ONLINE TO OFFLINE: PURE PLAY E-COMMERCE FIRMS GO PHYSICAL TO WOO CONSUMERS
Pure Play E-commerce Firms go Physical to Woo Consumers
While international online giants such as Amazon, Warby Parker, Zappos and Bonobos have been opening stores for some time now, the shift towards physical retail has become more noticeable over the last few years, both in the world and in India
While international online giants such as Amazon, Warby Parker, Zappos and Bonobos have been opening stores for some time now, the shift towards physical has become more noticeable over the last few years – in the world and in India…
In the late 90s and early 2000s, the retail industry was all gung ho about going online. Retailers wanted to get connected, design and run innovative e-commerce portals. The idea of selling the product online and delivering it in no time was being considered as a decisive move in-order to succeed. Retailers realised that hopping onto the ‘e-commerce superhighway’ was the future. Everyone hoped to become the next amazon in their chosen fields.
Cut to today and India came into 2017 on the heels of demonetisation. A country that by and large depended on cash was forced to go online. And even as the digital payments space exploded, the business of e-commerce in the Indian sub-continent received its biggest boost ever. E-tailers grew significantly to tap the burgeoning online audience through offers and innovations including easy accessibility and affordability.
In India, Flipkart is at the top of the online game with the highest top-ofmind recall among consumers, Amazon has been closing the gap fast, and both companies are preparing to go to war with Alibaba, which is all set to tap the serious potential of the Indian market.
With so much happening in the online space, it comes as a surprise winds of change are breezing through the retail industry, pushing retailers towards physical stores. While international online giants such as amazon, Warby Parker, Zappos and Bonobos have been opening stores for some time now, the shift towards physical has become more noticeable over the last few years – in the world and in India.
The Indian Scenario
While the Internet may have penetrated the heart of India, the hearts of Indians (and their trust) still lies with the physical retailer. In fact, a recent AT Kearney Study states that 95 percent of all retail sales are captured by retailers with a brickand-mortar presence while two-thirds of consumers who purchase online use the store before or after the transaction.
Future Group CEO, Kishore Biyani, who is a firm believer in brick-andmortar retail, feels that there will be no competition between channels in the future since all mediums of sale will converge. By unveiling the 30-year vision titled as Retail 3.0 in 2017, Future Group would become Asia’s largest integrated consumer retailer by 2047 with revenue of in excess of ₹1 lakh crore.
Like Biyani, a number of online retailers are branching out into the traditional, turning towards physical retail in order to gain a share of the Indian brick-and-mortar pie, which is estimated to be ₹28 lakh crore by 2019.
What Research Says
A KPMG study titled ‘Global Retail Trends 2018’ states that by January 2019, 90 percent of all retail will still be done in physical stores. Iconic retail brands like Apple, Sephora and Costco continue to succeed, despite relying mainly on brickand-mortar stores.
As a consequence, new classes of retailers are emerging. There are retailers who started online and are moving to physical brick-and-mortar and others are merging ‘bricks and clicks.’ Retailers are seeking to understand their share of consumer spending, and how their consumers search, shop and buy in order to devise new retail models. Simply put, as per the KPMG study, stores that are doing well offer a customer experience that meets or exceeds customer expectations. Leading retailers take advantage of their physical spaces to maximise experience per square foot and the real-life interactions customers have there.
Vend’s Retail Trends and Predictions for 2018 says that technology will fuel – not curb – the rise of brick-andmortar retail. Thanks to modern point of sale and retail management systems, it’s never been easier to open a retail business. The study also adds that mobile applications and cloud-based solutions are enabling merchants to quickly set up shop with a minimal investment.
Roughly 70 percent shoppers research online before they hit a physical store, and 1 out of every 4 consumers pulls out their mobile phone while in a store to research the products they see in store. Offline retail serves to give a consumer instant gratification, and a level of variety and novelty that they don’t find online.
According to Timetrade’s State of Retail Report, 85 percent of consumers prefer to shop in physical stores because they like to see, touch and test products in person before buying them. The report also reveals that one third of customers like to receive product advice from sales associates, and a whopping 90 percent of shoppers are likely to buy after receiving help from knowledgeable staff in-store.
According to Lsretail, by moving offline, online retailers use physical stores to create an immersive brand experience. Their showrooms and concept stores are first and foremost places where customers can be immersed in the brand culture. These retailers know it: in-store atmosphere is a key differentiator for brands, and if done right it can be a great way to create lasting impressions – and returning customers. The report also says that smart online retailers are using physical stores as part of their supply chain, to cut costs of inventory management and speed up delivery. By using the shops as warehouses and fulfillment centers, online retailers can improve their distribution across the territory, and make product shipment faster and more effective across more geographical areas.
Also, when retailers open physical stores, the traffic to their e-commerce store increases dramatically, so do the numbers of people mentioning the brand and searching for it online, leading to better returns.
As per a Google-at Kearney India Report, selling online is a difficult task and especially for a new brand. The newly-launched brand lacks instant gratification, as well as consumer trust for shoppers are uncertain how capable the delivery of the product – or the genuineness of the product is.
With all these studies at hand, one wonders why traditional retail is dying. The only reason traditional brick-and-mortar stores and malls are shutting shop is because many aren’t modernising their business models. In order to stay relevant, physical retailers need to connect with their customers, enhance consumer experience to a degree that the shopper should expect the unexpected when he walks into a store.
As a result, going from an online business model to bringing offline seriously into their strategy (Offline to Online – O2O), is becoming the new norm for e-tailers. On O2O approach is fast becoming the new norm for running a successful retail business.
Indian E-commerce Brands with Physical Stores