Online Sellers, Shops Slug it Out With Discounts


October 6, 2014

Avinash Bhat, The New Indian Express

Bangalore, 6 October 2014

As Diwali approaches, brick-and-mortar retailers are scrambling to compete with online websites offering hefty discounts to woo shoppers.

Offers like one-plus-one and 50% discounts are becoming the norm across shops.

This week, major online retailers like Snapdeal, Flipkart, Jabong and Amazon announced campaigns to target festival shoppers. Realising the need to compete, physical retailers are also offering huge discounts.

The online market in India has been growing at a dizzying pace, and attracting huge investments. In 2014 alone, Flipkart raised $1 billion in funds while Amazon announced plans to invest $2 billion in business expansion. Snapdeal, another online retailer, attracted a sizeable investment by industry magnate Ratan Tata, who has put in an undisclosed amount into the Delhi-based company.

According to a study by research firm Crisil in February this year, the online retail sector is estimated to grow at 50-55% for the next three years. Revenues have already touched Rs. 13,900 crore in 2012-13, and are likely to grow further as the online market share in the overall retail space still remains small.

This growth has not escaped the attention of brick-and-mortar sellers, who are being compelled to ramp up their online presence. Trader associations have vowed not to supply goods to online retailers who sell below the market price. This has led to online retailers saying that they are mere marketplaces where the prices are decided by other sellers.

As murky as the situation might be, consumers are the clear winners in the entire deal.

“I have been buying products online for a long time now. They offer door delivery and in case I do not like the product, I can get it returned without having to go to a store and wait in line. This is much simpler,” says Arvind T, an HR professional in the city.

“The offers are sometimes better or at least as good as the stores when you factor in the delivery and the ease of shopping online,” says Siddharth R, an IT professional.

It is this ease of shopping online that is adversely affecting the more traditional methods of shopping, feels Devangshu Dutta, CEO of Third Eyesight, a retail consultancy.

“Offline retailers have been investing in infrastructure since 2000, and there is high capital involved. As long as they are able to respond to these (online) offers, they do not have to match the discounts as they have a very large segment of touch and feel buyers,” he says.

However, the writing on the wall is clear for physical stores, Dutta feels.

“They need to match the service offered by the online sites. With assured service backup with online retailers, customers will go for the lowest priced products and a difference of even `200-400 could be a deal breaker for some,” he says.

Diwali sales under way

(Published in New Indian Express.)