 "Biyani has learnt from Amazon vs Walmart: E-tail won't kill stores, but its best to hedge")
The fact that Walmart leads Amazon by a country mile in the USA – with a turnover of US $ 473 billion as compared to just $60 billion recorded by the virtual shoppping place – is perhaps a harbinger of things to come in India given the fact that both the versions of retail have taken firm roots in the US and therefore can safely be used as benchmarks to go by.
Walmart has 4900 stores in the US and drives a hard bargain with its suppliers so as to be able to live up to its claim of selling the cheapest, though on occasions that claim has been busted. My son, for example, was looking for a cord for his GPS that was available for $25 at Walmart. He humbled the lion in its own den, as it were, by finding out then and there the comparable price on Amazon – its quotation was just US $ 10 with delivery four days later but also possible to get it the next day for an additional $5. Not surprisingly, he plumped for Amazon.
The marketplace model followed by Amazon perhaps gives it this advantage sometimes. Walmart stocks various items itself by purchasing them, whereas Amazon just offers its formidable portal for various traders registered with it to hawk their wares. In a country where there are apps galore, including the ones to find out comparable prices in the vicinity, Amazon traders are fleet-footed enough to cut their prices to take on Walmart by keeping their ears to the ground and employing informers who just do the rounds of Walmart on a price-spying mission.
However, it would be wrong to conclude from this isolated instance that online buying is the best for consumers. Walmart can beat its rival Amazon hollow when it comes to fast moving consumer goods (FMCG). Nevertheless, Walmart is ratcheting up its own online sale platform and is not allowing the grass to grow under its feet.
Kishore Biyani, the promoter of the Future group, voiced his skepticism the other day about online retail on the grounds that none of them in India enjoyed any gross margins. He could well have added the lack of touch and feel factor in online purchase, sizes going awry, the pitfalls of the cash-on-delivery model for good measure to make his case against online retail. The truth is the mystique surrounding online retail has still not worn off.
Commentators wonder about the sustainability of its business model and the government, notably the Karnataka government, is skeptical whether the market place model indeed does not involve purchase by Amazon in the first place. But despite this all-round cynicism and awe, online retail is taking roots in India as well. People like door delivery, of even items like clothes and footwear despite the lingerin doubt that the delivery might pinch or turn out to be outsized. The market place model suits manufacturers who are unable to build their own warehouses and unable to put up a distribution network in place.
Biyani, however, is right. Online portals just provide technology to bag orders but isn’t that marketing all about? That he was not being completely dismissive about online retail was obvious very soon — he met Amazon CEO Jeff Bezos who was in India checking the immense potential in e-commerce for the days ahead. Biyani too knows this which is why he reportedly discussed selling Future Group proprietary brands through Amazon India and
it is better to have one foot each in two potentially conflicting business models.
Walmart with its immense storage capacity is better equipped to take on Amazon in the US. There is no reason why retail bigwigs in India should not take a cue from Walmart. After online shopping does not mean things emerge out of thin air. All goods have to emerge out of bricks and mortar stores. Stores are needed by both Walmart and Amazon. Walmart in the days to come would perhaps be able to prevail upon its suppliers to be flexible with their prices to take on the nimble footed online sellers.
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