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Idea Transcript


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f you are an ordinary Indian, you go to the State Bank of India (sbi) to open an account, cash a cheque or even, like Vijay Mallya, take a loan. If you are already an account holder, you go there to buy lingerie. The Juliet Pink Non-padded Bra which, unlike Mallya, will never conceal nonperforming assets (npa s), is available for `185. If you are more bottomline oriented, you could choose the Red Blue Star Ruffle Bum Bloomer (`249).

Omni

The folks at sbi might believe they are incubating a new class of assets, but some former chairmen of the hitherto-staid, 200-year-old organisation must be going up in smoke – a second time. “This is a one-stop solution for all your shopping needs, offering great discounts and a large portfolio of products to choose from,” notes sbi on the site – statebank.yourmarketplace.in. It is restricted to sbi debit card holders. But, with millions of sbi debit cards in circulation, that’s a large universe. Abhay Deshpande, founder & ceo, MartJack, a digital commerce solutions provider, explains that the marketplace is a product of a marriage between his organisation and the bank. “They have the customers,” he says. “We have the technology platform and the retailers.” MartJack is totally in charge of the operations; there are no bankers here evaluating the assets. The sbi marketplace is a sign of the times. India’s biggest bank has been online for a long time in its more regular pursuits. The marketplace is an additional channel to connect with customers (and, perhaps,

HEADY GROWTH Total retail market ($ billion)

(%)

950

10% 7.5%

520

2013

Organised retail share

2018

2013

2018

Source: Pulse of Indian Retail 2014, EY

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A New Tale in Retail

BIG BUCKS The Indian retail market is worth `3,893,425 crore today Growing at 16-18% per annum Estimated growth over the next three years is 16% per annum

India may be evolving a model of its own Source: India Retail Forum

become an Amazon some day). “It is very necessary,” says Deshpande. “In an Omni world, you can’t leave any stone unturned.”

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hat is Omni, which seems to have suddenly captured the imagination of retailers of all hues? At the India Retail Forum (irf) in Mumbai last month, there was a session on Omnichannel Retailing: Fad or market reality? Most participants didn’t know whether they would be hearing a case study on a Maruti vehicle or a shopping mall in Miami. Omni has not been part of the Indian retailers’ lexicon. “Year 2014 marks the dawn of omnichannel retailing age,” says a report by ey (formerly Ernst & Young) titled Winning in the omnichannel retailing world. ey is talking globally, not just about India. At the irf, Omni turned out to be something everybody was thinking about, but hadn’t put a word to. “When a retailer approaches customers through more than one channel, he is said to be an Omni or multichannel retailer,” says Ajay Srinivasan, director, Crisil Research. “The channels are the physical stores, ecommerce, catalogues, call centres... In the omnichannel model, multiple customer touch points are integrated seamlessly. Shoppers also have multiple options for purchase and delivery. For instance, a buyer can place an order online on the ecommerce site of Croma and pick up the order from the physical stores of Croma. Some of the retailers like Amazon and the Future group plan to go a step further u 39 u

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From bricks to clicks

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ast month, retail giant Walmart pulled out yet another string to its online bow. In its hometown Bentonville (Arkansas), it launched the Walmart Pickup Grocery. Customers can order online and pick up their shopping from a designated warehouse. This is an experiment. But it needs to work. Rival Amazon is growing at a much faster pace. Walmart is streets ahead of Amazon in terms of revenue. In 2013, the company chalked up $476 billion in sales against Amazon’s $74 billion. But Amazon is growing at around 23 per cent against Walmart’s 1 per cent. That’s in brick and mortar.

Walmart’s online sales stand at around $10 billion. The growth projection for 2015 is better than Amazon’s at 25 per cent. Many of the largest online retailers are actually meatspace companies (see chart). “Indian companies and brands have realised that they

