orders were coming from mobile users last year. It has now grown to almost 40% and we expect that in two years’ time, more than 80% of our orders will be coming from mobile devices. As a brand, we are growing at a rate of more than 400 percent every year since our inception and nearly 80% of our business comes from online sources. E-retailers like us would also like to have some presence on the ground. A hybrid model which maintains a healthy balance between online and offline presence will be the best way to go forward”says Prabhkiran Singh, Co-founder & Director, Bewakoof Brands Pvt. Ltd.
“The online distribution increases our Brand Reach, gives us leads and moreover helps dole out discounts and offers and influence the online shoppers to buy more. We have tied-up with major online retail partners like Myntra, Jabong, Flipkart and Amazon & the association has been very beneficial to us. Currently, our brick and mortar outlets, gives us more revenue due to its sheer awareness and visibility” says Ajay Chablani, Business Head, Planet Sports.
On one side, where online players are looking at all possible reasons as to why consumers should not buy from them , the other side – Brands are gravitating to online first because it helps them avoid expenses associated with brick-and-mortar, such as steep rents and high distribution costs, particularly with e-commerce making rapid gains in terms of customer acquisition.
UK highstreet women’s fashion retailer Dorothy Perkins entered the country through a tieup with Jabong.com. British department store chain John Lewis said a few months ago that whenever it comes to the country it will start with an e-commerce storefront.
Omni-channel is an initiative by brick and mortar retailers to better integrate their stores and e-commerce channels. So a retailer might support buy online, pick-up at store; or order online, deliver to home from a store; several other fulfillment paths are also possible. Some of the world’s largest retailers are turning their stores into mini distribution hubs . Instead of fulfilling Web orders from warehouses hundreds of miles from shoppers’ homes, companies including Wal-Mart, Best Buy and Gap are routing orders to stores nearby.
E commerce chain Amazon has tied up with Bharat Petroleum ‘s retail store brand In & Out for a store pick up service in Mumbai and Delhi to reach a wider audience. Some retail chains abroad have already adopted this service and is popularly being Known as ‘Clicks& Bricks’ or ‘Click to Collect’ & similar. This trend has also led online retailers redefine their consumer segments viz – With more people turning to online shopping for gifting purposes, last minute shoppers are being targeted and offered a store collect or home drop service. Retailer are also tapping customers (event professionals, corporate honchos, working women, older generation) who work long and odd hours and avoid shopping due to delivery issues. Sellers can now tap into these customer segments with the Store Pickup service.
As a result, omni-channel retail has become the focus as retail shifts from a product-centric mindset driven by product selection and inventory logistics, to a customer-centric experience that embraces a growing list of customer touch points. However omni-channel does create some annoying problems for retailers who are used to thriving in a simpler world. Yet embracing these new customer expectations can create opportunities for both offline and online retailers. ”The future of E-commerce in India is excellent as we expect the market size to grow rapidly to turnover of around 40,000 cr. in 2020. The market being multilayered and wide spread in India we are confident that both the channels will co-exist. The brick-and-mortar outlets in high street as well as malls have their own appeal and clientele. The young population, growing numbers of work force and improving economy because of stable government can fuel the growth.” says Akhil Jain, Creative Director, Madame
What will be the future- online or brick and mortar by Anand Ramanathan, Associate Director, KPMG in India.
Currently, the phenomenon of players opening brick-and-mortar stores, with express interest in enhancing customer experience, is being seen largely in segments such as home furnishings and baby care.
Even in mature markets, such as that of the United States’, such a trend is being witnessed in the apparel segment with players like Bonobos and Piperlime opening “guideshops” to enhance experience.
However, it is unlikely that brick & mortar would become the mainstay of online retailers. While omni channel retailing could emerge, a complete shift
from online to brick & mortar may not be envisaged. A lot of investments across areas such as warehousing & fulfillment, IT and/or manpower today is geared & customized to meet the growing online demand. They would certainly be leveraged to innovate other channels of reaching the consumer and enhancing his buying experience. Brick & mortar in that sense just one such channel among many such ways of enhancing customer experience. Franchising is another channel which could emerge as another option for online retailing companies. For example, categories such as white goods, furniture have a component of last mile delivery, installation and servicing as well. Online retailing companies in this space could explore franchising as an option to provide such services in the long-run.
While in the short run, players could target to strategically open select stores in targeted markets, growing consumer confidence, higher number of repeat visits and adoption of supplementary technology would lower the need for opening brick-and-mortar stores.
Some key trends that we foresee in the space include:
New product categories will proliferate – eg. Whitegoods, furniture
Opening up of FDI regulations will attract a lot of niche marketplaces
eCommerce in B2B can open, with signs of that coming from Walmart’s recent announcement of pilots in India.
Export focus is expected to increase. Categories such as Jewelry, Fashion & apparel, handicrafts are expected to become attractive categories for export focused online players.
“For such a connected consumer it is very important for brands to be consistent in their approach – omni channel allows this flexibility and consistency – importance is given to brand and not the channel. Your pricing , promotions , merchandise is independent of a channel. A consumer might try product online and can later shop for same product on mobile or web portal” says Peyush Bansal,CEO & Founder, Lenskart.com.
“It is both hard and expensive to get noticed online now, but if you spring up offline – even for a short time via a pop-up shop – shoppers will love the interaction and potentially share their experience by tweeting or instagramming an image, which can help drive interest and also sales” says Avnish Chhabria – CEO Stylista.com..
“FabFurnish’s offline stores are 5-10K sq ft concept stores – much smaller than typical furniture stores of 30-50K sq ft. We display a limited inventory at the store, but it’s good enough for consumers to get confidence on our quality and brand value to buy anything from us” says Vikram Chopra CEO & Co-founder of FabFurnish.com
“The online distribution increases our Brand Reach, gives us leads and moreover helps dole out discounts and offers and influence the online shoppers to buy more. Currently, our brick and mortar outlets, gives us more revenue due to its sheer awareness and visibility” says Ajay Chablani, Business Head, Planet Sports.