Malls and brands must accept the 'e' challenge

Rise in inflation and continuous economic slowdown has affected consumer spending which is being reflected with low sales in brick and mortar stores. At the same time a recent Assocham study revealed consumers are increasingly looking to online retailers to make their purchases owing to the

discounts being offered by brands.

A 2013 Assocham paper said regular trade (when people buy goods from shops) increased 65 percent but

online trade registered an impressive growth of 85 percent. And fashion happens to be one of the hottest categories to be sold. Arvind Singhal, Chairman and Managing Director of Technopak too agrees that, exponential increase in internet connectivity across India is one of the factors affecting physical retail. He states that from about 150 million unique internet users at the beginning of 2014, India would probably see this number grow to over 300 million by 2016.

Physical retail feels the heat

Meanwhile mall owners feel the popularity of online retail has adversely affected small and medium retailers, since people are visiting malls just for window shopping while shopping for discounted products at the click of a mouse. E-commerce platforms don’t have to pay local body tax or value added tax and there are no overhead costs involved too which makes them offer heavy discounts through the year.

Singhal feels with challenges for the brick and mortar retailers, in the backdrop of fundamental changes in Indian consumer behaviour, ‘e’ is likely to emerge as the most attractive retail channel for a large segment of urban consumers. It will offer maximum competition to corporatised physical-format retailers, especially those in high streets and shopping malls. By 2023, e-commerce is estimated to dominant ‘organised’ retail in top 75 Indian cities (cities with population of one million or more). It will account for as much as 30 to 35 percent of total merchandise sale by value in these cities and about 20 percent of total merchandise sales in the rest of urban India.

Online vs offline war continues

According to Assocham India's e-commerce market was worth 16 billion dollars (99,880 crores) in 2013 and is expected to touch a whopping 56 billion dollars (Rs 3,49,720 crores) by 2023 which will be 6.5 percent of the total retail market. 2014 looks more promising for the online industry. While some feel there needs to be a uniform discounting policy for online and offline retail, while the new season offerings or fresh stocks must be exclusive to brick-and-mortar stores. But some industry veterans are against such restrictions and point out that it can sabotage the growth of offline retail. They don’t find it competitive. Bit surprisingly, on the other hand, online fashion retailers like Myntra has said to have supported uniform discounting policy.

Singhal suggest that the earlier mall owners/retail landlords (and some brand owners too) accept the reality of ‘e-tail’ and take steps to adapt to the fundamental shifts the better it would be for them. Indeed, there are many possibilities for such mall owners and landlords to rejig their spaces and business model to co-opt ‘e-tailers’ as their partners rather than see them as adversaries. Likewise, brands should not focus too much on preserving their ‘price integrity’ across various shopping channels but instead, collaborate with their channel partners (physical retailers and e-tailers) to find ways of stimulating consumer demand and grow their businesses faster.