Catalyst

Shop when they drop

Prasad Sangameshwaran | Updated on March 12, 2018 Published on October 09, 2014

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With organised retail, the bargain-hunting customer came to the fore. Soon, online retailers had this segment eating out of their hands. Together, these forces are rewriting the rules of retail



Earlier this week, all roads seemed to lead to the online marketplace. A much hyped Big Billion Day by online retailer Flipkart also saw many unsatisfied customers vent their ire on social networks. To top it all, there were ambush marketing efforts by rival online retailers. Even as Flipkart reportedly logged sales of around $100 million in less than seven hours on its big day, it apologised to its customers the next day for issues ranging from price fluctuations and cancellations of orders to website malfunctions.

When it seemed like everybody who likes shopping online would bust the bank on a single day of shopping, there were many seasoned online shoppers like J Vinod, an advertising professional in his forties, who were watching from the sidelines. For the past two years, Vinod has been a regular shopper online, for footwear, apparel and accessories, categories that many brick-and-mortar retailers were earlier confident of protecting from the online retailers. Retailers believed that customers like to touch and feel and try out these products before buying them and so would opt for physical stores.

But Vinod and others like him have a contra-view. He checks out malls and retail high streets during his leisure time, but stops short of buying items off the rack. Instead, he compares the prices online and adds goods to his online shopping cart if he finds a good deal. And a good deal means at least a 40 per cent discount, says Vinod. Online retailers have made the game only easier by offering flexible return options if a shopper is unsatisfied with the goods, and cash on delivery. Vinod claims that he returns things five-out-of-ten times. Still, that did not stop at least two portals from giving him a platinum member status because of the volume of transactions.

For the brick-and-mortar retailers, customers like Vinod are a nightmare. They add to the footfalls, but bring down the conversion rates as they walk out without having bought anything. In categories such as mobile phones, books and apparel, industry experts point out that the major online players outsell the leading organised brick-and-mortar retailers. In some cases, manufacturers like LG recently and Lenovo some months ago issued advisories saying customers will not get any warranty benefits if they buy from online retailers other than the company’s official retail partners. Samsung has a divide-and-rule approach. While it has some phones that sell exclusively on certain online channels, it recently pulled out more than four dozen models from online retail channels (see companion piece). And if you thought this trend was restricted to only a couple of categories, one is clearly misreading the situation.

FMCG too on board

Interestingly, even the fast moving consumer goods segment, which is largely driven by the strength of its distribution muscle covering millions of outlets across the country, is recognising the power of the online medium. Sometimes, its objective could be to test the market. Last month, when Coca-Cola India launched Coke Zero, it decided to sell it online exclusively on Amazon. The company reportedly sold one lakh cans within the first 13 days. Last year, Hindustan Coca-Cola Beverages, started coke2home.com which delivers in cities such as Ahmedabad, Bangalore, Hyderabad, Mumbai and Pune.

Even smaller beverage players are taking a leaf out of this strategy. Hector Beverages, which owns brands such as Paper Boat and Tzinga, is still expanding its presence in key cities. While focusing on Delhi and Bangalore, it launched its online site for delivery to Mumbai, Hyderabad, Chennai and Pune even as it’s in the process of seeding stores with its drinks in these cities. Neeraj Kakkar CEO and Founder, Hector Beverages says, “E-commerce will play a key role as the company tries and reaches out to more regions and consumers, especially the upcountry consumers.”

Low-penetration categories like diapers for infants have got a booster shot due to the online space. Companies such as Kimberly-Clark, which markets Huggies diapers, believe the digital space will be key in achieving this growth for the category in India. Vikas Singh, Managing Director, Kimberly-Clark Lever India, says, “The e-commerce channel lends itself well to the product, especially with more and more working mothers looking for convenience.” He adds that for brands like Huggies, ecommerce sales have been seeing a huge growth.

Long way to go

But it may not be curtains for brick-and-mortar stores just yet. A study titled The Secrets of Seamless Retailing Success by Accenture Research evaluated 15,000 consumers across 20 countries (India was not among them) to rank their shopping experiences across channels. While almost half of all respondents (46 per cent) said they plan to shop online more in the future, 28 per cent said they also would be shopping more at physical stores. In evolved markets, there is a marked shift to a preference for in-store shopping, with 16 per cent of consumers planning to do that as against 9 per cent a year earlier. Many consumers felt scheduling takes priority over speed and about a third of the respondents indicated they are buying more in-store compared to a year ago. In sectors such as consumer electronics, apparel and home improvement, the study says “shoppers are now webrooming (looking online then buying in-store) more than they are showrooming (looking in-store before buying online), a strong indication that the sheer range of online choice can be overwhelming and that shoppers often prefer to let stores curate their choices for them”. Altaf Harris, Director, Witco, a Chennai-based luggage retailer points out that some customers get frazzled by the breadth of information online and prefer to visit stores and make their choices from a smaller range. “Those who do not know exactly what they need also visit stores to make informed choices,” he says.

Others are proceeding with caution. Harkirat Singh, Managing Director, Woodland said that the company launched its own site to sell its shoes, garments and accessories nearly five years ago and is also selling its products through most key e-commerce players. Currently, 6-7 per cent of Woodland’s sales come from the e-commerce segment. Over the next two years, Singh expects nearly 15-20 per cent of sales to come through the online channel. However, he says the company is treading cautiously as several customers do not like the products bought online and return them, which mean such costs are also added to the transaction. He says that the company has to be careful to ensure prices of its products on the online space are in tune with the prices at the stores. That’s one big challenge, at least for the time being.

(With inputs from Meenakshi Verma Ambwani and Sravanthi Challapalli)

Published on October 09, 2014
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