Catalyst

Who’s nervous?

Jessu John | Updated on March 12, 2018 Published on October 09, 2014

Brands revisit their online-offline distribution strategy



There’s been a long-standing undercurrent of discomfort over the disruptive power of e-commerce in India. Conversations with industry players reveal that predatory online pricing hurts manufacturers and their offline partners. However, there is also a wider understanding that it’s all part of the curve as far as changing consumer behaviour in India goes – online retail brands too have to grow.

Just under two years ago, a Google India report revealed that consumer interest in online buying spiked 128 per cent between 2011 and 2012. The previous year in comparison reflected a growth of 40 per cent. Yet, this isn’t the entire piece. A deeper analysis of the influence of online retailers and the actual ‘disruption’ highlight some interesting sides to the e-commerce game in India.

Differential approach

Samsung made a headline or two some days ago for pulling out nearly 50 smartphone models from its online distribution channels. To stem dealer unrest, exclusive selling rights for those went reportedly to its key offline partners. In late August, though, the brand launched what it called “the world’s slimmest and lightest interchangeable-lens camera” announcing that it would be available exclusively through Amazon.in.

Although Samsung took a “no comments” stance when approached for this story, it isn’t the only brand that is realigning itself. Canon, for example, announced this week that its new PowerShot SX 520 will be sold exclusively on Amazon.in. “India has been through nearly three stages of mindsets around e-commerce. First, there was complete denial. Then many decided to take the online route while still feeling that the control was being taken out of their hands. But in a third stage, and especially as far as our relationship curve with partners is concerned, we’ve made online retailers an integral part of our game plan. Even looking back two years ago, 25 per cent of DSLR sales had moved online. However, coexistence with offline partners is possible if we build a differential model,” says Alok Bharadwaj, Executive Vice-President, Canon India. Canon plans to employ a mixed distribution strategy with lower-end products mostly being sold online and specialised products being available at the store.

Changing winds

Notably, the Google India report showed consumer durables (34 per cent) and then apparel and accessories (30 per cent) as the largest selling product categories online. Praveen Sinha, Founder and Managing Director, Jabong.com, sets a finer context. “E-commerce is not bigger than offline retail in India, but it is growing. But the data on online buying isn’t yet all that significant in a country as economically diverse as ours that this so called predatory pricing becomes an issue… at 1-2 per cent of overall retail, it’s a drop in the bucket as of now,” Sinha says, also admitting it’s easier when dealing in the fashion segment.

Online sales for premium labels GANT and Nautica are at 10 per cent of overall sales in India. Sumit Dhingra, Business Director, Bridge to Luxury Brands Division - Nautica and GAT at Arvind Lifestyle Brands Ltd, which distributes them says this will increase to about 15 per cent soon. “There is an even larger organised retail sector in the US than we have here. Catalogues and online retail are popular channels there, but online sales remain at 15-20 per cent. But the opportunity for e-commerce growing is immense, especially among young people who have a high affinity for smartphones and the Internet. We can’t ignore that in India,” says Dhingra.

The tussle between online and offline retailers continue. But large brands in India are beginning to reinvent their approach to selling while managing their partnerships more adeptly.

Correction

An earlier version of this story incorrectly said that Sumit Dhingra was Business Director at Urban Lifestyle Brands instead of Business Director, Bridge to Luxury Brands Division - Nautica and GANT at Arvind Lifestyle Brands Ltd.

Published on October 09, 2014
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