From clicks to bricks

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f you were in a San Francisco mall early this year, you may have seen a strange sight – an Amazon store. Hold your horses; the world’s largest online retailer has not gone brick and mortar. These are pop-up stores – shortterm retail commercial space that can be put up in a jiffy. Amazon is using these makeshift – yet classy – outlets to sell Kindles. The company has also tested what it calls the Pop-up Loft, designed for developers who can attend free technical classes and scoff pizza and beer. Winter Wonderlab is Google’s brick and mortar entry. You can’t buy anything here, just check out the Google range of Nexus phones and tablets, and Chromebook computers. eBay too has an eBay Boutique along similar lines. Pop-ups are a way of testing

the waters. If the grapevine is to be believed, the experiment has proved successful. Both Amazon and Google will set up physical stores by the end of the year. Multichannel retail demands that you ride all possible horses, even those you never earlier imagined would be part of your string. According to an Accenture study, 72 per cent of US digital shoppers ‘showroom’ – they first check out a product at a store and the buy it online. An even larger 76 per cent ‘webroom’ – research the product on the Net and then head to a store to buy it. “Consumers expect to shop seamlessly across in-store, online and

must go online,” says Abhay Deshpande, founder & ceo of digital commerce solutions provider MartJack. “That is where the action is and will be. Your products may be available with online retailers. But you need to have a presence of your own.” So what are Indian companies doing? Here’s a sampler: Raymond Ltd, a textiles solutions company, has flagged off RaymondNext.com. The company also has RaymondSelect. com, ColorPlusSelect.com, ParzSelect.com and ParkAvenueSelect.com – quite a range to select from. Raymond has a budget of `20 crore to develop these sites. Arvind has set up a new company Arvind Internet Ltd. Notes Arvind group executive

mobile channels,” says Accenture. Adds Peyush Bansal, founder & ceo, Lenskart. com, a New Delhi-based eyewear company: “Consumers today research products online but shop offline.” Omni has arrived. What the big boys are still cogitating over, smaller companies and startups are implementing post haste. Eyewear

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director Kulin Lalbhai: “We are all set to be a leading consumer lifestyle player in digital space by engaging in several business models that can scale globally. Creyate (Creyate. com) is our first offering.” Creyate hopes to be a `100 crore brand by 2015. This retailer is an e-tailor: you can design garments online.

maker Warby Parker, menswear e-tailer Bonobos, babyproducts company Baby Town and Gap-owned Athleta (women’s yoga clothing) and Piperlime (women’s clothing and accessories) started life online. They have all set up physical stores. “This is an evolutionary step for modern retail,” says Bansal. Lenskart has opened physical franchised stores and is targeting 150 retail stores across the country over the next two years. “Our plan is to put spectacles on every Indian face.” Bansal is not alone in marrying online and offline. Says Vikram Chopra, co-founder and ceo, Fabfurnish. com: “We currently have two stores in Delhi and two in Bangalore. We are looking at several

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BRICK & CLICK

Hindustan Unilever Ltd (hul) is looking at a model in which it does the online booking and the delivery is through the kiranas. hul has an advantage in that the kiranas anyway stock its products; it has 3.2 million outlets across the country. Three years ago, hul launched a “Bru online café where consumers could order coffee from the comfort of their homes or offices”. It didn’t work and only betrayed

the fmcg giant’s lack of understanding of the new media. But it has learnt a lot since then. The Aditya Birla group has set up a team to steer its entry into online. It already has TrendIn.com, a Madura Fashion & Lifestyle initiative which hawks brands such as Allen Solly, Louis Philippe, Peter England, Van Heusen and Pantaloon. On the financial side, there is MyUniverse.

co.in, which offers The biggest online retailers ($ billion) the usual range of Amazon 67.9 financial products. Apple 18.3 hdfc Bank has Staples 10.4 a marketplace for Walmart 10 its cardholders. Sears 4.9 Like an online loo, Liberty 4.8 its opening page Netflix 4.4 has sections for Macy’s 4.2 His and Her. If you Office Depot 4.1 thought Flipkart Dell 3.6 had flipped over Source: Internet Retailer discounts, try this out. Handbags are array of its brands on Rupagoing at 75 per cent off and OnlineStore.com from Bumperfumes at 60 per cent. chum and Hunk to Torrido and Eurotica. “Online retailing itc has online shopping at ShopWillsLifestyle.com is offering a cusp of growth and KitchensofIndia.com. to the overall innerwear and But its real success is a differ- knitwear industry,” says the ent channel – the eChoupal company’s annual report. – which is a case study in Like sbi, it is selling underwear business schools. on the Net – with far more Rupa & Co has a wide justification. u

