Online retail seems to be trapped in an identity crisis. While the growth of e-commerce is blamed for lowering sales of many of the brick-and-mortar stores, over a dozen pure-play e-commerce brands are establishing their offline presence in a bid to chase profitability and build trust among consumers. So what is it that has spurred this change in tracks?
While in the recent past online sales claimed to be moving ahead at a quick trot, the reverse seems to be true now. In particular, fashion retail players are increasingly adopting the online-to-offline (O2O) model. Take case of such leading online players as Firstcry, Clovia, PrettySecrets, Zivame and Myntra that are now opening franchise outlets. Firstcry, which already has over 375 outlets, is further expanding its base pan-India. A Firstcry outlet calls for 1,500-2,000 sq. feet area with an investment of Rs 50 lakhs to Rs 1 crore. For Zivame, around 20% of business comes from offline retail, of which a majority is contributed by its 35 exclusive brand outlets. It plans to have 60 stores by 2020.
THE TRIGGERS
The reason for the churn is that despite billions of dollars of investment, online retail is merely 3% of the overall India retail market. Clearly, consumers value offline retail stores, either for convenience or as holistic brand ambassadors. Moreover, many of the smaller e-retailers targeting Tier II and III locations are facing existential crisis with a slowdown in sales and severe competition from large brands. According to market experts, these brands struggle due to lack of customer trust, inferior quality and weak supply chain, thus leading to high returns and miserable customer repeats.
The online-to-offline trend is part of the strategy to address customer demand for convenience and trust. In fact, both online and offline models have inherent strengths in adding value to customers; hence both will continue to co-exist and grow, shares Mayank Badola, COO, Offline Stores, Firstcry.
OMNICHANNEL APPROACH
Since fashion demands ‘touch-and-feel,’ the offline push has helped e-commerce players to build a brand, albeit at a price due to inventory and distribution costs. “While the average online order value is Rs 1,200-1,400, the ticket size doubles when it comes to offline,” says Amisha Jain, CEO, Zivame.
At the same time, brands are leveraging an omnichannel approach to offer a seamless shopping experience across physical stores and online portals. As Manohar Kamath, CXO and Chief, Myntra Fashion, puts it, “We are not opening stores because we want them to be big sales centres. It is a great way to establish our brand and to provide the touch-and-feel experience to consumers. In future, stores can also help us deliver products faster to online consumers.”
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