Today one of my friends called me for brainstorming session, Topic is what business to start next in retail? We dwelled into serious 3-4 hours of discussion and we concluded that in India now for tier 1 cities, following trends are being observed
- The real estate cost is becoming more and more prohibitive and cost are increasing
- Aggressive marketing from online retailers is making people aware and driving adoption
- Online retailers are better priced and providing great discounts and service
- Finding Skilled manpower is becoming more challenging
- Jobs being created today does not use to exist 5 years back
See the e-commerce journey in last 15 years.
- Phase 1 was specialized online retailers Flowers & Gifts
- Phase 2 was Online banking & Payments
- Phase 3 was online boking – Travel, Movie & Books
- Phase 4 was birth of social media
- Current Phase 5 is Online retailers with all type of options (tell me one thing which you can’t buy online today?)
So very clearly two things are happening, One – best low cost model available is online retailing and second – adoption of online purchase in increasing week by week.
So what future potentially will look like – People will adopt and order everything very conveniently online (where choice is not much of a issue) e.g. Toiletries, Food items, Groceries, Tickets, flowers, Books, Vegetables, Furniture, Electronics etc.
This all will lead to online retailers killing the local kirana shop and big departmental stores….so coming to the big question – what business to start? Conclusion was
- Online retailer with innovative product and great customer value
- People will only go out for Entertainment or Eating out – so either a restaurant or Bar, Games arcade, Bowling alley, Movies, theater
- Innovative Hobby, Travel or Adventure spots
- Education & Training Related
We might be totally wrong – but it was a very interesting discussion and conclusion and thought of sharing with everyone and will love to know your thoughts!!
Also as I like not to popularize myself too much – here I am with my rodinhood tee 🙂
Sridhar V
The online retailing which is seeing a growth phase will mature at some stage and you will find several companies or players exiting due to high competition, similar offerings and resulting consolidation. This happened in the dot.com sector, just started in telecom sector and is a normal business cycle where things that were totally new and fancy with high growth would suddenly become normal. There is good potential in both cases but it all depends on the focus of the business and its ability to sustain itself. I’ll just add a few points from my perspective.
Kirana and departmental stores would get impacted to an extent. However, remember that nothing is easy. The concept of “Barrier to Entry” can be advantageous as well as disadvantageous. Today setting up a kirana/dept. stores in prime localities is difficult (lack of space) and a high cost proposition (real estate rentals, other costs, etc), this is a barrier, but if one has a good shop with a regular clientele……he/she is better off since it may take time for new competitors to eat away market share significantly. Even if a couple of new players set shop – the neighborhood market is still big enough to service and earn income.
On the other hand online space is now having lesser barriers, which means if you set up one retail store there are dozens of competitors already. The cost of setting up is relatively low and entry is easier, but this becomes a disadvantage when you have more and more players eating in to the market. However, the advantage is you have large/wide audience online (unlike kirana or dept. which have a limited geography). At some point this hype about the online retailing will die down….and it will become another normal industry with normal growth.
In my view the local kirana or dept. store will not get wiped out fully. And neither will online retail industry fail. Both formats will co-exist and complement each other. I dont think people will always think of buying stuff online because they also like to go out and check new stuff, products, shops, etc…..and this is true of middle class people. How many times do you remember buying vegetables or groceries online? Not too often. But you may have bought a Chetan Bhagat book online. So we still prefer to do a lot of stuff offline.
Rochak Sharma
Totally agree with your thought process and thats is the reason – my conclusion is the big departmental stores will get impacted more rather then the small kirana stores