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What is the Future of eCommerce In India? If all original retailers start giving tough competition to online retailers?

By Amit Shroff on 15 Comments / 2948 views

This is today’s ET Headline – Original Retail Takes on E-Trailers with Discount War.

So my basic Question is, can discounts really make a difference. According to me following should be the approach if Original Retails really want to take on Online Retailers:

  • Money Back Guarantee – Hardly any original retailer follows this and will not refund the money if you are not satisfied with product or its quality.

  • Change to Old School Theory – Goods once sold cannot be returned – This you might have noticed at many store, this theory has to change, if they wish to compete with online retailer. Since everyone who makes a purchase will not return the product, only a certain % will do.

  • Customer Friendly Exchange – Most stores that allow exchange often ask customers to come after 2pm and if customer is unable to find any alternative, there is no refund policy. Hence leading to customer harassment, frequent visits, etc etc.

  • Poor Customer Service – Customer Service is poor at majority of original retailers, including after sales service. Like Future group, the long queue on billing counter during weekends, forcing customers to wait for hours, hence now customers prefer to go online, which saves time and money both.

  • Home Delivery – Even if you shop for 5000 or 10000 they will not deliver your goods free at home, where as if you shop for as tittle as 500, online retailers will delivery FREE.

So do they need to offer just better discounts or improve on their services. Please share your thoughts and points.

So Guys what will be your suggestions for Original Retailer. What changes they need to bring into their business to fight with Online Retailers?

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15 Comments

  1. Diverse options to choose from is another crucial point that makes online shopping more appealing. Online shoppers get range of options to choose from as compared to a brick and mortar store.

  2. The more important question is what can SMBs do to survive & thrive since not everyone is a Biyani or Flipkart etc with deep pockets.

    You can’t always win discount wars with goliaths when you are small so that option is ruled out. Better services? Always! Use marketplace optimization softwares to stay competitive, use product combinations to own the buy box, etc.

    When elephants fight… i try to be the smart mouse that steals ALL of the peanuts that the elephant isn’t watching & trust me smart mice can steal an awful lot from the elephants 😉 Cheers!

  3. This is the future I guess :- Whoever will have the deepest pockets and will be able to maintain the depth of those pockets will survive.

    • If only one retailer survives (which is unlikely to happen), the survivor will be able to create a monopoly and set the rules of retail market once again.

    • If two retailers survive and others get sullied during the process, the remaining two survivors will join hands together and will set the rules among them accordingly.

    • If more than two retailers survive, the discounting war will continue until only two players are left in the market 😛

  4. Discounts can make ANY business succeed.

    You cannot create value building losses.

    Just a view using my Thinking Hat : The USSR was the biggest execution in terms of ‘subsidy”- a la giving away things that were not ‘truly’ priced. That is what Socialism was. “Pleasing the People” at the cost of the State. That model not just collapsed, but could not get reversed. I dunno how long will it take to ever see a real democratic, hyper competitive model kicking in the lost Socialist economies. Add to that the sorry state of people..

    Isn’t E-Com’s ‘discounting’ just the same? ‘Subsidising’ costs to ‘please the consumer’? And in this case the ‘State’ (VC) isn’t even the eventual owner… They are just the money lenders fuelling the mayhem?

  5. Yes I agree Alok, So what should be right approach for Mr. Biyani. Do you also believe that just discount can do the trick. I personally feel no, it cannot. Today customer want more then discount, they want experience, they want quality, they want service etc etc!!!

  6. Ashish, the question is not of survival. Here the question is what will make you survive, just discount or more. Even if you have deepest pocket and loose money in each transaction, how long can you survive. Considering that who will kill whom. Online Retailer / Offline Retailer.

  7. Yes I agree, lot left in the market and if you can just collect the peanuts you can make huge difference. But then what is the future of Indian Retail and Online Retail. 

    Can they really fight back! Time will tell.

  8. “You cannot create value building losses.”

