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May 5, 2016
Viveat Susan Pinto, Business Standard
However, when Biyani, 54, laid his hands on the
Rocket-Internet-promoted company last month, it did come as a surprise.
The Marwari businessman has been a fierce critic of the e-commerce
business model in India, saying it is designed to lure consumers with
discounts with little focus on profits. He had told Business Standard
earlier that he was waiting for the bubble to burst before he would
make his moves.
That moment appears to have arrived. Fabfurnish
is his first acquisition but more such deals could be in the offing. “I
am not closed to the idea,” he says. “I will do it selectively and
ensure our investments make money,” he adds.
It is clear the
lines between physical and virtual shopping are blurring for him. In a
press conference on May 4, he said he plans to merge the group’s home
furnishings business under HomeTown with Fabfurnish and subsequently
de-merge it from flagship Future Retail.
The goal is to unlock
value and make his home furnishings business a stronger enterprise in
the face of increased competition. Once the online and offline arms are
merged, HomeTown is likely to reach a turnover of Rs 1,000 crore within
a year. It closed the last financial year with revenues of around Rs
750 crore.
The driving force
Biyani’s
hybrid business model, also called omni-channel retail in industry
parlance, is a compulsion, say analysts. With consumers today spread
far and wide, brick-and-mortar retailers have been left with no option
but to add an online leg to their offline operations in a bid to reach
as many customers as possible, and quickly.
Biyani has been at
work on an omni-channel presence for a year now, trying to create a
seamless and consistent brand experience across his group’s retail
channels: bigbazaardirect, futurebazaar.com and offine stores. Other
retailers, including Reliance Retail, Aditya Birla Retail and Shoppers
Stop, have also been working on creating an omni-channel presence in
recent months.
“The endeavour
is to reach more consumer touchpoints and ensure you are there while
the action is on. The ultimate objective is customer acquisition. That
will mean that you have to go where he or she is,” says Devangshu
Dutta, chief executive, Third Eyesight, a consultancy firm.
A
recent study by the Retailers Association of India and Mumbai-based
data analytics firm Hansa Cequity says that nearly 74 per cent Indians
shop across all channels including neighbourhood stores, modern trade
outlets and online platforms.
The study also notes that a
significant number of these consumers still prefer to touch and feel
products before buying, implying therefore that an online-only model is
not enough.
Domestic e-tailers have picked up this cue. The top
three e-commerce majors -Flipkart, Snapdeal and Amazon – have all gone
offline in the last six to eight months to ensure the “touch and feel”
experience is provided to consumers.
Flipkart, for instance, has
tied-up with brick-and-mortar retailer Spice Hotspot to provide access
to its exclusive range of phones offline. Its fashion arm Myntra is in
advanced talks to acquire brick-and-mortar chain Forever 21, which will
allow it to stock its online catalogue offline.
The same goes
for rival Snapdeal, which has initiated tie-ups with The Mobile Store
and Shoppers Stop for mobiles and apparel, respectively. Amazon, too,
is tying up with small retailers across the country in a bid to allow
consumers with no internet access to shop online in these outlets. It
is also setting up Amazon-branded stores offline.
Additionally,
the top three e-tailers have pick-up stores offline where consumers
who’ve purchased products online can get delivery of their goods.
Dutta
says the online-offline retail marriage follows global trends.
“E-tailers abroad such as Amazon, Birchbox and Bonobos in the US,
Spartoo in France, Astley Clarke in the UK have all opened physical
retail stores in recent years. This completes the picture in a sense
and plugs gaps if any,” he says.
Social media to retail
Hybrid
business models are not restricted to retail alone. Social media giant
Facebook recently entered hyper-local services in India, offering
everything from medical and repair to business and personal services.
Apart from letting users to browse for these services, the initiative
also allows them to leave reviews so that other consumers can make the
right choice.
Tech giant Google, too, is on a similar adventure.
In recent years, it has ventured into making wearable tech devices,
mobile phones and is now piloting driver-less cars. This even as it
strengthens its presence online with a suite of services from basic
search to online advertising, email, chat, browsing and software for
phones.
Harish HV, partner (India leadership team), Grant
Thornton India, says that hybrid business models for these companies is
a way to ring-fence themselves from competition by marking their
presence in virtually every space.
This online-offline merger,
he says, will mean that these firms will get stronger as they enter new
areas. The world is indeed shrinking.
(Published in Business Standard)