admin
October 7, 2023
Gargi Sarkar, Inc42
7 Oct 2023
The Indian ecommerce industry anticipates a stronger festive season compared to last year with over 20% sales growth, driven by the D2C segment’s expected 40% QoQ surge
The overlap of festive celebrations and wedding seasons, particularly with a later Diwali this year, is predicted to further stimulate demand
Despite the evident purchase intent, retailers are preparing for a possibly neutral festive season as economic challenges may hit consumers’ spending
As the festive season rings in its 10th anniversary in the ecommerce realm, giants like Flipkart and Amazon are prepping for their annual mega sales, set to begin on October 8. This year, however, they will face tough competition from newer players, including Meesho, which carved out a significant slice of the festive sales pie last year.
With new entrants like Tata Neu and JioMart, and fashion and lifestyle ecommerce players such as Myntra, Nykaa, and AJIO, the stage seems to be set for a fierce showdown.
For these ecommerce platforms, the annual festive sales aren’t merely about revenue generation; they’re pivotal customer engagement and acquisition opportunities. These events lure consumers with compelling discounts and promotions, giving a considerable boost to their yearly sales targets.
Through strategic marketing blitzes, they also aim to amplify brand recognition and glean insights into shopper preferences. Following last year’s subdued festivities, market analysts have predicted a revival in shoppers’ enthusiasm this year, forecasting a robust 20% surge in sales.
The festive season this year is set to witness a remarkable upswing in the ecommerce sector’s gross merchandise value (GMV). According to consulting firm Redseer, the GMV is anticipated to see an 18-20% surge, amounting to INR 90,000 Cr, a leap from INR 76,000 Cr in the previous year.
“The preceding quarter (April to June) witnessed a subdued performance in both offline and online retail sectors, primarily due to persistent inflationary pressures. However, the scenario is expected to undergo a transformation during the upcoming festive season. Festive periods tend to unleash latent consumer demand, prompting individuals to open their wallets more liberally,” Ashish Dhir, EVP (consumer and retail) of business consulting and services firm 1Lattice said.
There is a growing focus on electronics and appliances as traditional categories of interest. However, fashion and beauty are also emerging as important categories. The emergence of luxury goods is another important segment, which will likely make waves during the upcoming festive sales.
The ecommerce industry anticipates a stronger festive season compared to last year with over 20% sales growth, driven by the D2C segment’s expected 40% quarter-over-quarter (Q0Q) surge. However, average user spending is likely to remain flat.
Further, Tier III cities and beyond are becoming key revenue contributors, particularly in the fashion and beauty categories. Although consumer sentiment has improved, retailers are wary that buyers could maintain a cautious stance when it comes to spending lavishly.
While there is much to look forward to, let’s delve deeper into what shoppers and retailers can expect from this milestone year, which marks 10 years of festive sales fervour in the Indian ecommerce space.
D2C Brands To Lead The Charge
Notably, the Indian market is projected to have 500 Mn+ online shoppers by 2030, growing at 12% compound annual growth rate from 205 Mn in 2022, according to a 2020 report.
As far as the upcoming quarter is concerned, industry experts forecast that the homegrown ecommerce sector will likely see impressive growth of over 20%.
Playing a pivotal role in this escalation will be the D2C segment, predicted to grow more than 40% QoQ from October to December. Established ecommerce giants like Amazon, Flipkart and Meesho could also be looking at an approximate 30% uptick in sales, according to experts.
Tracing back to the inaugural ecommerce festive sales in 2014, the industry’s GMV was recorded at INR 27,000 Cr. Fast forward to 2023, the GMV is poised to touch an impressive INR 5,25,000 Cr, a nearly 20-fold increase, per a RedSeer report.
Festive Ecommerce OffersAverage User Spending Could Remain Muted
Despite the rise in GMV in 2022 compared to 2021, average expenditure per shopper held steady at INR 5,200 during the initial four days of the festive season sale, according to a RedSeer report.
This year doesn’t seem poised for a significant spike in individual user spending either. However, there is a silver lining in the form of rising consumer activity in smaller towns and cities. On the flip side, elevated living costs in metropolises like Bengaluru and Mumbai could dent extravagant consumer spending, noted Devangshu Dutta, the founder and CEO of Third Eyesight, a boutique management consulting firm.
Yet, with the growing online shopper populace in these cities, there’s potential for the average order value (AoV) to reduce as more users flock online to shop.
