Can offline retailers in India compete with Amazon, Flipkart and Snapdeal?

Flipkart’s Big Billion Day Sale has left us with a bitter-sour taste and a heap load of unanswered questions. From marked up prices and out of stock woes to selling some products really cheap and annoying big brand , it even compelled founders and ex-Amazon employees Sachin Bansal and Binny Bansal to subsequently push out an apology email to its every customer. Clearly, the past few days have sparked a new fight over e-tail and retail businesses. Take a look back at the past 2-3 years and you will see how the e-commerce industry has proliferated. An increasing number of Indians are ready to shed off the importance given to touch-and-feel and are ready to buy a product at the comfort of their couch. Moreover, consumers are more open to financial transactions over the Internet. On the other hand, online retailers are involved in some powerful number crunching to attract audiences. Firstly, there is a sale for every occasion, be it Diwali, Dussehra, monsoon or a special 12-12-12 date that appears once in 89 years on your calendar. These heavy discounts have begun to anger brands as well as offline retailers. In spite of all the accusations, there’s been an increase in the number of people now preferring online sales. For instance, on October 6, Flipkart managed $100 million of GMV (gross merchandise value) sales in just 10 hours. Likewise, Snapdeal too claims Rs 1 crore a minute. [caption id=“attachment_219622” align=“aligncenter” width=“640”] Image: Reuters[/caption] Does this mean it’s time mortar and brick stores get ready for a future that is all about online shopping? Bharatbhai, a retailer from Mumbai without any online presence tells us, “Yes, online retailers are affecting our sale, but what can we do. Right now things are sustainable, but if the future is online then we will have to do something about it. They have investors and big management.” However, he believes that people looking for cheap products opt for online retailers and those who prefer after sales service wouldn’t come to shops that offer them all these services even after buying the product. “They (online retailers) don’t offer after sales service and feedback is generally bad.” Some also believe that e-retailers should be answerable to a committee about how they manage to price their devices so low. Piyush Sharma, a retailer from Sarojini Nagar, New Delhi tells us, “Yes, it (online sales) has affected the market badly. I think some legal action should be taken against these people. I don’t understand how they manage to sell a device so cheap. For instance, they were selling a 32-inch LED TV (refused to mention the brand) for Rs 15,000, whose buying price is Rs 24,000. There should be someone asking them from where they source these products and how do they manage such big losses. The companies along with the government should set up a team to ask them about all of this.” However, Sharma has another take about going online. “Right now, we can’t do much but are hoping some legal action is taken against these online retailers. We can only offer awareness to stop this. Like tell our old customers and supply chain about it. Nothing much can be done by us. Whether the future is online or not can be decided only once some decision is taken about the pricing scheme of these companies,” he added. This isn’t surprising as the retail format has changed over the years and people are now moving from large format stores and malls to the digital platform. The benefits from digital formats don’t merely stop at discounts and home delivery. It has now enabled users from the small towns to access same products you will find in metros and has expanded the horizon for businesses. Kunal Bahl, Snapdeal CEO, told The Economic Times , “E-commerce is not just about merchants and consumers. It is about enabling businesses that are experiencing tremendous growth. A case in point is the growth of logistics and courier companies, which are on track to employ lakhs of people who are delivering products at home.” Citing Alibaba’s growth in China, he also talks about how it could help expand and leverage on the infrastructure created by the Indian government. “In China, we have already witnessed the magic Alibaba has created with this regard, becoming the largest customer for the state owned China Post. It will only be a matter of time when digital commerce companies contribute a significant portion of India Post’s shipping volumes and leveraging the infrastructure the government has created,” he adds. [caption id=“attachment_228438” align=“aligncenter” width=“640”] Micromax mobiles are seen in a store. Image: Reuters[/caption] Now, online retailers do have several advantages, but everything isn’t hunky dory either. J Suresh, MD, Arvind Lifestyle Brands told The Economic Times, “Any business selling at below cost is unsustainable and I am sure the online retailers will quickly realize this – and stop the practice of selling products at predatory prices. Apart from building unsustainable business models, most of the online retailers sell brands. One has to be conscious of respecting and brand and protecting the integrity of the brand.” However, Suresh believes that the only way brick and mortar retailers will stay relevant and continue to be successful in the future is by developing omni-channel capabilities. “In the US, out of the top 20 retailers selling online, the majority of them are omni channel retailers who started primarily as brick and mortar retailers. There is clearly a lesson to be learnt from this. Markets with high level of online and omni-channel penetration, the online channel contributes a maximum of 15 percent to the retail market. As India’s retail market is geared to scale up from $650 million to $1 trillion by 2020, the opportunity is great for all types of players in the retail industry,” he adds. So, are we late? Not really!  In fact, if we look at, a similar transformation took place in the US. Other markets have also followed a similar trend wherein brick and mortar retailers slowly transformed themselves into omni-channel retailers. There are several sites that serve as a marketplace and list out offline retailers or the device is directly shipped via an offline retailer. For instance, eBay serves as a marketplace for several retailers. In India, we can slowly yet steadily see this change as big as well as small stores are trying to make an online presence, be it a full-fledged website or simply a Facebook page.