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Online to offline: Is the e-commerce industry declining?

By Alisha Singhal

Almost a decade ago when Flipkart was founded, nobody had envisioned the extent of growth that the e-commerce industry has experienced. Starting from books and electronics, the industry has given space to product categories like furniture, décor, lingerie, luxury products, and eyewear among others.

Rising digital influence, smartphone penetration, and consumer experience with online browsing of their favourite products have made online business a lucrative option for new entrants into the start-up world. However, as an industry develops, so does the strategy for growth and expansion. For example, Flipkart was in the news recently for entering into the brick and mortar space by becoming a master franchisee for the foreign apparel and accessory brand Giordano.

Shifting offline: An emerging trend

Flipkart is not the first of the many e-commerce players to start their operations online. All has not been well for this industry in the past year, both for consumers and investors. This has happened for various reasons including the entry of diverse competition as well as government policies—particularly demonetisation. However, to say that following a 020 strategy (offline to online) is only because of declining growth in the e-commerce industry is an exaggeration.

Amazon India is in the process of opening offline stores. In the area of furniture retail, two e-commerce companies— Pepperfry and Urbanladder—have opened offline stores. The idea is to provide interior designing consultancy and offer a holistic experience to the consumers for better decision making.

The emerging beauty retailer Nykaa has also ventured into offline stores from a pure play experience perspective and not with the motive of sales or profit. Nykaa reported a net revenue of Rs 214 crore and a gross merchandise value (GMV) of Rs 275 crore for the financial year 2016-17.

Increasing brand credibility

Another reason for an offline presence is to give the consumer an opportunity to experience the brand. Myntra’s private label ‘Roadster’ was opened as an offline store in Bangalore. The purpose was not just to increase Myntra’s profit or sales, but to make the brand credible among more and more consumers.

Moreover, a business may use offline stores as a method to cement its online business. Lenskart, for instance, has opened a number of offline stores along with services of assisting consumers with eye testing to placing an order for frames in the store itself. Zivame is another example of this, where the prime purpose of opening offline stores was to build a women’s lingerie wardrobe and help them find the right fit. It is a way to enhance the shopping experience, leading to a high conversion rate of customers entering the stores.

How physical stores are transforming e-commerce

Flipkart-owned Myntra entered into a franchise agreement with the fashion giant Mango; now Flipkart has chosen a similar path for itself. This is a sales and profit strategy which comes at a point when the company is in need of a fresh perspective.

Amazon’s $5 billion commitment to the Indian market and the fresh infusion of Rs. 1680 crore, comes at a time when the company wishes to strengthen its presence and business in India in order to take on its local rival, Flipkart. Such a scenario may not necessarily imply a declining e-commerce industry. As the business grows, consumers diversify. There comes a need for strategic growth and expansion plans to sustain the company in the future.

In the retail industry especially, in-store experiences are becoming essential for consumer engagement. They also give a direction to casual shoppers. Discounts offered by e-commerce players are surely tempting; however, physical presence and experience at the store cannot be substituted for the average consumer. At this point, there is a need to acknowledge the number of traditional players that opted to expand by going online. The primary reason was to strengthen and grow the existing business.

The e-commerce industry is surely headed towards a transformation. How consumers react to it will determine if this will remain a trend in the ever-dynamic e-commerce industry.


Featured Image Source: Wikimedia Commons

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