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Challenges that lie ahead for digital retail

31-January-2011
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Challenges that lie ahead for digital retail

Talking about digital retail in India in 2011 is perhaps a little like talking about e-commerce five years ago. It’s an interesting idea that a lot of people have a view on, but with very few exceptions, no one is actually doing it in any organised fashion. The reason for that is not too hard to fathom either – organised retail in India itself is a relatively new phenomenon, and on that is only now beginning to develop. In such a situation, e-commerce outside the travel vertical is barely in its infancy, but already, there has been a lot of development, some positive and some not.

Amanpreet Bajaj, Co-founder and COO, Letsbuy.com, which largely deals in electronic goods, is of the opinion that some brands have started to see the online channel as a useful way to test new products, or to achieve quick liquidity for end of life products through deals, but worries that some see the sector as being in competition with their core offline business. He said, “For a lot of brands, the decision to go online has not been backed from the top, at the CEO level. They haven’t set up their own e-commerce destinations, and are content with showing up in aggregators. But then, the decisions are made by brand managers, whose numbers are met by brick and mortar stores. So, while we might help them to reach out to a new audience, they are only worrying about cutting into their sales figures, which is a completely incorrect way of looking at things.”

People are so worried about the net as competition for their existing business, that Bajaj said that many brands who wanted to sell online also wanted him to source the goods from their distributors. He said, “We are told not to sell below the MRP, and so one of the ways we provide value to our customers, beyond the convenience of online shopping, is by creating bundles and special offers, which has worked out well for us.”

Rahul Narvekar, co-founder and director brand sourcing for Fashion and You, which provides deep discounts as flash deals in the premium fashion brands, also felt that while companies were now starting to see the potential of the internet, the predominant use was for branding, not e-commerce. He said, “There is no competition, but people say that it will eat into their existing numbers, and also worry that the additional audience from the Internet won’t deliver the numbers to justify the time and money spent going online. They have a point in that it is not a quick and easy solution, but one that requires commitment and money. However, the advantages to going online are also very persuasive.”

He added that the fastest growing segments for Fashion and You were in T2 and T3 cities, not the big metros, and that the buyers were the people who did not have access to the expensive brands that were clustered in Delhi and Mumbai, and the other big cities only.

Vijay Kumar Mishra, retail and branding expert who was earlier heading apparel retailer W, felt that part of the problem had been the approach online brands had taken so far. He said, “As long as people see the online sector as just one where they will buy for discounts, the sector is digging a hole for itself. Deals, specially for a model like Fashion and You follows, are great, but other retailers must not see that and think they need to offer deals all the time. Discounts can’t drive growth, but rather, convenience and value. For an existing brand, touch and feel is no issue. People might be hesitant at first, but if you can convince them to try you out once, and they see the process work, then you don’t have to convince them a second time.”

While it’s clear that the online sector can only continue to grow, this is largely because it is so underutilised. But the most important aspect, and how it can help offline retail as well, is in providing reach and research. Bajaj said, “When the Galaxy Tab was launched, it’s a premium product, it’s expensive and hi-tech. Over 60 per cent of the sales were in small towns, where people would have had to wait for a week or two before their local retailer stocked the device.”

Narvekar further said, “What we see is that the fastest growing market for us is in the North-East, because the brands are just not available there. Thanks to us, the buyers are made confident to try out a brand for the first time because of the discount, and after that, there’s a demand for the brand where there wasn’t any earlier, but how do you serve this person? If there is enough demand, set up a store in Guwahati. Or you retail online to reach these people. That’s how the two channels can work together, and help each other, for maximum sales.”
 

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