other cities. All these will be franchisee outlets.” “The brick-and-mortar presence helps us build trust and credibility,” he adds. The outlets are small concept stores with a limited inventory. “But they are good enough for consumers to gain confidence in our quality and brand value,” says Chopra, who is just as ambitious as Bansal. “In two years we will become India’s largest and most loved brand in home décor,” he avers. Also in furniture space is Ashish Shah, co-founder & coo, Pepperfry.com. He plans to launch four experience centres in key cities by the end of 2014. “In the past two-and-ahalf years, we have had customers who have inquired if they can check our products to experience their quality. For any individual, furniture buying is a huge investment and he would like to get a touch and feel of the product as an assurance.” The need to touch and feel

is what brick and mortar retailers earlier claimed was the reason why online wouldn’t work beyond a point. They were wrong. But is depends on the category. “Spectacles are experiential products,” says Bansal. Clothes, unless you are going in for readymades, do better in physical outlets. In fact, any high-involvement product (toys for babies, for one) should perform better in real stores. A caveat is in order here: you cannot always generalise. Books may be very high involvement, but the physical bookstore is doomed except as a place to have coffee. One key issue is trust. Every online buyer in India is worried about what he will get; he is worried about the shopping experience. The first ecommerce

players in India ripped off the early shoppers. If you got a defective item, you had to move heaven and earth to have it replaced or get a refund. Some of their tribe (even belonging to big media houses) are still around. This is where Flipkart introduced a new level in customer service and then

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destroyed its reputation in a day (see box: Bakras on Bakri Eid day). Flipkart ceo Sachin Bansal declined to respond to Business India’s questions save to forward the apology email to customers. So, is Flipkart also planning to foray into meatspace? It already has. In a corner of Bangalore is a store called Fliptomania. It’s the company’s first store on terra firma and sells a variety of Flipkart-branded products. It is mainly intended for employees, but outsiders can shop there too. The plan is to set up similar stores in other cities. You can get several novelty items out here. And mugs. No supply-side problems for the company; on Big Billion Monday, Flipkart created a lot of them. u

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Wooing the kiranas

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ill a couple of years ago, the kirana was considered cannon fodder, as the multinationals came marching in with their big guns. Today, it is accepted that, while modern trade may take some market share, the kiranas will not only thrive but also be a key component of this ecosystem. “Last-mile delivery is a big challenge for online retailers and they are trying to pilot newer delivery models given Indian challenges,” says Pragya Singh, associate vicepresident, retail, Technopak. “One of them is using kiranas as delivery points. This move can simplify last-mile fulfilment by minimising delivery locations. This can be especially relevant for a country like India where a large-scale B2C network doesn’t exist and it is difficult to locate addresses for lack of proper street and house numbers in several locations. However, these are still early days.” Walmart has come into the country with its Best Price cash-and-carry stores. It has also come wooing kiranas. “There are an estimated 12 million kirana stores in India of which as much as 90 per cent are not directly serviced by India’s fmcg majors,” says the company. “Best Price offers them access to quality products at the lowest prices.” With just-in-time supplies, the kiranas can use the Best Price store as their godown, freeing up working capital. Walmart also has a programme styled Mera Kirana, which involves training in various aspects of shop management. Walmart is the world’s largest brick and mortar retailer. At the other end of the spectrum, in online space, the world’s largest online

retailer Amazon has started a pilot project in Bangalore to use kiranas as the last-mile delivery point. If it works, this hybrid model will be rolled out nationally. Even before the new mncs could target kiranas, older companies in India have got into the act. Modern retail manages to sell products cheaper because of the economies of scale and the fact that manufacturers give discounts for bulk orders. Companies like Hindustan Unilever Ltd (hul) and Marico have started giving bulk discounts to small retailers also (though the size of the orders can hardly be classified as bulk). They have also started pilot projects to make kiranas part of the family. Select kiranas will be upgraded and, to some extent, branded. Marico’s choice of umbrella is Mera Store. The Delhi-based Dabur has called its scheme Parivaar. hul has had its Super Value Stores for some time now.

