Earlier this year, online retail giant Alibaba picked up stakes in Chinese supermarket chains Hema and Bailan; Amazon bought out grocery chain Whole Foods for a whopping $13.7 billion; and, last year, the world's largest brick-and-mortar supermarket chain Walmart bought out US-based e-commerce company Jet.com for $3.3 billion. These strategic deals clearly indicate the need (both online and offline) for an omnichannel business model. "Retailers who don't have an omnichannel business model will lose customers," points out Rajat Wahi, Partner, Deloitte.
The Amazon-Shoppers Stop deal (Amazon's investment arm, Amazon NV Holdings LLC, picked up 5 per cent stake in Shoppers Stop for `179 crore) is a move towards an omnichannel strategy, which Govind Shrikhande, MD, Shoppers Stop, has been advocating for a while now. The company took baby steps in the omnichannel business with Shoppersstop.com and attracted just 4.5 million customers per month.
"Between 80 physical stores and online stores we manage over 8 million visitors per month, while Amazon.in gets 400 million visitors per month. Therefore, the multiplier effect will build in for us. So, we will build the catalogue, and Amazon will bring in the traffic," explains Shrikhande, who is optimistic that online retail will contribute 10 per cent to his revenues by 2019, from the current 1 per cent.
Shoppers Stop is not the only Indian retail company building an omnichannel business model. Others such as Landmark Retail and D'Mart have joined the race, too. Even online retailers such as Urban Ladder, Pepperfry, CaratLane and Lenskart now have an omnichannel strategy. While Shoppers Stop wants to reach out to more cities and consumers through online retail, online players are launching offline stores to get customers to touch and feel their products. Lenskart, for instance, has over 500 physical stores where consumers can come in, take a look at their offerings and then transact online.
However, the debate now is whether it makes sense for a multi-brand store such as Shoppers Stop to have not just a robust omnichannel presence but also a partnership with Amazon which is also multi-brand. "Omnichannel works well for powerful brands which are both brands as well as retailers (such as Zara and H&M)," points out Arvind Singhal, Chairman, Technopak Advisors. Singhal is referring to single-brand retailers, and only 15 per cent of Shoppers Stop's revenues come from its private and exclusive brands.
An omnichannel strategy in food and grocery will not be easy in India as consumers want fresh food, and the cost of delivery is quite high. Amazon's investment in Whole Foods in the US may be bang on, as grocery stores there are not easily accessible. "In India, there are kirana stores and vegetable vendors, literally at the doorstep. So, an online grocery business in India will be difficult," says Wahi of Deloitte.
In fact, Kishore Biyani, Founder and CEO, Future Group, once a staunch advocate of the omnichannel model, has now shelved his plans. While omnichannel is surely the next wave of retailing, one needs to see how deftly Indian retailers crack the code. Till then, all eyes would be on Shoppers Stop and Amazon."