In the early days of e-commerce in India, the sector built itself on discounts as the primary proposition. Despite e-commerce being a very small part of the retail sector (2% of total retail spending), it gained outsized visibility due to the tantalising offers and discounts. And therefore, retailers and brands started to emulate some of the practices of discounting through the year. In short, topical bursts such as Diwali and Christmas as well as interest generating, rather than sales generating, campaigns on smaller occasions such as Mother’s Day, Rakshabandhan, etc.
The approach of brands and retailers varies by categories. In the lifestyle category, retailers and brands typically allow only the past season’s or old or slow moving inventory on e-commerce portals, and reserve their best lines/designs for the stores. In the electronics category, where products are standardised, retailers are increasingly being forced to match online prices or provide additional benefits in lieu of higher prices (such as extended warranty, EMI, etc). The lessons therefore are:
Lifestyle brands that are present across fewer portals or those that ensure that online marketplaces don’t distort prices have been able to grow in both channels.
To be competitive, lifestyle brands will continue to need to build innovative promotions during the festive season, not restricted to only discounting on online channels alone.
Electronic brands need to offer products at sharp prices because price and feature set matters to customers.
The shift to year-long promotional efforts calls for either increase in margins (higher prices or lower costs) or greater sales for retailers and brands to sustain their profitability objectives.
The right strategy cannot be different across online and offline channels. If anything, different strategies across online and offline have led to rampant price comparison, reduced credibility of declared prices in customer minds and a feeling of getting cheated if prices continue to drop. The right strategy is clearly phygital — where physical store strategy meets digital/online initiatives.
Brands need to offer their entire store merchandise online, linking the digital and physical through innovative services like click and collect, ship from store, order in store and return to store.
As omni-channel e-tailers, use of i-beacons, better layout of stores to direct customers to the right places within the store, use of technology to allow customers to shop online while in physical stores (offering a simple thing as free wi-fi, which isn’t in most retail stores even now) and delivering a great experience are the key.
Most of the benefits will come through phygital. Delivering an integrated experience requires deep involvement between the e-commerce player and the brand. If the brand has a strong network of stores, it should ideally do phygital by itself. India is a large country and the biggest retailers have reasonably small store networks. Therefore, the brand needs to work with a trusted e-commerce portal where it can retain fair amount of control over what is offered to customers and the way it is offered.
Having said that, for brands to balance their stores, regular e-commerce marketplaces and phygital e-commerce marketplaces, they might need to restrict the extent of merchandise being offered to regular marketplaces (where discounting is likely), try and control the discounts to the extent possible and link their offline and phygital e-commerce marketplace to offer customers the best of both worlds.
Ashutosh Pandey, CEO, Tata CLiQ