“As the online shopping base continues to expand, the average spending per user naturally tends to decrease. This phenomenon occurs as more people venture into ecommerce, with platforms like Amazon and Flipkart extending their reach to cover a broader audience. However, it’s essential to note that this drop in the average ticket size is a common trend when the customer base expands,” Sangeeta Verma, director of digiCart India said.
Consumers Sentiment Positive, But Retailers Remain Realistic
With the waning impact of inflation, India is witnessing a positive shift in consumer sentiment from the previous year. Unlike several developed nations wrestling with inflation, India has remained largely untouched by its dual impact on demand and supply, experts suggest.
For example, Flipkart delivered strong gross merchandise value (GMV) and sales growth in the company’s second quarter of the financial year 2023-24 (FY24), Walmart’s chief financial officer John David Rainey said during an earnings call.
“In India, the distinguishing factor in terms of festive demand is that it’s not merely brand-driven; consumers here are eager to spend, and the purchase intent is notably high. Unlike some developed economies grappling with inflationary concerns, both the demand and supply sides in India have not seen any impact of inflation. The consumer demand continues to stay buoyant,” Chirag Tanjeja, cofounder and CEO of GoKwik said.
The overlap of festive celebrations and wedding seasons, particularly with a later Diwali this year, is predicted to further stimulate demand, 1Lattice’s Dhir added.
Nevertheless, a note of caution reverberates among retailers. Despite the evident purchase intent, retailers are preparing for a possibly neutral festive season as economic challenges may hit consumers’ spending.
However, a recent study conducted by Nielsen Media India and commissioned by Amazon India says otherwise. According to the report, 81% of consumers are enthusiastic about shopping during the upcoming festive season. More importantly, this positive sentiment towards online shopping is not limited to metropolitan areas but Tier II and III cities and towns.
Ecommerce Platforms Ramp Up Efforts To Woo Sellers
In this year’s festive season, a standout trend is ecommerce giants’ intensified drive to court and captivate sellers with multiple strategic offerings like enticing commission rates, equipping them with advanced selling tools, enhancing the overall selling experience, and broadening their outreach.
Recently, ecommerce heavyweight Meesho made its platform accessible to non-GST registered sellers too. Not too behind in the race is Amazon India, which unveiled its multi-channel fulfilment (MCF) last month for D2C brands and retailers. This initiative is expected to aid sellers in managing customer orders from diverse channels.
Meanwhile, Flipkart flaunted its impressive seller growth, citing a tally surpassing 1.4 Mn — a notable 27% jump since 2022. Meesho currently has a seller base of 1.3 Mn and Amazon has over 1.2 Mn sellers.
Echoing the seller-side optimism, digiCart’s Verma said, “As a seller, we hold a very bullish sentiment. We’re so confident that we started stocking up well in advance. The robust build-up is evident from the current numbers. Mature sellers will expand into existing and new categories after.”
A recent survey by Redseer revealed that sellers are projecting a 15% increase in festive sales year-on-year. Even though the recent sales momentum on ecommerce platforms has been somewhat subdued — with only 40% of those surveyed reporting a 10% quarterly hike — there’s palpable enthusiasm for a significant festive sales boost across a multitude of product sectors.
Who Will Drive The Festive Ecommerce Growth?
Tier II and III cities and towns are expected to be the biggest contributors in this year’s festive season sales. According to experts, customers from these cities and towns are keen on giving their wardrobes and beauty kits a festive makeover. Although Tier I cities are spoilt for choice with numerous offline stores, spanning both legacy and contemporary brands, such luxuries are scarce in smaller cities.
However, this is steadily changing now. Some of the prominent D2C brands that have emerged from the country’s Tier II & III towns and cities are Raipur-based Drools, Mohali-based Lahori, Kanpur-based Phool, Coimbatore-based Juicy Chemistry, just to name a few.
Furthermore, consumer demand in the eastern regions of the country, along with enhanced connectivity in the Northeast, is also on the rise. Semi-urban and rural areas are fast emerging as the driving force behind the new wave of ecommerce growth, a trend expected to be pronounced during the festive season.
Considering that a whopping 65% of India’s populace resides in rural regions, the untapped ecommerce potential is immense, according to the Economic Survey 2022-23.
Yet, fostering trust will be paramount. Residents in these regions typically bank on word-of-mouth endorsements and recommendations from local retailers when exploring new products and brands. This is expected to give local D2C brands a much-needed boost in the upcoming festive season.
