In The Time Of Dotcom
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?
Indian retailers will have to invest in these new business models. Not many people are willing to accept the dramatic change