From competition to collaboration - The changing dynamics of offline and online retail
In the last few years, the offline retail industry has increasingly come under stress with the rising popularity of online shopping platforms.
Led by big discounts, online retail players like Amazon, Flipkart, Snapdeal, Shopclues, etc. have managed to woo customers with their innovative and aggressive marketing mix. Moreover, the convenience of shopping from a remote location with competitive price points has added to their popularity. The numbers say it all. As per the latest study by Forrester Research, Indian online retail market is expected to reach $64 billion by 2021, growing at a five-year CAGR of 31.2 percent, making it the fastest growing online market in the world.
Morgan Stanley puts these figures differently. According to its latest estimates, India’s e-commerce market will grow at a 30 per cent compound annual growth rate for gross merchandise value worth $200 billion by 2026. Whatever be the case, the online retail market in India is poised to become one of the biggest drivers of the growth in the sector.
With an internet user base of about 450 million, which is roughly 40 per cent of the population, India has become the second-largest user base in world, only behind China which has about 650 million or 48 per cent of the population. Led by the spurt in smartphone penetration, improved logistics infrastructure and convenient payment gateways, online shopping is set to maintain a robust growth in the time to come.
Offline Vs Online Retail
Looking at the growth and potential of the online retail market in India, the offline sector has been realigning to the changing market dynamics. In a way, it has been forced to change. While some experts have painted a gloomy picture of the future of offline retail, others have offered co-existence as the way forward for both.
If we look at offline retail sector closely, one of its biggest strengths has been its sheer size. With over 14 million retail outlets in India, many online players are now looking at co-creating newer possibilities by leveraging the power of offline retail. This may be the reason why the growth of online-to-offline (O2O) is currently gaining momentum. O2O is all about leveraging the digital and mobile medium to drive sales through the offline platforms. In other words, it is about establishing a link between the online discovery of products and offline transactions for the same.
Speaking about the battle for market control between offline and online and how the former is fast reinventing the game, Harish Bijoor, Brand-expert & Founder, Harish Bijoor Consults Inc. says, “The offline and online retail battle will be a continuous one. This is a see-saw battle. The weight is skewed towards offline as of now for sure. Even as online retail makes rampant strides, offline retailers will reinvent their game by being savvy. We have seen that happen. Every weakness of online will be the key strength point of offline retail. The elephant will therefore dance. Offline retailers in India, with the biggest brand names in early organized retail such as Shoppers Stop and the Future Group, are doing exactly this. And the one that is making the elephant dance is ecommerce for sure.”
Experts also believe that the future of retail will eventually become extremely personalized and powered by data-driven insights. According to them, online and offline touch points will merge to deliver the most intuitive customer experience.
Sugham Dhall, Business Head, International Brand Luxury, Tata Cliq, says, “I see it settling with the convergence of online and offline. There is a new buzz word called the Omni channel. What Omni channel does is that it’s able to maximize footfalls, increase retail turnover and sales. We are enabling Omni channels for brands. We don’t see offline as competition, we see us as enablers to offline.”
This point is also well argued by Manu Agarwal, Founder, Naaptol, who believes that the offline vs online debate will finally find a right mix through interdependence. “Omni channel is the need of the hour and thus most of the retail players are embracing it,” says Agarwal. He also vouches for the power of offline. “The Time Trade Retail 2017 Report also endorses that 70 per cent people plan to shop in stores in 2017. Even in our Focus Group Discussions, the customers are vocal about products being available in their cities and towns. We at Naaptol will soon getting into brick and mortar business,” he says.
With new market forces realigning the retail sector in India, offline players have responded to the change and have started reimagining their approach. The power of the reimagined offline is validated by online players too, who are rushing to set up offline stores for better connect with customers. A good example of this is the way big smartphone players like Samsung, Oppo and Vivo are investing in setting up experiential stores to leverage the power of offline retail.
Moreover, offline players have also adopted learnings from their online counterparts, especially in the domain of customer engagement and this is becoming its biggest strength too.
“In my opinion, the online players have acted as a catalyst for the market growth. At Vijay Sales, we have become more tuned to our guest’s needs; be it in giving the product demonstration, delivery scheduling and post purchase service which has helped us grow. I don’t see any challenge to offline players due to online presence,” adds Nilesh Gupta, Managing Partner - Vijay Sales.
With offline retail 2.0 adapting to new demands, the perceived competition with its online counterpart is fast turning into a collaborative reality which will only strengthen in the time to come.
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