What’s Beyond The Festive Sale Fervour
As festive trends leave their mark in the ecommerce landscape, we’re likely to witness several transformative strategies. Central to this evolution will be Buy Now, Pay Later (BNPL) schemes. Yet, the traditional cash-on-delivery remains a preferred choice for many.
Ecommerce brands are increasingly prioritising customer retention, recognising that fostering enduring relationships offers more value. This shift is evident in the rise of loyalty programmes.
Notably, Flipkart introduced “Flipkart VIP” – a direct competitor to Amazon’s Prime – right before the festive sales kickoff. Simultaneously, Meesho debuted a loyalty initiative, targeting both customers and sellers.
Apart from the dominant themes, a few other noteworthy trends are slated to redefine the festive shopping narrative. Black Friday, for instance, is set for a revamp. Gen Z’s influence, especially their propensity to favour specific brands, will be significant.
Last year, for D2C brands, the Black Friday event overshadowed the traditional Diwali and Dusshera festivals in sales figures. GoKwik data indicates that brands on their platform saw a staggering 63% rise in GMV during the Black Friday sale, contrasting starkly with the 10-day Diwali sales.
Also, Christmas, too, is evolving. The allure of winter holidays and modern gifting practices are propelling this transformation, turning Christmas into a significant commercial event.
Given that the final leg of 2023 (October to December) will host almost all the major Indian festivals, the ecommerce players are in for a treat. Even though there will be a lot of cut-throat competition among ecommerce players, there will be no dearth of opportunities for them to woo customers who are eager to splurge to add more flavours to their festive celebrations this year. Going ahead, we will keep a close eye on the ecommerce players and D2C brands that will emerge triumphant after the great Indian festive showdown.
(Published in Inc42)
admin
July 25, 2023
Suprita Anupam, Inc42
Jul 25, 2023
– Following a stock downgrade, Nykaa might lose some visibility among public market investors at a time when competition in the beauty ecommerce space is intensifying
– Nykaa, which has been the most popular beauty marketplace, has had to fight off Reliance Tira, Flipkart-owned Myntra, Tata CLiQ and others but has to invest heavily in omnichannel and private label expansion
– As its profitability and traction have declined, Nykaa needs to fix things for the long run without losing too much money as it does not have the capital reserves similar to its rivals
In the first week of July, the Nykaa stock took a significant hit, falling 42% from its 52-week high. Further, the Association of Mutual Funds in India (AMFI) downgraded the stock, dropping it from the top 100 listed companies in the country. As of now, the company is ranked somewhere between 101 and 250 on the market capitalisation threshold.
From a near monopoly in the beauty ecommerce space, Nykaa has lost its top spot. Not to mention, new competition, in the form of D2C brands and behemoths such as Tata and Reliance, has complicated the situation even more.
The downgrade by the AMFI means that Nykaa is no longer an attractive largecap stock in India, and this could have an impact on the company’s visibility in the near future.
So, what exactly triggered this collapse?
It was only in November 2021 that Nykaa’s INR 5,352 Cr IPO saw 82x subscription, the highest among large startup IPOs in India. Having withstood competition from marketplaces such as Amazon India and Walmart-backed Flipkart and Myntra, Nykaa seemingly set a new benchmark for Indian ecommerce startups with its blockbuster IPO.
But the last 20 months have been nothing short of disruptive. Reliance-backed AJIO has grown in stature, and the Indian conglomerate has also launched Tira in the beauty ecommerce space.
Meanwhile, Tata has also bolstered its beauty and personal care product assortment on its platform Tata CLiQ. Furthermore, the Tatas have added 20 beauty tech stores across the country, aligned with its ecommerce operations, while Myntra Beauty has registered 2X-3X growth in recent months and expanded its brand collection. Therefore, Nykaa needs to come up with something exceptional to compete with the aforementioned well-funded BPC contenders.
Adding to the company’s woes was the announcement of the issue of bonus shares in a 5:1 ratio and changes in key management personnel after a successful IPO. This did not go down well with investors. Bonus shares announcement was largely perceived as a way to keep the company’s anchor investors from offloading shares at the end of their IPO lock-in period.
Experts believe that amid declining year-on-year profitability, Nykaa could see a cash crunch as it prepares to combat with deep-pocketed corporations. For now, it will be interesting to see if Nykaa can hold onto its market share?
Nykaa’s Losing Its Footfall To AJIO & Myntra
First, let’s look at the bread-and-butter for ecommerce platforms such as Nykaa — that is visits, page views, engagement and repeat orders.
