Online vs offline: E-commerce discounts hit traditional retailers hard this festive season
Online players have captured the market through deep discounting and deeper penetration, feel offline retailers
While the business of e-commerce players like Flipkart and Amazon are seeing a good hike during the festivals, for conventional offline sellers, the celebrations seem to be subdued. The festive season used to be the annual golden opportunity for Indian offline retailers to make profits, but that is gradually changing with the advent of e-commerce. The online retail market is hitting the business of offline retailers through deep discounting and deeper penetration.
According to Subhash (name changed), a local clothing retailer of Chandni Chowk in Delhi, online fashion brands are impacting the offline business extensively.
“Diwali is just days away and it is the time when we expect consumers to buy new clothes. But this year, we are very sceptical about the sales,” he says. He highlights that clothing is one such industry that is hugely losing its business due to the high discounts during online sales.
Subhash feels that the biggest reason for the growth of online is better communication channels. "Online marketing has a set of powerful tools and methodologies to promote their products and services which we retailers lack. We spend more money on spaces and a lot of other things," he adds.
Similarly, Ajay (name changed), owner of an electronics showroom located in Delhi’s Daryaganj reveals that their business has seen 25% less growth in comparison to other festive quarters.
"There used to be a time when we would not get time to prepare for festivals because of the rush at the shop. But now the sales have drastically gone down,” shares Ajay.
"Though local people still prefer to buy electrical appliances through offline mediums, we have lost almost half of our high-society consumers," he highlights.
When asked about the reasons behind this huge gap in the growth of the business of online and offline, Ajay replies, “It's all about the changing lifestyle. Online stores have emerged as a one-stop destination for all products.”
He feels the online market is causing and will further cause dents in the offline space.
He also highlights that people are becoming more prone to window shopping. "Consumers can have the touch & feel of products in malls and then buy the same things on a discount online," he adds.
Sukhesh Madaan CEO, Blaupunkt Audio, an offline & online retailer, thinks this year around, there is much more semblance between both the channels.
“I think this festival season, both online and offline channels have taken the first step towards bringing the equilibrium back into place. Though to be honest, it will take a while to reach the perfect state,” says Madaan.
While the offline retailers seem worried about the trend, online sellers seems to be having a happy time.
Rajneesh Kumar, SVP & Chief Corporate Affairs Officer, Flipkart Group, says Flipkart doesn't see sellers and consumers holding back at all. “In fact, sellers and brands are looking to e-commerce to drive consumption sentiment – leveraging on its continued growth,” he adds.
Similarly, talking about good business this season, Manish Tiwary, VP -Category Management, Amazon India, claims that Amazon.in has endorsed the highest share of transacting customers and purchases across all marketplaces in India; orders from 99.4% pin codes; over 65,000 sellers from 500+ cities, receiving orders in just five days and customers from over 15,000 pin codes joining Prime".
Another Amazon spokesperson said, “We at Amazon have not experienced any kind of slowdown."
“In the last three to four months, Amazon has witnessed an acceleration in the number of sellers wanting to register, starting from local artisans, weavers to large sellers and brands, we see no signs of anxiety from them," he adds.
It is believed that the buying tendency of customers has gone down this year due to the economic slowdown.
However, Suvodeep Das, Vice-President, Marketing & Sales, Sodexo BRS India, doesn't feel so. Instead, Das feels that people have become smart and value-conscious.
"I don't think people are spending less this festive season. However, their nature of spending has changed, the young buyers are spending the same but they've become more value-conscious,” said Das.
Das further adds, “Our consumer base is very young. Our target audience is from 24 to 36. In that particular target group, we have noticed that consumption is happening, people are spending but they're becoming value-conscious and more inclined towards trusted brands than local ones.”
Suvankar Sen, Executive Director, Senco Gold & Diamonds, says the real market situation cannot be ignored. "The slowdown is a real behaviour driven through limited liquidity and changing consumer behaviour. Customer from across society is more careful and conservative with the spends. The economy needs a positive boost of the velocity of money," he says.
Asked why online business is growing, Sen, shared that customers are becoming busy at work and trying to manage time in between their busy schedule is becoming difficult. “That's the reason for the growth of online. The willingness is there to spend, but the ability has been reduced," emphasizes Sen.
"While the key reason for the growth of online sales is the huge discount offers, the biggest reason behind the falling business of local offline retailers is that they lack in variety and often push old stocks during festive seasons," says Sandeep Prasad, Founder & CEO, Wink & Nod, the online mattress retailer.
Online business eliminates middlemen and mark-ups in the distribution cycle, the prices of online brands are 25 to 50% lesser compared to offline retailers, he added.
With a boom in the e-commerce business, it's seems it has become imperative for offline retailers to establish their niche and upgrade themselves with technology.
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