In The Time Of Dot­com

VM&RD - - RETAIL TALK -

The In­dian re­tail in­dus­try is in a tran­si­tory phase with on­line re­tail business com­ing up in a ma­jor way. Against this back­drop, VM&RD talks to

on the In­dian re­tail sce­nario and the way for­ward.

Vi­neesh Chadha Man­ag­ing Part­ner, Au­men­tis Con­sult­ing

lead­ing to lower sales and high cost of in­vest­ments and op­er­a­tions. In other coun­tries sales are higher as per unit re­al­iza­tions and vol­umes are more. This leads to higher pro­duc­tiv­ity of as­sets even if spends on capex and opex are the same.

How se­verely is this sce­nario af­fect­ing phys­i­cal re­tail stores?

E-tail­ing is a new sales chan­nel and many cus­tomers are try­ing it out. From their side, e-tail­ers have sig­nif­i­cantly re­duced bar­ri­ers to trial through in­no­va­tive and tra­di­tional per­sua­sion meth­ods. In­no­va­tive steps like COD, free 30 days trial, free re­turns, ef­fi­cient de­liv­ery and re­turns ca­pa­bil­ity, apps for mobiles, re­spon­sive cus­tomer ser­vice, etc. have served to at­tract cus­tomers. In ad­di­tion, E-tail­ers have also fo­cused on the tra­di­tional meth­ods of at­tract­ing cus­tomers like wide va­ri­ety of mer­chan­dise, ad­ver­tis­ing in mass me­dia and dis­counts. All th­ese steps have re­sulted in good trac­tion for the e-tail­ers and they are see­ing their num­bers grow month on month and e-tail­ers are tak­ing away wal­let share from the phys­i­cal re­tail­ers. Un­for­tu­nately, for phys­i­cal re­tail­ers the rise of e-tail­ers has hap­pened at a time when the In­dian econ­omy has been see­ing a sharp slow down. They have not been able to get new cus­tomers to re­place their old cus­tomers who are mi­grat­ing to e-tail­ers. In this sit­u­a­tion, where the capex and opex costs for phys­i­cal re­tail­ers are al­ready high, the re­duc­ing sale is hurt­ing their prof­itabil­ity.

Is the value of in-store ex­pe­ri­ence re­duc­ing? Is price the only ba­sis of shop­ping to­day?

When some­thing is new, ev­ery­one wants to try it es­pe­cially if it is a bet­ter price. It is up to the phys­i­cal stores to com­pete with on­line pric­ing. Phys­i­cal stores thrive on the ba­sis of their strengths like lo­ca­tion, pos­si­bil­ity of touch­ing and try­ing mer­chan­dise, per­son­al­ized ser­vice, brand fa­mil­iar­ity, etc.. Re­tail­ers need to lever­age those plus points in a way that the im­por­tance of price goes down. This is where the hy­brid store con­cept comes in. To give ex­am­ples, Bono­bos, Macy’s, Nord­storm in USA, John Lewis, Next, House of Frazer, River Is­land in UK have en­abled a deep e-com­merce in­te­gra­tion within their phys­i­cal stores. In such a model, th­ese stores en­cour­age you to look at on­line cat­a­logs while still in the store and the staff is also trained to of­fer a seam­less om­nichan­nel ex­pe­ri­ence . In this model an en­hanced in-store ex­pe­ri­ence re­sults in re­tain­ing the ex­ist­ing cus­tomer and higher sales.

With e-tail­ers of­fer­ing low prices, how do you tackle the con­cept of show­room­ing?

Show­room­ing like e-tail­ing is a phe­nom­e­non that is here to stay. Cus­tomers will try to max­i­mize their value by get­ting com­fort­able with prod­uct look and feel and fea­tures in phys­i­cal stores and then search­ing for the best prices on­line. Here, brands have a big­ger role to play. It is up to brands to de­cide what prod­ucts they choose to sell on­line vs. off­line. If the brands come up with a strat­egy that is on­line only or off­line only for cer­tain prod­ucts, they might be able to bring in a bal­ance in their sales. Some brands are be­gin­ning to follow such a strat­egy to pro­tect the phys­i­cal dis­tri­bu­tion net­work they have built. Pre­vent­ing leak­age from one chan­nel to another will be crit­i­cal.

Tell us about the Dot­com stores?

Bono­bos is a great ex­am­ple of a Dot­com store. They opened stores with an area of 1000 sq ft stores which they called guide shops. They have well-trained staff which in­tro­duces you to the brand, ex­plains the mer­chan­dise de­tails and makes sure you fig­ure out your right size and fit. Once the mer­chan­dise se­lec­tion is done on the Bono­bos e-tail­ing site (re­fer­ring to the sam­ples avail­able in the store if re­quired), the staff places your or­der on­line from the store. All your size and fit de­tails are stored with them for fu­ture ref­er­ence. Your or­der is de­liv­ered at your ad­dress and next time on­wards you might not have to visit the store at all.

How will th­ese preva­lent in In­dia?

prac­tices be­come

In­dian re­tail­ers will have to invest in th­ese new business mod­els. Not many peo­ple are will­ing to ac­cept the dra­matic change

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