It must be noted that Nykaa has separate properties for fashion (Nykaafashion.com) and beauty (nykaa.com). If we look at the performance over the last 3-4 months, the fashion vertical has definitely seen some gains, but Nykaa.com itself has experienced negative growth in total visits.
The flagship property is bleeding users due to an ever-intensifying competition, which is quite clear in the graph given below.
Further, Nykaa, Nykaa Man and Nykaa Fashion have the lowest numbers when it comes to average visit durations.
On the ecommerce front, Nykaa has a lot of catching up to do against its competitors. Some of Nykaa’s private labels — take Dot&Key for instance — have become popular discounted items on Myntra, AJIO, Amazon India and other marketplaces, which shows that the company is forced to use its competition to sell its products.
In contrast, Myntra, AJIO, Tira and Amazon’s private labels are largely walled inside their respective marketplaces. To beat the competition and stay in the public spotlight, Nykaa has opted for the omnichannel strategy, and it is looking to add brand-owned stores on the retail front. But here too, the competition is stiff.
Nykaa Faces Challenges With Its Online-To-Offline Strategy
When we look at the omnichannel operations, Nykaa has 145 physical stores, 38 fulfilment centres, and 2,749 stores of its owned brands. The company plans to open more physical stores this year, according the announcements made in its last earnings call.
Nykaa’s founder and CEO Falguni Nayar had earlier said, “Physical retail is a necessary investment that we need to make, even if it adversely affects overall profitability. So, we are aiming for the optimal mix of online, offline, and duty.”
This is where the situation becomes more complicated. Being primarily an online platform, Nykaa has managed to stay lean and achieve profits thus far. However, opening more stores means more investments and a significant increase in operational expenditure, including higher employee expenses.
Plus, this entails entering into fierce competition with Tata and Reliance.
Reliance Retail alone has launched over 3,300 new stores in FY23 under its various brands, including Tira Beauty, Trends, and others.
Similarly, Tata has been a well-known name in the BPC and fashion industry. It introduced the first-ever cosmetics brand, Lakme Cosmetics, to India (later sold to Unilever). Tata has over 22 in-house labels for its Westside brand, which operates over 200 stores across the country.
While Tata plans to open 20 beauty tech stores, equipped with AI and VR, it already has 391 Zudio stores nationwide.
For Tata and Reliance, it is relatively easier to build an online business backed by their offline stores compared to Nykaa’s strategy of building an offline presence backed by online operations. These large conglomerates have years of experience in building retail brands in the offline space.
So, essentially, Nykaa seems to have lost ground in its strength areas of ecommerce and offline retail, as it is not as experienced as its rivals.
Speaking to Inc42, Devangshu Dutta, the founder and CEO of Third Eyesight, a boutique management consulting firm explained, “Apart from the impact of Covid, in the last 3-4 years, many brands have started moving offline because that’s where the bulk of the business happens. But moving offline means entering a completely different business. You’re not able to centralise inventory as much, and you may not be able to respond to market-specific segments as quickly.”
He also believes, like any other offline retail business, Nykaa will face high operational costs, but it has an advantage in the fact that it may be able to use data more effectively from its online operations. Nevertheless, this is a minor advantage.
“Your store locations have to be correct, and self-sustaining quickly, at least on a cash operating basis. At the business level you may look at profitability in a longer term,” Dutta added.
Profits Plummet: Nykaa’s Other Big Worry
India’s beauty and personal care market, presently valued at $16.8 Bn, is poised to grow at a compound annual rate of 11%, with cosmetics and perfumes categories growing at a faster clip.
According to a joint report by international beauty brand Estée Lauder and Gurugram-based business insights firm 1Lattice, a substantial portion of sales worth about $1.3 Bn are through ecommerce channels. This is expected to grow at a CAGR of 30% during FY22-27, followed by companies that retail beauty products in health and beauty stores and modern retail shops.
With 30% of India’s BPC market share, Nykaa has so far managed to stay ahead in the race. Nykaa’s beauty category (55% of the broad BPC category) saw 33% full-year growth with a GMV of INR 6,649 Cr. On the fashion side, the GMV grew 47% for the full year at INR 2,570 Cr.
BPC and fashion are the two mainstays of Nykaa’s business, even though fashion is a relatively new vertical for the Mumbai-based company. The company had earlier launched Nykaa Man, a separate platform for men’s grooming, beauty and fashion, but with less than 1 Mn visits, it has failed to grow over the last few years while AJIO has grown from 0-37 Mn users, as per analysts.
