At VCCircle’s E-commerce Forum held last week in Mumbai, the e-commerce heads of retailing heavyweights – Tata and Biyani – discussed offline and online commerce in India, why large retailers like them addressed the online medium and how they might combine online business models with offline play.
Tata Croma has 65 retail outlets across India and, as Techcircle.in has reported first, it is now working on an e-commerce storefront. The current site only displays a catalogue of products available on Croma. But the company is now trying out various other online-offline combinations to woo more customers than ever before. Kishore Biyani’s Future Group also had a resounding success with FutureBazaar.com, which underwent a redesign earlier this year and now claims to be selling more laptops online than offline. Other sites by the group include Pantaloons.futurebazaar.com and BigBazaar.futurebazaar.com. In the next three to five years, Future Group expects to see 10 per cent of its group sales coming from online channels – around Rs 65,000 crore in revenues.
Why Go Online
Kashyap Mehta, head of e-commerce at Infiniti Retail Ltd, which runs the Croma chain of consumer electronics showrooms, said that online stores helped increase the reach of retailers and set up a pan-India presence. The Internet is becoming increasingly accessible to consumers and it is regarded as a channel of ‘convenience’ that retailers must offer.
“An online presence helps in discovery of brands and products, as well as in research before buying. Offline retailers can set up multiple channels to tap various cycles of consumer interest – from initial curiosity to the final transaction,” he explained.
But the first step has to be towards creating an online presence – whether as a full-fledged shopping portal or just a placeholder. “Whether it’s e-commerce or not, brands need to be online,” said Anaggh Desai, CEO of Bombay Stores, another offline retailer who participated in the panel discussion.
According to Desai, offline players are seeking to go online as it is a ‘no option, no brainer’ choice and is akin to logging onto Facebook. The costs of setting up an online store are also lower than a physical one. Yet, Bombay Stores took a year to decide why it should go online, considering that most of the websites being launched were not commerce-enabled. Finally, the retailer came up with a soft launch of its site in mid-2010. Bombay Stores expects one-ninth of its sales to come from the online medium this year.
Rajiv Prakash, advisor (digital businesses) at FutureBazaar said, “Our idea is to take a social and digital commerce approach. We are adopting various digital influences – from increasing awareness through to marketing, as well as aiding in research, by offering information that is often unavailable in the physical stores.” Now, the company is working on the longer tail of merchandising.
Challenges faced by retailers are different, compared to e-commerce start-ups. “Offline retailers suffer from strategic challenges due to a different mindset,” said Mehta. Another challenge for retailers is converting an online user into a buyer. Online conversion rates vary between 2-5 per cent; however, it is around 20-30 per cent offline.
But there were always surprises in store. When Bombay Stores replicated their offline model online, they noticed that their top categories (artefacts, home décor and gifts) were not selling on the Net, noted Desai.
The question, as Mahesh Murthy (Managing Partner, Seedfund, and moderator at the panel discussion) put it, is a bit tricky: Is the future of e-commerce not pure online? Convergence of online and offline is becoming crucial, especially as consumer electronics buyers conduct research offline at the stores where they can try out various gadgets and then go online to find the best deals. Does it indicate that stores will soon become mere display windows and the point-of-sale will be shifting towards online?
Convergence would also mean marrying online features with the storefront, said Prakash of FutureBazaar. Mehta of Infiniti Retail posited that two models would co-exist – Web2Store and Store2Web.
Croma will endeavour to draw in buyers by offering both online and offline benefits at its outlets. The retailer plans to set up kiosks at its small format Zip retail stores located in airports – so that consumers can do product research and check for the best deals available, as well as purchase the gadgets directly from the physical outlets.
According to Desai, hybrid models adopted by online travel agencies Yatra.com and Via, or matrimonial sites like Shaadi.com and BharatMatrimony will be replicated by offline retailers. “There is relevance to offline play, as travel and matrimonial companies have adopted them,” he said.