E-haw! Traditional retailers take to the internet


December 2, 2013

Vandana, The Week
Mumbai, December 2, 2013

Online buying might be in vogue these days, thanks to a growing tribe of youngsters shopping online. But there are old-schoolers, like Srikant Bahal, who do not believe in virtual shopping.
The 36-year-old human resources manager at a private firm loves his weekly rounds of malls. For Bahal, the touch-and-feel experience is paramount while shopping. “One cannot judge the quality of a product by just seeing it. Even though I buy movie and airline tickets online, when it comes to products, touching is believing for me,” he says.
However, when Titan started its online store this year, Bahal gave it a try. He went to a nearby Titan store and shortlisted some designs to gift his wife on her birthday. The designs were available online, and he got a discount, too. Also, with the online deal, he could avoid the hassle of shipping it to Tiruchirapalli district in Tamil Nadu, where his wife stays.

Bahal has now made it a habit of checking out products at stores and then clicking the “buy” button online.

Retailers in India are trying to catch customers through every means possible—online, offline, mobile and television. Multi-channel retailing is the buzzword. And traditional brick-and-mortar players such as Titan, Croma, Madura Retail, Fabindia and Vijay Sales have jumped on the e-wagon.

The growth potential, no doubt, is huge. A recent study by Delhi-based consultancy Technopak says the e-tail market is set to grow from $0.6 billion in 2012 to $76 billion by 2021.

Another major advantage of e-tailing is the wide geographical reach. Take, for example, electronics retailer Croma. Owned by Tata Sons, it is physically present only in 16 cities, with 95 stores. But Croma’s online store, just a year and a half old, covers 298 cities and towns. “Let customers decide which medium they are comfortable with, and we will try to be present there. Going online has opened India for us,” says Ajit Joshi, managing director and CEO, Infiniti Retail, which runs Croma stores.

Experts believe the trend will grow, courtesy real estate woes and high labour costs. Also, in comparison, the capital required to set up an e-tail venture is far less.

The biggest driving factor, however, is the increasing penetration of broadband and availability of browsing devices, including smartphones and tablets.

Alokedeep Singh, head of e-commerce, Titan Company, says sales have gone up month-on-month, and doubled since it started. For Croma, sales have gone up from Rs.30-40 lakh a week to about Rs.1 crore a week. Pizza chain Domino’s, too, gives a thumbs-up after its online launch.

The e-tailing market being already crowded with start-ups selling everything from toys to homes, traditional players are targeting customers who are particular about the touch-and-feel experience.

Like in Bahal’s case, the customer can check out a product at a store and then order it online. They can also choose unique products which are not available at stores. Plus, the web sites guide customers on products through videos and chats.

However, unlike a pure-play e-tailer, there will also be integration issues for brick-and-mortar retailers moving online.

“Physical retail requires the supply chain to handle merchandise in bulk coming in from suppliers and smaller bulk going out to stores. In the case of online retail, while the incoming shipments are in bulk, the outbound consignments are to individual consumers, who may also return the merchandise [if not satisfied],” says Devangshu Dutta, CEO, Third Eyesight, a retail consultancy. “This needs operating structures and organisational orientation, flexible and varied enough to handle the wide range of merchandise volumes.”

Experts say that multi-channel retailing as a concept has only recently started gaining prominence across the globe. This has been possible because of an advanced mobile app ecosystem and smartphone penetration going up. India will need some time to catch up, they say. “Multi-channel retailing will be limited by a lack of a supporting ecosystem,” says Ankur Bisen of Technopak. “Right now, 3G access is limited to certain areas. Broadband penetration has gone up, but quality of internet access remains poor. Unless this sector improves, full-fledged multi-channel retail will not be possible.”

The global trend, however, is encouraging. Some of the top e-tailers in the US, for instance, are brick-and-mortar players such as Macy’s, Walmart and Tesco.

The e-tale

* Online retailing or e-tailing in India is set to grow from $0.6 billion in 2012 to $76 billion by 2021

* Traditional brick-and-mortar retailers account for 93 per cent of the market, while corporatised brick-and-mortar retailers have a share of nearly 7 per cent

* E-tailing is set to grow from the current 0.12 per cent market share to 5.3 per cent by 2021, when there would be at least 180 million broadband users in the country

* The e-tail sector could create 1.45 million jobs in the next decade

* The total volume of Indian e-commerce, including financial and travel services, touched $10 billion in 2012

* Some of the top players are Flipkart, eBay India, Snapdeal, Myntra, Amazon India and Jabong

(Edited version; sourced from The Week .)