Pure Play E-com­merce Firms go Phys­i­cal to Woo Con­sumers

Images Retail - - CONTENTS - – By San­deep Ku­mar, Charu Lamba & Surabhi Khosla

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.

Go­ing Off­line

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

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