Can etailing bypass distribution centres and warehouses entirely? That is the mega-buck question that the leading ecommerce players in the country are now reportedly exploring. After all, industry estimates peg inventory, warehousing and delivery costs at around 35-60 per cent of overall expenses.
According to The Economic Times, Flipkart and its fashion arms Myntra and Jabong as well as Amazon India and Paytm Mall are exploring a hyperlocal strategy, which gives customers access to fashion products that can be picked up and delivered from local stores within hours. "This way, ecommerce companies don't have to buy inventory, which is a massive cost. And then, storing in warehouses is an additional cost," Harsh Shah, cofounder of Fynd, told the daily, adding, "This is a great way for them to get inventory at zero cost."
Fynd, an offline-to-online marketplace that recently got funded by Google, reportedly integrated its brand inventory with Jabong Luxe and Facebook Marketplace as part of a pilot run recently. So Facebook Marketplace now enjoys access to all the 330 fashion brands available on Fynd through 8,700 stores across India while Jabong Luxe - which focusses on high-end brands - gained access to labels like Steve Madden, Superdry and Brooks Brothers.
Real-time access to stores inventory, furthermore, will allow online marketplaces to keep up with the latest trends in fashion. "Currently, of the fashion products that are listed on ecommerce (marketplaces), 90% is old-season merchandise and only 10% is fresh fashion. If ecommerce companies integrate store inventory onto their platform, this number can shift to 60-40 in the next 3-4 seasons," said Shah.
However, this store pickup model need not be limited to fashion. The report claims that it can be replicated in categories such as mobile phones, electronics and home furnishings - routed through technology partners. In the bargain, it might just transform how marketplaces operate.
Mukul Bafana, CEO of Arvind Internet, similarly told the daily that they are preparing to allow Flipkart, Myntra, Amazon India, Paytm Mall, and TataCliQ access to the company's 16 in-house brands and a handful of other partner brands including Arrow and Nautica. "On an average, fulfilling an order from a store close to you is about 30 per cent less expensive than sourcing it from a warehouse," he said. The online arm of the Arvind Group added that it has been running pilots across 100 stores for three months now.
Not to be outdone, Alibaba-backed Paytm Mall has long been betting on an offline to online strategy. In February, while announcing a new partnership with Red Tape, Amit Sinha, COO, Paytm Mall had said in a statement that, "We want to provide a best in class in-store experience wherein users can browse the entire catalogue available from a brand and be able to pick up products from the shop or get them delivered to their doorstep on the same day. We will also offer this technology to traditional retailers to help them transform into the digital age.
We are confident this will prove beneficial for brands as it combines offline stores, warehouse and fulfillment hubs into a single place thereby enabling them to offer an enhanced experience to shoppers." In addition, Paytm Mall works with several other top brands, including Samsung, LG, Lenovo, Intel, Canon, HP, Godrej, Hitachi, Bluestar, Whirlpool, Bosch, IFB, and Intex and claims to reach over 700 towns across India.
In April, the company announced in its blog that the offline stores drive over 60% of all sales on its platform. "We have partnered with around 75,000 stores and aim to triple our offline presence by the end of 2019," it added.
The new hyperlocal model is also throwing up new opportunities for players in the logistics business. Consider Shadowfax, an on-demand logistics provider for local businesses, Paytm Mall and Fynd, and exclusive delivery partners to Amazon Now, BigBasket and Grofers. The company claims that its O2O model doesn't use a distribution centre at all - they pick goods from the sellers and deliver it directly at the customer's address, mostly under an hour. Its CEO Abhishek Bansal told the daily that "Shadowfax delivers a few thousand orders within four hours, including apparel and electronics."