Krishna Karwa Moneycontrol Research
Amazon and Flipkart have taken retailing to a whole new level in a rapidly growing consumer market like India. Moneycontrol spoke to some of the top CFOs of India’s retail majors at a recently held event in Mumbai to gauge their views on the changing landscape in the sector. A common consensus suggests that though a boom in online retail has made things difficult for physical stores, it's not all over for brick and mortar outlets (BMOs). Here’s why:
‘Touch & try’ preference: In a vast majority of situations, even today, most Indians prefer to touch and try products before buying them. This is particularly true in cases involving clothes, perishable items, and consumer durables. Reliability issues in terms of packaging, product quality, acceptance of goods returned to sellers, and brand originality are the primary factors that dissuade prospective buyers from relying on e-commerce portals.
Shopping as a hobby: For some individuals, the ‘feel-good' factor associated with window shopping through BMOs is unparalleled. Social interactions among friends and retailer-customer relationships are fostered through store visits, too. Online channels don’t offer this connect at all.
Limited reach of e-commerce & banking channels: Digital platforms, despite gaining noticeable headway in regions other than the top-tier Indian cities, have not been able to replicate the same degree of success in all parts of the country evenly. This is evident from their restricted distribution capabilities, especially in the tier-3 and tier-4 towns, semi-urban, and rural zones of the country, which constitute a significant portion of overall consumption.
Moreover, even if some e-commerce portals possess the capabilities to cater to such areas (for retailing a certain range of products only), the ‘cash on delivery’ payment option is unavailable in most situations, unlike the metros. To make matters more difficult, banking networks aren’t optimally developed in these geographies either, thus making the use of debit and credit cards unviable for most people. Consequently, BMOs become the preferred choice.
Acceptance by millennials, resistance to change by elders: In addition to offering convenience and saving time, one of the key drivers for digital platforms over the years has been their growing use by young buyers, who are not only familiar with but also inclined towards purchasing products online. However, in stark contrast, even today, the middle-aged and older generation of India’s population remain fan followers of BMOs. This can be attributed to reasons such as lack of adequate technological knowledge, unwillingness to experiment, unpleasant shopping experiences in the past (if any), and apprehensions about fraudulent activities online.
Possibility of online fraud: Indians are no strangers to data leaks and internet-related financial frauds. Even as banks, merchants, and digital platforms strive hard to strengthen their information systems in a bid to reassure fund transfer safety, a negative bias against online channels in the minds of some customers is almost impossible to eliminate. The prejudice clearly works in favour of BMOs, that, more often than not, offer a comparatively safer shopping experience.
What’s next?
Given the competitive intensity in the retail sector, it hardly comes as a surprise to see e-commerce players and BMOs upping the ante with the objective of outperforming each other. Both business models, undoubtedly, have their pros and cons. It’s interesting to see that while BMOs have been focusing their attention on setting up their own omni-channels, digital platforms, on the other hand, are gradually and simultaneously laying emphasis on launching physical stores to gauge the buyers’ preferences better. Clearly, a blend of both appears to work well.
Periodic incentivisation (by way of freebies, discounts, loyalty programmes, and wallet-based bonus points) and attempts to ensure faster redressal of customer grievances have been commonly observed themes in both cases. No one format can be a complete substitute for another since there are loyalists for both. Irrespective of the retailing structure, one thing is certain – consumers stand to benefit the most and will remain kings in this ‘survival of the fittest’ battle.
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