Brick-and-mortar retail makes a comeback in 2015
Ajita Shashidhar December 31, 2015
If 2014 was all about empty malls and the traditional brick-and-mortar stores losing out to the e-commerce upstarts, 2015 saw almost all the traditional retailers back in the race with innovative ways of wooing consumers and of course their omni-channel offerings.
At a time when the economy at large was under pressure, it was but natural for the consumers to flock to the online stores which offered them irresistible discounts. While it was party time for consumers, the online retailers in order to get customers onboard burnt a lot of cash, as they bought the merchandise from the brand at full price and sold it at a discounted price. The brands lost out because consumers preferred buying on online platforms which offered them steep discounts.
While having an omni-channel presence became mandatory for the brick and mortar retailers, the first thing that all of them did was ensure that they didn't allow the online stores to sell their fresh season stock at a discounted price.
The online retailers through 2015 sold only the previous season stock of brands at a discount.
Online shoppers this year would have observed that barring mobile phones and other electronic goods categories, there were fewer discounts in 2015.
This move helped the brick-and-mortar stores get the consumer back into their stocks, especially during the festival season. With offers such as buy for Rs 5,000 and get Rs 1,000 worth free vouchers and aggressive advertising spends (at least 10%-15% more than what they usually), the traditional retailers succeeded in getting the fizz back into their business.
Meanwhile, all the leading brick-and-mortar companies, be it Aditya Birla Retail, Reliance, Future Group, Shoppers Stop and even single brand retailers such as Puma and Fabindia, launched their omni-channel offerings.
While Future Group announced a Rs 100-crore investment for creating its omni-channel platform, Aditya Birla Retail launched Abof.com (All About Fashion), its online multibrand fashion store, where it not only sells its own brands but also other brands. Similarly Shoppers Stop created its omni-channel presence by partnering with Snapdeal.
So, if a customer walks into a Shoppers Stop store and wants a particular fit of a shirt which is not available at that particular store, he can place an order online and Shoppers would make sure that the shirt is delivered at his home. Alternatively, he can place an order online and walk into the nearest outlet of Shoppers, try it out and then pay for it.
Though omni-channel is still in its infancy, the analyst community unanimously agrees that it is the omni-channel model which is here to stay. Apart from the fact that omni-channel offers the customer the convenience to shop at home as well as touch and feel the products at the store, retailers with an omni-channel presence, thanks to their network of physical stores can speed up the time of delivery considerably.
So, if I as a consumer order a particular colour of Puma shoes online and if Puma has a store in my locality, it will be able to deliver the shoe to me on the same day. In contrast, an online store will take anywhere between 3-7 days to deliver the shoes as the shoe will first travel from the distributor to the online retailer's warehouse, from where it will be delivered to me, the customer.
From a business model point of view, the analysts feel that an omni-channel retail model makes better sense as the stores themselves can double up as a warehouse, unlike online retailers who have had to cough up crores to put in place a robust warehousing and supply chain system. In fact, the online retailers in the last one year have reported a record number of fraud and counterfeit product deliveries and this is largely due to loopholes in their warehousing and supply chain capabilities. When a product moves directly from a brand's store or warehousing the chances of fraud and counterfeit, say analysts, are that much more lower.
In fact, the year 2015, also saw the beginning of the e-commerce euphoria dying out. While the first half of the year saw nearly $6.4 billion funding in the e-commerce sector, towards the end of 2015 there were reports of investors shying away from investing in the sector, and that has been mainly because profitability doesn't seem to be anywhere in sight for a long time to come.