The mistake many analysts seem to have made is to equate the kiranas with the mom-and-pop stores in the US. The mom-and-pop stores are empty nesters which have become a burden with no one to take over; young Americans desert the smalltown parental hearth to head for Hollywood to become a Marilyn Monroe or Wall Street to become a Gordon Gekko. In India, a kirana is a small business handed down from father to son. “Local kirana stores will continue to thrive, as many of them are efficient, offer personalised and customised service to customers, and give sweeteners such as a credit period for loyal customers,” says Ajay Srinivasan, director, Crisil Research. Notes a ficciPwC report: “The one difference between the traditional kiranas in India and the momand-pop stores in the West is that the latter, historically, were relatively inefficient as

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compared to modern trade. However, it has been proved that the traditional kirana stores and outlets in India are ultra-efficient and have been able to compete very successfully with modern retail for a very long time. Modern trade has expanded dramatically, but the classical, traditional kirana and convenience outlets have grown, modernised and become self-service outlets to do remarkably well.” In fact, an Assocham report says Indians prefer kiranas to malls. “Malls only entertain the shoppers and make a big hole in their pockets, while in case of retail shops consumers have the satisfaction of scanning through major brands and products for which prices are generally negotiable.” If Napoleon had reached India – he had his eyes on Mysore – instead of getting bogged down in Egypt, he would have called the country a nation of small shopkeepers. u

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and involve the local kirana shops as a delivery touch point.” “To meet and exceed consumer needs, retailers have to be wherever the consumer wants them,” says Deshpande. “Omnichannel needs become their growth mantra.” At the irf, MartJack and Microsoft released a jointly-published book – It’s Commerce Sense: Omnichannel retailing handbook for offline retailers and brands. MartJack has more than 350 clients, including well-known names such as the Godrej group, Body Shop, Indigo Nation, Metro footwear and hcl . And, yes, it also runs another banking marketplace with all the necessary appurtenances – for hdfc Bank. Omni is not too old in the West, but the numbers are already surprising. Omni channel sales for Walmart were $13 billion in 2013 and growing at 30 per cent. (This is different from Walmart’s purely online sales.) Tesco is spending $750 million this year to beef up its Omni strategy.

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n India, they are not talking big bucks as yet. True, Omni is happening – brick and mortar companies are going online (see box: From bricks to clicks) and vice versa (see box: From clicks to bricks). Others are deploying kiranas as their lastmile delivery point. “Taking cues from the success of multichannel retailing in such mature markets as the US and UK and facing increasing competition from Web-only players, brick and mortar retailers are trying to leverage their physical presence in their approach towards multichannel,” says Pragya Singh, associate vice-president, retail, Technopak, a management consulting firm. “Going forward, online players will not only be competing with onlineonly players but multichannel players as well.” At the irf, though Omni was like an unknown ghost peering over people’s shoulders, everyone was thinking multichannel. Online hobnobbed with offline over Bacardi Breezers. Marketplaces chatted up product companies over brandy snifters. In the mood of general bonhomie, several deals were struck.

India Retail Forum: chatter on omnichannel retailing

Delhi-based Snapdeal announced a tie-up with electronics store Croma. “We are extremely excited to launch Croma’s flagship store on Snapdeal,” says Kunal Bahl, co-founder & ceo of the online marketplace. Croma, a Tata group company, already has an elaborate online presence. Incidentally, Tata group chairman emeritus Ratan Tata has invested in Snapdeal in a personal capacity. Last month, Snapdeal also tied up with Mahindra & Mahindra for pre-bookings of its new Scorpio variant and with celebrity chef Sanjeev Kapoor for a gourmet food category. “Partnership has been the crucial element of our business and we will continue to enter into a whole lot of partnerships,” says Bahl. Alibaba, the Hangzhou-based e-commerce giant which raised $21.8 billion in an ipo end-September, is talking to Snapdeal to make an India entry. Alibaba is present in India through Easy Business India E-commerce which it acquired in December 2010 and renamed Alibaba.com India E-commerce. The company sources several billion dollars of products from India annually. Sourcing is, of course, the tail end of e-commerce. It’s an important tail, but largely invisible to the public eye. Things are happening there, true. The Kishore Biyani-owned Big Bazaar, for instance, is asking u 43 u

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entrepreneurs to walk in with product samples and get approvals on the spot. But the real action is in the frontlines. Biyani is also talking to Amazon for a tie-up. When India’s largest retailer (Mukesh Ambani’s Reliance may dispute that) joins hands with the world’s largest ecommerce company, you know that it’s the way forward. “The Indian retail landscape is under transition,” says Debashish Mukherjee, partner at at Kearney. “The market is following a global trend, where offline and online components are expected to play a complementary role towards formation of a much more robust value chain.” Adds Abheek Singh, senior partner & director, The Boston Consulting Group: “The Indian consumer’s profile has changed considerably. He is seeking an enhanced experience in a combination of brick & mortar and online.” “Recent years have seen a remarkable transformation in the way India shops and trades,” says Ajit Joshi, managing director & chief operating officer, Infiniti Retail, the wholly-owned Tata Sons subsidiary that operates the Croma chain. “E-commerce has captivated the imagination of an entire generation of consumers. This is the reason for the three-fold growth the industry has witnessed

