Companies

E-tailers rake it in as shoppers log in, drive out of malls

Rashmi Pratap Deepa Nai Mumbai | Updated on December 30, 2013 Published on December 30, 2013

People go to malls to see the products they want to buy, butdon’t make a purchase.

Online retailers have stolen the thunder from big malls and jazzy retail outlets this holiday season.

Offering discounts from 10 to 60 per cent, and sometimes even more, e-commerce players such as Snapdeal, Flipkart, Jabong and Yebhi have reported more business in December than they did in any other month. Big malls are feeling the heat though, for people are eating and watching movies, but are not shopping.

“People go to malls to see the products they want to buy, but don’t make a purchase. They come back home, check discounts online and buy from whoever gives them the best deal. They are just spending money on food and entertainment in malls,” says Susil Dungarwal, founder of Beyond Squarefeet, a Mumbai-based mall advisory firm.

For consumers, buying online means no transportation and parking charges, saving time and more variety to choose from, in contrast to the limited range that can be stocked in a brick-and-mortar outlet.

Technopak Advisors has pegged the e-tailing market in India at $1 billion (Rs 6,180 crore today), growing at a compounded annual growth rate of 60 per cent. Growth is reflected on the ground. For Snapdeal, sales have grown five times in the past one year. “We have seen a significant and continuous jump in sales since Diwali,” says Snapdeal Vice-President (Marketing) Sandeep Komaravelly.

For Yebhi, too, sales have accelerated since Diwali. “Since November, we have seen a 30-40 per cent growth in sales,” says Nikhil Rungta, Chief Business Officer at Yebhi.com.

Deals & Discounts

Online retailers either obtain products directly from manufacturers or have distributors and wholesalers as sellers on their websites. This does away with the need to share margins with multiple players in the chain. Ashutosh Lawania, Co-founder of Myntra, says online retailers often tend to negotiate with brands and vendors to bring down prices, and that margin cuts are borne by both. This cuts prices by 20-30 per cent for buyers.

Moreover, since e-tailers are a part of the still nascent online eco-system, the focus is on customer acquisition. “We are working on lower margins. Apart from variety and convenience that online retailers offer, price is the biggest draw for customers,” says Rungta.

Agrees Komaravelly: “Pricing is decided by sellers listing products on our platform. It’s very competitive, since there are lots of sellers for every product. If they don’t price it well, they will lose a customer.”

Wake up call

Dungarwal of Beyond Squarefeet points out that malls and brick-and-mortar outlets need to improve their own supply chain to retain market share. “You cannot penalise customers because your own overhead expenses are high. Online retailers are able to sell at lower prices since they can pass on the benefits of supply chain efficiency to customers.” Interestingly, the back-end requirements of online sellers are similar to brick-and-mortar retailers. “Online retailers also need warehouses and staff. Plus, maintaining a portal and the logistics cost of delivery and payment collection are high. It is important for conventional retailers to set their own house in order if they want to retain market share,” Dungarwal adds.

As things stand, online retailers are proving to be a threat for brick-and-mortar stores. “With the growth we have witnessed in the last one-and-a-half years, it will not be very long before e-tailers start making a dent in the sales of brick-and-mortar stores,” adds Snapdeal’s Kumaravelly.

>rashmi.p@thehindu.co.in

>deepa.nair@thehindu.co.in

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Published on December 30, 2013
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