E-commerce seems to be driving retail growth but brick-and-mortar stores continue to hold relevance.
Over the past half a decade, e-commerce in general has seen a dramatic growth in the Indian market. The success of Flipkart, Snapdeal, Myntra, Jabong, and several others in various product categories, from groceries (Bigbasket) to baby products (Babyoye), is a clear indicator of the gradual shift from brick-and-mortar retail towards e-commerce—at least among those who were born in this era.
Comparisons and contest between the two is not new. We saw the same debate when organised retail stepped in and one wondered if the days of the local mom and pop stores were numbered. We even witnessed similar promotional efforts by the spanking new malls dotting the city’s landscape. Big sales, special initiatives such as Big Bazaar’s purana do naya lo (give old and buy new), and a number of promotional campaigns helped drive traffic and inculcate the ‘mall’ culture we have come to know so well. E-tail is doing pretty much the same—trying to drive adoption and inculcate the habit of online shopping.
As I reflect on this, I realise that the number of local bania stores in my locality of about one kilometre radius in central Mumbai have reduced from about 15 to about 2–and been replaced by a prominent new-format retail outlet selling groceries to wellness products and fresh veggies to packaged foods. The new store has become the common place for local hutment dwellers as well as the middle and upper middle class to meet their day-to-day requirements.
A few savvy bania’s who have built deep customer relationships, or stock products of lower price points or categories not offered in the more organised stores continue to do business. Some of these like a particularly successful grain store in the busy Dadar area of Mumbai have converted to the departmental store format and have not only managed to survive but also grow.
The hyperlocal model of e-tailing, where e-commerce companies are looking at the local store to provide the last-mile delivery, seems to provide a shot in the arm to the apparently dying unorganised local store. Coexistence seems to be possible.
We also saw in the past five years the role e-commerce played vis-a-vis brick-and-mortar retail. In the early days of e-tail, people would search and study products online, then visit the physical store for touch and feel, and finally find it safer to buy it there. Today many customers go to physical store and purchase it online for the sheer price advantage.
The mall culture has become so deep-rooted perhaps not as much by the lure of the retail stores in the mall as for the sheer experience and entertainment it offers–given the limited number of such locations which exist in most Indian metro cities. Footfalls coupled by sales have to a certain extent helped brands and stores in malls to maintain a respectable sales volume. If the recent performance of most malls is any indication this is a warning bell for organised retailers.
E-tail seems to be making speedier inroads into the tier2 cities as evident from the volume of orders coming in from these places. This is partly due to the awareness about a wide variety of products, increasing levels of aspirations, and the lack of other options to fulfill these.
Some product categories seem to have held their own position in the face of the e-tail boom. The wedding and traditional ceremonial products category is one such. On traditional occassions, most customers go back to their trusted stores. This includes ceremonial dresses, jewellery, and several others.
However, e-tail is surely breaking conventional norms. It has found initial success even in categories which have been considered unlikely for e-commerce such as selling two-wheelers, flats, art and crafts—ticket size upwards of R50,000. Non-resident Indians offer yet another market segment for e-commerce in general. The nostalgia for all things mera Bharat combined with their buying power, leads them to look for the fastest way of purchasing such products. This could include local handicrafts and gift items, food products and even special delicacies as we quite often see during festivals such as Diwali.
Perhaps like in many fields such as telecom where India has hop-skipped some stages of evolution, the vast rural Indian market may skip over to e-tail. However, coexistence is perhaps the other distinct possibility. The jury is clearly out —whether e-tail will succeed over conventional brick-and-mortar retail.
The following was a cover story was penned by Dean Pradeep Pendse – IT/e- Business/Business Design/Analytics at Welingkar. It appeared in the December 2015 issue of Indian Managementmagazine.