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kea , the $37 billion Swedish furniture maker, is setting up shop in India. Last month, it signed an agreement with the Telangana government for its first store in Hyderabad. It will be a greenfield project and the tab per store is `500 crore. Earlier, the company had looked at available retail spaces all over the country but found nothing to fit its requirements. “We think long term,” says ikea India ceo Juvenico Maetzu. “We look 100 years ahead.” (ikea already has a presence in India; in 2012-13, it sourced goods worth $450 million for its global operations.) If ikea is to be believed, most of our malls don’t measure up to international standards. The popular debate in retail is the future of the kiranas. A more pertinent issue may well be the future of the malls. “Our earlier malls were haphazard,” says Susil S. Dungarwal, chief mall mechanic, Beyond Squarefeet, a boutique mall advisory company. “Builders saw something they liked and duplicated it. After the novelty had worn off, it didn’t work.” An assocham survey last year said that almost 70-80 per cent of the space in the malls that had come up in the past two years was lying vacant. “The vacancy levels are due to poor location, poor design and poor parking facilities,” said the survey. Some have closed down; others have converted themselves into offices. Building a mall in the heart of a city is asking for trouble. Crossroads (now Sobo Central) was India’s first shopping mall. It opened in 1999 in downtown Mumbai offering 150,000 sq ft of retail space. Early days saw a mob rush; at McDonald’s, one of the anchor

Malls: A new beginning tenants, there were 100-deep queues. But the visitors (at the mall, not McDonald’s) turned out to be rubberneckers. The site was close to a pilgrimage point and religious rustics from the outskirts of Mumbai treated this as part of the itinerary; those who came to pray remained to scoff. Crossroads started asking for mobile phones, credit cards or a club membership before allowing people in. There was a public outcry and the number of relevant visitors (read buyers) began to drop. Even when the screening was discontinued, the footfalls kept plunging. Crossroads was clearly in the wrong place and the management compounded the error by taking an elitist stand. Location has always been very important for malls. Parking is another issue. In India, malls have been coming up wherever there is space available. Delhi and Mumbai were congested, so there was a rash of malls set up in Navi Mumbai and Gurgaon. “Many malls in India are today facing a crunch in terms of footfalls

and occupancy rate,” says Shubhranshu Pani, regional director (retail services), Jones Lang LaSalle India. “The reason often is that, with most malls offering more or less the same brands and stores, visitors are not finding any differentiation.” Says the Assocham survey: “Both retailers and consultants seem convinced that the mall magic has disappeared in a puff of smoke.” Tenants have been moving out as soon as their lease period expires and are proving difficult to replace. The villain of the piece is the high rental. But that is a consequence of the cost of land and nothing can be done about it. An allied problem is lack of mall management skills. Builders put up malls. They settle for a hodgepodge of tenants. Attention is paid only to the anchor tenants. Dungarwal says the hard skills – setting up facilities etc – are not so much an issue as the soft skills – interacting with the tenants. Today, mall owners are leasing space to all and sundry;

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a random survey of some malls found a fortune teller, a doctor’s clinic, an ngo and a recruitment agency. Pani doesn’t think this is born of desperation. Says he: “Many owners of vacancy-plagued malls in India have now discovered that including nonretail tenants such as fitness clubs, spas, travel agencies, vacation brokers and car servicing centres is a very effective strategy. Gyms, in particular, are a unique category of tenants that brings several advantages. For many retail landlords they are, in fact, the cavalry riding to the rescue.” According to Images Research, which released its report at the IRF, there are 250 malls coming up currently. (There are about 470 operational malls in the country today.) There will be an increase of 18 per cent in the average number of stores per mall and a 10 per cent decrease in store size. So more fortune tellers can get in but there may not be room for the parrot. Consultants say that malls can succeed in India in the long term only if they go in for events and try to attract a younger crowd. Unlike the average housewife, young India likes to spend. Organise, say, a beauty pageant with customer participation, and you will attract the right, well-heeled crowd. After that, it is for the individual stores to cash in on the footfalls. Dungarwal is optimistic. He thinks builders have traversed the learning curve and now know what they are about. One thing that’s a great success is the food court. “Every Indian is a foodie,” he says. The way to a customer’s pocket is through his stomach. u