“At one end, Nykaa’s online PAT has been going down for the last two years, while Nykaa Fashion’s loss for the year has grown consecutively, putting Nykaa business in a fix,” said an analyst from PwC.
Nykaa needs to bring a balance between short-term losses and long-term profits. However, the company’s current strategy fails to show a way out, the analyst added.
The Balancing Act For Nykaa
As per the analyst quoted above, the company’s BPC products have so far had lower prices than Myntra and AJIO, where discounts are typically lower.
However, when compared to Amazon India and its long list of D2C brands and private labels, Nykaa products were slightly more expensive. Amazon also scored over Nykaa with its better supply chain and distribution.
Nykaa banked on product assortment, the assurance of quality and authenticity of products, but as more and more brands join Tira, AJIO and Tata CLiQ, this is also fast eroding.
Access to international brands is no longer exclusive to Nykaa, so it needs to tackle distribution and supply chain, where its rivals score heavily.
Giving Nykaa the benefit of the doubt, a consultant from brokerage firm Motilal Oswal recently said, “There is no clear playbook for these businesses. When Nykaa entered the segment, it was pioneering many aspects in India.”
However, now the company needs to exercise extreme caution regarding expenses and investments because of heavyweight competition with deeper pockets.
P Ganesh, chief financial officer at Nykaa, highlighted that the company still has funds remaining from the IPO, which will be utilised to secure future capital needs.
Ganesh added, “It’s worth noting that while we have observed a considerable increase in working capital as the company scales up, the number of working capital days is expected to stabilise. This means that the amount of funding allocated to working capital should moderate in the future.”
But analysts also believed that Nykaa cannot afford to sacrifice its market share in India’s rapidly growing beauty, personal care, and wellness segment. One thing that is advantageous for Nykaa is that Reliance-owned Tira is still new in the market and will take some time to get to critical mass adoption.
This is a window of opportunity for Nykaa to stretch its lead and fight off its rivals. Nykaa’s brand value primarily comes from its online business, so it must not let offline expenses hinder its online growth plans. However, given the competition, Nykaa is in a Catch-22 situation.
In the BPC segment, owned and private label brands play a vital role in increasing long-term profitability and repeat purchases. All of this will require extensive investment from Nykaa’s leadership — there are segments in BPC where Nykaa has no private label or owned brands.
As of now, the question remains: Can Nykaa maintain its dominance in the online market while facing fierce competition on multiple fronts?
(Published on Inc42)
Devangshu Dutta
July 30, 2015
Much has been written recently, with more than a touch of surprise, about ecommerce companies opening physical retail stores. Whether it is Amazon, Birchbox and Bonobos in the US, Spartoo in France, Astley Clarke in the UK or FirstCry and Flipkart in India, young tech-based ecommerce businesses are adopting the ways of the dinosaur retailers that they were apparently going to drive into extinction.
Perhaps, the seeds of the surprise lie in the perception that the ecommerce companies themselves built for their investors, the media and the public, that it was only a matter of time that the traditional retail model would be dead.
Or perhaps we should pin it on their investors for keeping the companies on the “pure-play” path so far – venture funds that have invested in ecommerce have largely taken the view that the more “asset-light” the business, the better it is; so they’re far happier spending on technology development, marketing, salaries, and even rent, than on stores and inventory.
After a bloody discounting and marketing battle, in a few short years, there are now a handful of ecommerce businesses left standing in a field littered with dead ecommerce bodies, surrounded by many seriously wounded physical retailers who are trying to pick up unfamiliar technology weapons. And their worlds are merging.
Which is a Stronger Building Material – Bricks or Clicks?
Online business models offer some clear strengths. Etailers have a reach that is unlimited by time and geography – the web store is always up and available wherever the etailer chooses to deliver its products.
An ecommerce brand’s inventory is potentially more optimised, because it is held in one location or a few locations, rather than being spread out in retail stores all across the market including in those stores where it may not be needed.
However, we forget that consumers don’t really care to have their choices and shopping behaviour dictated by the business plans of ecommerce companies or their investors. The fact is that physical retail environments do have distinct advantages, as etailers are now discovering.
Firstly, shopping is as much an experiential occasion as it is a transaction comprising of products and money. In fact, the word “theatre” has been used often in the retail business. For products that have a touch-feel element, the physical retail environment continues to be preferred by the customer. Of course, there are products that could be picked off a website with little consideration to the retail environment. For standard products such as diapers or a pair of basic headphones, online convenience may win over the need for a physical experience. However, non-standard products such as apparel or jewellery lend themselves to experiential buying, where a physical retail store definitely has an edge.
