The age-old battle between physical stores and online platforms is over. Retailers are now taking a new path by blending the best of both worlds.
For new age consumer startups like Licious, GIVA and Curefoods, online is where the customer discovers and interacts with the brands for the first time, but offline is what helps create consumer trust and scale up in geographies beyond Tier-1.
This emerged at the Moneycontrol Startup Conclave, where a panel moderated by Accel partner Anand Daniel delved into how startups are navigating the complex terrain of balancing online and offline channels. DTDC, which enables logistics for many new age brands, was also part of the panel.
Ishendra Agarwal, co-founder of fine jewellery startup GIVA, emphasised the importance of a phased approach. "We started by launching our own website, and then we gradually expanded to marketplaces in parallel. For the first two years, we focused on understanding and optimising each channel, building scale, creating a product-market fit, and designing effective funnels. After establishing these online channels, we added offline strategies, as each individual channel presented its own challenges."
Agarwal noted that online is crucial for discovery and initial engagement, but the physical experience is essential for categories like jewellery, where customers want to try before they buy.
Vivek Gupta, co-founder of online meat delivery startup Licious, echoed the sentiment. "Meat was always bought and sold offline," he said, emphasising the importance of touch and feel for categories like fish.
Gupta highlighted the challenges of scaling meat distribution online, particularly in India, where cold chain logistics are underdeveloped.
"In the meat category, we did not have too many choices in distribution. Meat has not scaled in India just because there was no cold chain," he said. "In our case, we have chosen channel based on customer backward thinking," he added.
Gupta said that the company's offline stores allow customers to select their cuts and explore a variety of products that aren't always available online. This approach has been instrumental in building trust and increasing sales, he said.
Abhishek Chakraborty, CEO of logistics service provider DTDC Express, highlighted the transformative impact of COVID-19 on their business model.
Before COVID, our business was primarily physical. The pandemic highlighted the necessity of an online presence, leading us to develop the MyDTDC app, which now has over 3.5 million active users," Chakraborty explained.
Ankit Nagori, founder and CEO of cloud kitchen startup Curefoods, spoke about his company's evolution from a direct-to-consumer (D2C) model to incorporating marketplaces and offline channels. Nagori also highlighted the importance of maintaining consistent profitability across channels.
"I think one important discipline is to find a way to maintain the same bottom line across channels, as this will naturally indicate the right proportion for each channel. If you create a channel-wise EBITDA model and find that your EBITDA is significantly higher for one channel compared to another, then you may not be doing justice to that channel," Nagori said.
Nagori also stressed the role of geography in channel strategy, advocating for an online-first approach in metros and an offline strategy in smaller cities.
He said that for local or low-radius commerce, there isn't always enough order density to sustain a purely online model. In smaller cities with populations around five lakhs, even if affluent, people may prefer to experience products in person rather than ordering exclusively online, he added.
"Dark stores, which rely on high density for optimal unit economics, may not be feasible in such areas," he said.
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