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over the past five years.” What’s happening today is “a healthy collaboration between online and brick & mortar retailing. We at Croma are much in sync with the relevance and importance of omnichannel retailing. As a result, we have further strengthened our online presence through a strategic partnership with snapdeal.com.” Biyani’s Future group, which includes Big Bazaar, is investing `100 crore in Omni retail – Big Bazaar Direct. Says Biyani: “Big Bazaar Direct is a unique business model, which is the next revolution in the retail industry.” It basically involves enrolling ‘entrepreneurial Indians’ as franchisees. They use a tablet to sell deals to customers. The amount of the deal gets deducted from a security deposit. Big Bazaar takes care of the delivery. When the customer pays up (cash on delivery – CoD), the money is returned to the franchisee’s security deposit.

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ne can visualise scores of kirana stores joining the scheme. The coming demise of the kirana store is a story oft told, but unlikely to translate to reality (see box: Wooing the kiranas). The kiranas are also a possible solution to a growing problem: Flipkart and Amazon have stopped taking orders above `5,000 in Uttar Pradesh (`10,000 for Flipkart) because people buy things just for fun and refuse to pay up (on the CoD system, also unique to India). When the kirana does the selling, the shopowner is dealing face-to-face with someone he knows (not an online stranger). The chances of his customers taking him for a ride by refusing delivery are much lower. “Big Bazaar Direct will empower millions of entrepreneurial Indians to be a part of this revolution,” says Biyani. Biyani is not the only retailer adding strings to his bow. Other big retail chains have been slow. Smaller chains – and single stores and product companies – have established an online presence to display their wares. But many have transferred execution to the bigger online

MODERN TIMES Key retail sectors and growth projections Apparel The apparel retail market is worth `324,500 crore and is growing at 20-21%. Modern retail is estimated at 43.1% of this market and is expected to grow much faster at 30-40%. The growth is being driven by the surge in demand for readymade apparel in semi-urban areas, rising income levels and youth population, and increasing preference for branded apparel Food service The food service retail market is worth `204,438 crore and is growing at 23-24%. Modern retail is estimated at 13.3% of this total and is expected to grow at a much higher rate Mobile and Telecom The mobile & telecom retail market is worth `203,981 crore. The market is growing in all sub-segments – services (64% of the market), handsets (31%) and accessories (5%). The share of modern retail is estimated at 19.3% Jewellery The jewellery retail market is worth `201,344 crore growing at 24-26% and is expected to reach `383,000 crore by 2017. Modern retail is estimated at 10.2% of this total market and is expected to grow at a lower rate of 22% CDIT The total consumer durables and information technology (CDIT) retail market is worth `137,750 crore and is growing at 19-21%. Modern retail is estimated at 23% of the total market and is expected to grow by 28%. The market is led by retailers with multi-brand offerings Pharmacy The total pharmacy retail market is worth `105,570 crore is growing at 10-11%. Modern retail is estimated at 5.9% of this total market and is expected to grow by 24-30%. Same store revenue growth has been more than 22% Home & Interiors The home & interiors retail market is worth `102,750 crore. All three segments- furnishings, furniture and décor- have been growing. Modern retail is estimated to be 18.6%. There was a small shift of market share from furniture to décor during past two years. But the furniture segment contributes highest in the overall market Entertainment & Gaming The entertainment & gaming retail market is worth `96,094 crore growing at 14-15%. Modern retail is estimated at 14.3%. Growth has been over 50% in terms of number of retail outlets. Same-outlet revenue has 20% growth Other key sectors are beauty and personal care (`68,930 crore), eyewear (`43,243 crore), leisure (`36,009 crore), fashion accessories (`15,557 crore) and timewear (`11,592 crore) Source: India Retail Report 2015

retailers. It doesn’t always work. You can ‘shop online’ for the Funskool range of toys and baby products; the international range includes Lego, Tomy and Baby Alive. Then you are directed to both Amazon and Flipkart. Like as not, they don’t have the products in stock. Funskool is an example of product companies that are going online. For independent retailers it is becoming a matter of survival. But Omni is u 45 u

