By Ritika Kapoor
Globally, annual online sales have exceeded USD1 trillion and Asia is touted to become the largest e-commerce market in the world
A retail revolution is in the making. Evolving integrated e-commerce business models are materialising in a prolific manner in the e-commerce space. Retail is becoming confusing for traditional shops. In the past, people either tended to shop online with home delivery or shop in-store with immediate collection. But this pattern is now more complicated: people shop in-store for delivery at home or shop online for collection in-store or for collection at a petrol station or at another branch of the same store, etc.
Retailers are aiming to bring the offline shopping experience to the online marketplace. This requires seamless integration between front end and back end operations and processes. Online retailers are looking to reduce the time between purchase and final delivery of the product. Furthermore, bricks-and-mortar retailers are aiming to provide an enhanced shopping experience to their customers through their online portals
A business cannot be run in isolation. There has to be continuous realignment of the business model in order to achieve customer satisfaction. The customer is still (and always will be) the head of the market, the business and the operation and is the centre of everything we do in our businesses.
Retailers are aiming to bring the offline shopping experience to the online marketplace. This requires seamless integration between front-end and back-end operations and processes. Online retailers are looking to reduce the time between purchase and final delivery of the product. Bricks-and-mortar retailers are aiming to provide an enhanced shopping experience to their customers through their online portals. For example, Swedish home products store IKEA has designed an app that enables consumers to visualise how the displayed furniture will look in their living rooms.
On the one hand, there is much eagerness from e-commerce companies to develop hybrid business models that include offline retail in their overall business models, while on the other hand, small- and medium-sized retail businesses in particular look to these e-commerce firms as alternative revenue models thanks to the aggressive marketing efforts and reach of these websites.
If the news is to be believed, Big Bazaar will launch an app that will offer a pizza delivery-type grocery supply service that will bring daily essentials and produce to customers’ doorsteps within 30 minutes, beginning in the country’s financial capital, Mumbai.
Two things are worrying traditional retailers such as Biyani: online retailers are commanding several multiples of offline retailers’ valuation. This means the valuation that e-commerce companies are targeting are fairly larger than the business models of offline stores brought together.
More importantly, online retail’s market share is approaching equality with that of offline retail.
By acknowledging that offline retail is the largest source of shopping for consumers to date, such retail outlets will not be easily overshadowed by glossy e-commerce companies.
So how do e-commerce firms ultimately develop a robust ecosystem with offline stores that offer varied choices and enhanced shopping experiences for the end consumers?
Let us look at some developments of these e-commerce companies. Amazon very recently introduced retail locations for their company, making these the pickup and exchange points for Amazon. This, they say, is ‘India Learning’ for Amazon. Instead of developing their own warehouses, which would entail significant investment from Amazon, such e-commerce companies are acting intelligently. This is indeed a win–win situation at both the ends of the chain, since the online–offline retail battle has reached a tipping point in India.
There is no denying that e-commerce firms are more aggressive than their offline counterparts. They are more marketing-driven, grab more attention and offer far more variety to consumers, sometimes at lower prices than those of retail points.
On the other hand, e-commerce companies are facing difficulties regarding logistics, warehousing and delivery, primarily because the business models of these websites are more inclined towards marketing and promotions than these other significant contributors to retail success. Every e-commerce company is often criticised by consumers regarding delivery bottlenecks, delayed shipments and suchlike.
What would a mutually beneficial agreement for both sides consist of? This author predicts that the retail segment would have to co-exist between the two selling forces. Offline would remain the most trusted way of shopping for consumers. However, the necessary volumes could only be achieved when working in tandem with online sales forces that act as an additional volume sources for offline retailers. At the same time, online would have to bring offline to the table and work through any problems.
Going forward, investing in enhancing user experiences is likely to remain a top priority, followed by investing in developing mobile and commerce platforms. Investing in enhancing user experiences is seen as a significant opportunity for obtaining additional revenue. Merchants are also investing in rewards and loyalty programmes to attract and retain customers.
With regards to the organic market in particular, when comparing online and offline B2C organic retail, offline remains superior to online. This is due to the significant demand for organic fresh vegetables, dairy products, bread, etc. There are very few e-commerce firms that have been able to successfully adapt these products to their catalogues and maintain efficient delivery at the same time.
Famous e-tailers such as Kiddicare, a British internet based baby specialist retailer, have broadened their selling tactics by opening multiple retail locations in order to supplement their online shopping experience. While this is the same basic integration that we saw here in the organic industry with Morarka Foods Private Limited, there are other emerging hybrids that also provide numerous options to replace actually venturing into offline retail.
At Organic Shop, an e-commerce organisation that offers wide range of organics to online consumers, the company is now venturing into connecting all of its offline stores in India to the end consumers via a mobile platform. This is the benchmark in technological advancements for organic e-commerce firms in India.
Planned investments in formulating mobile platforms are likely to increase significantly in the coming years. Retailers without an online sales channel are looking to invest in developing their e-commerce platforms and integrating them with their offline sales channels.
Furthermore, major e-commerce firms such as Amazon, Flipkart and Alibaba have already ventured into the process of maintaining the fine balance between online and offline retail, and this will slowly become the norm of the industry, thereby creating entry filters into the industry due to these complex industry demands.
This article appeared in the July 2015 issue of Pure & Eco India