    Would be interesting to read your thoughts on AMZN which hasn’t turned profits in 15 yrs and still continues to create value for the stock holders. ( AMZN  is just an example, it’d be interesting to know your thoughts on a potential valuation bubble V. 2.0 )

  9. I wish you spent a few hours understanding ‘Cash Flow’, “P&L” and Balance Sheets vs. just quoting Stock Charts 

    For instance, check the REAL numbers behind these charts – Amazon audited results for the past 3 years :

    The RED arrow points to “Losses” – The Black Arrow points to CASH generated every year 🙂

    Now, a common man would be befuddled! HOW CAN LOSSES ADD TO CASH EACH YEAR?

    Therein lies the mystery of Amazon! Amazon MAKES MONEY EACH YEAR – They just OVERSPEND in Land, equipment, Tech, acquisitions and WRITE OFF THE COSTS HYPER AGGRESSIVELY that makes losses appear.

    Check out this graph provided by Harvard Business Review:

    If Amazon was an INDIAN MARWARI COMPANY, the losses would have been MAGNIFICENT profits even allowed by the Big 5 firms :))

    Think of it another way – If Amazon has made LOSSES all these years, WHO HAS GIVEN IT MONEY? Check how often Amazon has gone to the Stock Market to RAISE money (zero after listing) or borrowed from Banks :))

    This is what the Harvard Article Headline says:

    At Amazon, It’s All About Cash Flow

    PLEASE DO READ THIS ARTICLE!

  10. As an economics newbie, my comment was out of bewilderment of ecomm biggies like AMZN to defy the fundamental principle of bottomline based appreciation for such a prolonged period.

    Appreciate your time & expertise to elaborate on the subtle nuances & bringing more context to the data. 

  11. The answer to your first question is money 😛 If you get involved in a discounting war, only money can make you survive. Sustaining discounts for a long period requires money (actually a lot of money).

    As far as offering something more (i.e. features, functionality or customer service) is concerned, I believe any company can survive successfully if it focuses its energy on right attributes (i.e. customer support, brand building) instead of focusing on discounting. Zappos is the living example of this strategy. Sure, sales may be less in short term, but in the long term that company may survive in a much healthier position while other major players will either be bleeding in their balance sheets or will be dead as a result of this discounting war.

    For “how long can you survive” thing I would like to say that as long as a company can find money to sustain discounts, it can survive. That depends on its alertness and ability of getting financed at the right time.

    Who will survive is uncertain as all major players are well-funded, but one thing is clear – once this war is in full-swing, all of these warriors will be bleeding, including offline retailers like Future Group.

  12. So Alok, can offline retailer can play big in terms of offering genuine discount and better service then online retailer. Do are your immediate suggestion for them. 

    How can win the lost ground?

  13. Just to add my 2 pence to this dated discussion, that i just read now…. 

    1. The retail market size in India is well over $760 BILLION. Organized trade / Modern Trade combined, after over 15-20 years of existence has not been able to make any dents, let alone make deep substantial inroads into the business. It accounts for less than 2-3% of the market size. McKinsey & other famous reports in year 2000-2005,had projected modern trade to account for 30% in 2015. and….. here we are at the end of 2015. 

    2. Online business & Ecommerce, including travel portals etc, all put together are “projected” to be of the size of $ 52 Billion in 2020. By that time, 2020, the size of the Indian retail would be $ 1.5 TRILLION. So, online/ecom will account for ONLY 3.46%of the retail industry, if their prophecies were to 100% true. Surprisingly, the biggies don’t share the assumptions they make…. just magical figures out of the hat !   

    3. The fact of the matter is that the size of the market in India is really really HUGE. In reality, the so called elephants are very busy fighting for peanuts in a sugar cane farm ! And we’re all busy watching the elephant fights over peanuts on live TV, cheering & commenting on the same, like an IPL match.

    There are infinite opportunities all around, it’s just the way you want to look at things. Go out in the market, understand consumer needs better, innovate, solve real problems to serve customers  & create your own market niche !

    Don’t let the elephantine sounds of VCs, valuations, competitors,etc etc  distract you. Else, you will become the audience or viewer. And what we call the viewer of the idiot box?

  14. –

    Nice analogy w.r.t. the USSR…

  15. Nice sum up Manish…

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