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really a matter of mindset. “The benefits of omnichannel retail include widening the consumer base geographically, effective management of inventory and providing customers with a seamless shopping experience wherein they can exercise the store pickup service, in-home demonstrations and much more,” adds Joshi. At Shoppers Stop, ceo Govind Srikhande is looking at an Omni strategy. It requires significant

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Bakras on Bakri Eid day

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n 6 October, Flipkart, the darling of India’s ecommerce sector, shot itself in the foot. Its welladvertised Big Billion Day garnered $100 million in sales. But it easily cost the company much more in terms of reputation and valuation. In social media (see chart) and in the newspapers, the company was castigated for biting off more than it could chew. The first round of the online battles has gone to Amazon and Snapdeal, albeit by default. Snapdeal claimed that it had also reached $100 million in sales. Amazon, like some other mnc subsidiaries attached to apron strings, doesn’t talk about turnover in India. The event was top of mind because of tv spots, hoardings and full-page ads in the papers. Snapdeal added to the excitement with a “Diwali Bumper Sale”. Amazon, perhaps directed from Seattle where Diwali doesn’t ring a

bell, had a Mission to Mars Celebration Dhamaka. Myntra announced “a cracker of a sale”. In its own corner, LocalBanya.com had “A Festival of dealights”. Even sbi had a Big State Bank Sale. Flipkart got a billion hits. But it alienated a million potential customers. What

Flipkart’s initial reaction was to boast about its success – $100 million in gross merchandise value in just 10 hours. Then, as the dimensions of the pr disaster dawned, founders Sachin and Binny Bansal sent an email apology to their customers. “...we are really and truly sorry... most of our special deals were sold out as soon as they went live…” On the puffed up discounts, they

went wrong? First, the servers collapsed intermittently. Second, the advertised bargains were not available; apparently, the stock got over in seconds. Third, buyers who had snagged attractive deals found their orders cancelled. Finally – and most importantly – there were widespread accusations in social media that the company had marked up prices just before the sale in order to show a higher discount.

wrote: “This breaks the trust our customers have put in us.” (Flipkart’s unpreparedness was symbolised by the fact that the BigBillionDay. com domain was booked by rivals as late as 4 October; it led to Amazon.in.) An earlier generation of ecommerce players in India had taken customers for a ride. Flipkart scored simply because it put so much stress on customer satisfaction. This

investments and new technology, so implementation may take 18-24 months. “Even today, online sales haven’t crossed more than 10-15 per cent of total sales in most advanced markets,” he says. “Physical stores will continue to provide a major chunk of sales. Online, however, will provide the key factor of convenience.”

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mni has wider dimensions. “No channel is an island,” notes an Accenture report titled Capturing the Potential of Omnichannel Commerce. “(In) today’s omnichannel commerce world, consumers, employees and business partners leverage a variety of channels to reach their objective, whether that is to research product information, complete transactions, or collaborate. What’s more,

consumers expect companies to use the digital data trail created by their activities to generate deeper customer insight.” While Omni is today’s buzzword, big data analytics will be the big thing tomorrow. (Walmart Labs already has a technology centre in India.) “The entire retail landscape is a huge pie and the good part is that it is growing and is expected to grow unabated in the coming years (see chart),” says B.S. Nagesh, founder, Trrain, a retail people advisory. “All the three formats including traditional retail will coexist and continue to grow going forward. It is a matter of customer experience as also convenience that will drive the market in India.” “Backed by increased availability of information, customers have become u 46 u

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is why the betrayal matters so much and is likely to take more than $100 million – even $1 billion, perhaps – off Flipkart’s $7 billion valuation. The company will take months to address all the complaints. The brick and mortar folks were quick to react. “You can’t take a nation for granted even for one day,” read full page ads from Kishore Biyani’s Big Bazaar. “No deal can win the trust of a billion people. You have to earn it.” The one-day shopping orgy doesn’t matter as much to Biyani & Co as the discounts being given. This is far more than manufacturers are offering. Traditionally, a store used to stock a product at a much cheaper (even below cost price) rate to attract customers, who would then buy other products. It was called a loss leader. At the ecommerce sites on the manic Monday, every item was a loss leader. How did Flipkart manage? By taking a big hit on the bottomline, of course! It has recently raised $1 billion from Tiger Global Management,