Shopping in a physical retail environment is also a social and participative activity. We take our friends or family along, we ask for their opinion and get it real-time. The physical retail environment lends itself to the consumer being immersed in multiple sensory experiences at the same time. These aspects are not replicable even remotely to the same degree by online social sharing of browsed products, wish-lists and purchases, nor by virtual smell and touch (at least not yet!).
In a market that is dominated by advertising noise, a physical store also helps to create a more direct and stronger connect for the consumer with the brand than any website or app can. An offline presence creates credibility for a brand, especially in an environment where online sales are dominated by discounts and deals, and many brands have risen and fallen online in the customer’s eyes during the last 3-4 years.
As a matter of fact, every store acts as a powerful walk-in billboard for the brand. If used well, the store conveys brand messages more powerfully than pure advertisements in any form. This reality has been embraced by retailers for decades, as they have created concept stores and flagship stores in locations with rents and operating costs that are otherwise unviable, except when you see it as a marketing investment.
Showrooming vs. Webrooming
As ecommerce has grown and brands have become available across channels, offline and online, the retail sector has been faced with a new challenge: customers browsing through products in the store, but placing orders with ecommerce sites that offered them the best deal. This obviously meant that retailers were, in a sense, running expensive showrooms (without compensation) on behalf of the ecommerce companies! The industry adopted the term “showrooming” to describe the phenomenon.
However, ecommerce businesses are now getting a taste of their own medicine as retailers are benefitting from a reverse traffic.
Consumers have now started using websites to conveniently do comparative shopping without leaving the comfort of their homes, and collect information on product features and prices but, once the product choice has been narrowed down, the final decision and the actual purchase takes place in a physical store.
This is described with a slightly unwieldy term, “webrooming”. This is one among the reasons that lead to consumers abandoning browsing sessions and carts when they’re online.
Bricks AND Clicks
The wide split between offline and online channels is mainly because traditional offline retailers have been slow to adopt online and mobile shopping environments.
Most physical retailers around the world have approached ecommerce as an after-thought, with a “we also do this” kind of an approach. Ecommerce has typically been a small part of their business, and not typically a focus area for top management. So, in most cases the consumer’s attitude has also reflected these retailers’ own indifference to their ecommerce presence. However, due to the accelerating penetration of mobiles, tablets and other digital devices, a serious online transactional presence is now vital for any retailer that wants to remain top of the consumer’s list.
On the other hand, ecommerce companies, as mentioned earlier, have so far mainly stuck to “pure-play” online presence due to their own reasons. However, with passage of time there is bound to be a convergence and eventually a fusion between channels.
The Journey to Omnichannel
Omnichannel today, in my opinion, is still more a buzzword today than a reality. Being truly omnichannel requires the brand or retailer to offer a seamless experience to the customer where the customer never feels disconnected from the brand, regardless of the channel being used during the information seeking, purchase and delivery process. For instance, a customer might seek initial comparative information online, step into a department store to try a product, pay for it online, have the product delivered at home, and be provided after-sales support by a service franchisee of the brand.
Very few companies can claim to offer a true omnichannel experience, due to internal informational and management barriers. However, having an effective multi-channel presence is the first step to creating this, since operating across different channels needs a completely different management mind-set from the original single-channel business. Having a presence across different channel means that a retailer will need to juggle the diverse needs. Capabilities, processes and systems that are fine-tuned for one channel, may not be fully optimal for another channel. This requires the retailer to restructure its organisation, systems and processes to handle the different service requirements of the various channels.
For instance, brick-and-mortar retailers moving online need to rethink in terms of the service (“always open”), speed (“right now”), and scale (“everywhere”). A traditional retail organisation is seldom agile enough to work well with the new technology-enabled channels as well.
An etailer opening physical stores, on the other hand, needs to embrace product ranging and merchandising skills to allocate appropriate inventory to various locations, as well as the ability to create and maintain a credible, distinctive store environment – in essence, inculcating old-world skills and overheads that they thought they would never need.
The retail business is not divided black-or-white between old-world physical retailers and the upstart online kids – at least the consumer doesn’t think so.
Retailers need to and will see themselves logically serving customers across multiple channels that are appropriate for their product mix. They need to mould their business models until they achieve balance, proficiency and excellence across channels, and eventually become truly omnichannel businesses. It doesn’t matter from which side of the digital divide they began.
