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Brick-and-mortar retailers partnering E-commerce players for targeting net-savvy consumers

The Economic Times

Mumbai, 13 November 2014

Several brick-and-mortar retailers are forging exclusive partnerships with e-commerce marketplaces including Amazon, Flipkart and Snapdeal to target the growing base of net-savvy consumers, digressing from their earlier strategy of considering online players as rivals over deep discounting.

Dubai-based retail major Lifestyle International on Thursday entered into an exclusive partnership with Flipkart to sell goods from its value fashion format, Max Retail. And Max is just one of a clutch of brand that made similar deals – Future Group with Amazon, Tata-owned electronics chain Croma with Snapdeal, Amazon and Ebay, FabIndia’s partnership with Myntra and Viveks with Ebay – have all partnered online companies in the last few months.

"Apart from big sales potential, the biggest reason to go online is to target the millennial customers or those below 22 years old, who would first venture into an online store for shopping before hitting out at physical stores," said Lifestyle International executive director (Max Retail division) Vasanth Kumar. Max is targeting nearly 5-6% of its sales through Flipkart’s collaboration.

Nearly 70-75% of e-commerce transactions are being driven by the online marketplaces like Amazon, Flipkart, Snapdeal and Ebay in India. While online sales accounts for nearly 4% of the overall apparel market, it is as high as 15% for smartphones and between 5-10% for flat panel televisions, digital cameras and personal care gadgets.

Hence, experts feel that there is a need for such ‘co-opetition’ where companies engage in both competition as well as co-operation.

Retail consultancy Third Eyesight’s chief executive Devangshu Dutta said offline retailers have now started to acknowledge that online marketplaces are a part of life and it can add bandwidth to their sales. "For e-commerce companies, they need such brands to add critical mass and be trusted as a marketplace," he said.

At the same time, retailers are also safeguarding that merchandise aren’t deep discounted to en extent where it either erodes brand equity or bottom-line. For instance, Croma and Max Retail has mandated strict pricing norms with the marketplaces with whom it tied up. And despite that, Croma clocked a sizeable Rs 30 crore from online mega sale this Diwali.

"The marketplaces are like virtual mall with huge customer traffic which is a huge opportunity," said Ajit Joshi, MD & CEO at Infiniti Retail, which owns the Croma chain. "We don’t see online as a threat but another channel to reach out to customers," he said.

Joshi said Croma has a preferred relationship with Snapdeal and will partner with companies to launch exclusive models like it recently did with a Karbonn smartphone.

Ditto in the case of Max that has mandated Flipkart not to offer more than 10% discount. Though experts feel that after initial exclusive tie-ups, many brands could explore other marketplaces to magnify sales from online channel. "There is usually an exclusivity period for such deals that doesn’t go beyond many months as retailers seek other avenues," added Dutta.

Some retailers however, feel that their partnership could be stretched beyond just listing their wares on portals.

"The deal is deeper than just transactional involvement with Amazon. We are exploring several synergies in data sharing, co-branding, cross-promotion and distribution network sharing through the partnership," Future Group founder Kishore Biyani told ET last month.

(Published in The Economic Times)

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