more demanding,” says Amit Agarwal, country head of Amazon India. “Though experimentation is imperative for retailers, the whole business should hover around stability. One may be relentless, but cannot afford to be stubborn in approach.” In other words, be prepared to sup with the devil, the long spoon be damned. Not everybody is so gung ho. “India continues to be an underserved market and things are not going to change in hurry,” says Sam Balsara, chairman & managing director, Madison World. “Each format has its strengths and weaknesses.” Adds Srinivasan of crisil: “Currently, omni-channel retailing accounts for a miniscule proportion of the turnover of retailers.” It will grow, he agrees. But it isn’t about to change the world overnight. Adds Singh of Technopak:

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online sales. SamMorgan Stanley TWEET, TWEET sung has decided and others. SnapSome of the Twitter comments on Big Billion Day to stop selling 48 deal has raised Rahul Roushan @rahulroushan cellphone models $100 million from Good news. The 500 Internal Server Error pages are gone from Flipkart. online. BlackRock. And Now you have 404 Page Not Found pages. 19.2% off on error message. On WednesAmazon ceo Jeff GabbbarSingh @GabbbarSingh day, the governBezos has been The Flipkart Big billion sale ended at 8:05 a.m. Thanks for coming. ment got into the in India flashing act. Commerce & around a cheque abidpatel @TheAbidPatel Industry Minister of $2 billion for Flipkart should change 500 server error to “You are our Bakra of the Day” Nirmala Sitharaphoto-ops. man told the Expectedly, The UnReal Times @TheUnRealTimes media in Delhi that this has raised the Raghuram Rajan lauds Flipkart for doing its bit to fight inflation. there had been bogey of foreign Ramesh Srivats @rameshsrivats several complaints money driving So, Flipkart is giving 44% off on Half Girlfriend. Which of course makes it just slightly over about Big Billion Indian retailers out a Quarter Girlfriend. Day. The governof business. Ecomment was exammerce has money kray kray @krazyfrog ining whether a to burn. ModFlipkart ded. Snapdeal ded. Amazon should offer their domains for sale now. policy change was ern trade is under required. siege even before In the US, Amazon has it has had time to establish are doing unethical wrong getting regarded as a disitself in the country. trade practice in the coun- count product is like a kiss of had a largely unchallenged Biyani says that selling an try” (sic) is likely to spearhead death for an upwardly mobile run and online vs online wars brand. Among the companies have happened only in speitem below cost price is anti- the protests. competition. Retailers are The predatory pricing that have taken objection are cific sectors. But Alibaba is planning to approach the has also been assailed by the Sony, lg, Canon and Lenovo. coming. It is sure to eat into Competition Commission. manufacturers. First, their lg, which has an online retail Amazon’e fiefdom. After The anti-fdi lobby, which was own outlets are impacted. presence at lgBrandStore. the Flipkart fiasco, there is acting as sob sister for the kira- Second, other bulk customers com, issued an advisory on unlikely to be another fronnas, now has further ammuni- are asking for large discounts Monday saying it had noth- tal attack – deep discounts, tion for its campaign. A new on the assumption that the ing to do with the discounts. crashed servers and dissatisbody – the All India Mobile online retailers are getting As a pre-emptive measure, fied customers. The confronRetailer Association – formed them. Third, many feel it is Lenovo is planning a sep- tation will be insidious; watch “to fight against online, which damaging to their brands; arate class of products for out for the 40 thieves. u

“Till sometime back online was looked upon as a youth-centric fad and most brands and brick and mortar retailers did not take it seriously.

Disruptive growth in the adoption of digital devices and the increasing growth of Web-influenced sales are pressurising retailers to keep up with u 47 u

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a changing environment.” “The conventional buying cycle is dead,” counters Deshpande of MartJack. He points to another of his clients tiffin.com, which started as a Web only service for lunch and dinner. Now it has six locations in Philadelphia. The project was inspired by the dabbawalas of Mumbai another channel that has diversified and is now selling, among other things, Airtel cellphone connections. When you have integrated online, brick and mortar, direct selling, TV shopping and the dabbawala, you will know that you are truly Omni. The pizza you order online, confirmed on your mobile and delivered by the dabbawala along with mailers for sbi cards will taste so much better. u PARTHASARATHI SWAMI , ARZ O O DINA and ARBIND GUPTA

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