One of the most respected, bold and gutsy leader of offline retail industry finally did a Peter Finch act and announced his war cry to all those who are engaged in endless debate over offline vs online retail: ‘I’m as mad as hell, and I’m not going to take this anymore!’
Future Group’s CEO Kishore Biyani took the challenge head on, and decided to end the hegemony of online retailers by presenting the outline of his online strategy (Link). A good competitor is always healthy for an ecosystem. If we really need some good shake up in online e-commerce industry, there is no other worthy competitor than Mr Biyani. I read his announcement with much pleasure and appreciated his adoption of mobile as a platform. Equally interesting was the response of online retailers.
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Everyone loves a good fight: bring it on! But then there was something which started bothering me in that announcement. In a nutshell, Mr Biyani decided to create an online clone with a bigger discount power to get a hard earned pyrrhic victory over new cowboys of online retail. We are going to see a massacre in the arena. Participants will bleed, consumers will be entertained. What a spectacle it will be!
The billion dollar question is, “Is cloning the only option available to Mr Biyani to take Unicorns of e-retail by horn?” To explore an answer of this question, we need to see buying process of a typical consumer. A typical consumer goes through a five-step process of Search, Discovery, Ordering, Payment, Delivery/Collection during his buying process. These five processes are more or less common in any purchase whether it happens in organized offline retail, unorganized offline retail or online retail.
Appeal of discovery
The appeal of organized retail over unorganized retail for a consumer was mainly discovery. During the early years of offline organized retail in India, it was an often statement that big retail is the place where consumers meet new products. Consumer goes to buy a product x and while going through the aisle, he collects many other products in his shopping cart. Discovery lets big offline retailers steal a march on traditional offline retailers. It puts them in the cat bird seat so comfortably that at one point, Mr Biyani decided to start investing in new consumer good products via his own investment vehicle as he knew the power of discovery will reduce marketing costs to bring any consumer a good product in the market. Apart from discovery, other stages that is, Search, Ordering, Payment and Delivery/Collection were more or less similar in unorganized offline and organized retail.
Business was good, cash registers were ringing, and financing was available: It was all peaches and cream for offline retailers. Then came 2007, and it brought with it a new challenger Flipkart and a worldwide gargantuan financial crisis. The advent of Flipkart started shifting the Indian consumer from offline to online. It was not that offline players just waited and watched this exodus. They tried to replicate online retailers by starting their own e-commerce portals, and now starting their own mobile app churning out discounts.
In this context, let us revisit the five steps of a buying process, that is: Search, Discovery, Order, Payment and Delivery/collection. Online retailers have a decisive lead over search and discovery stages of the buying process. Tables are turned, online retailers have bettered offline organized retailers’ winning recipe of an edge in discovery. Offline had an initial advantage in order and payment, but online retailers adopted COD (Cash on delivery) and created a level playing field even in these two stages.
It is the fifth and last leg of last mile (delivery & collection) where things are really rosy for offline retailers. The undisputed last leg leader is the offline retailer who has stores in the neighborhood. The proximity makes it a natural winner of the last leg. Delivery is the sole reason due to which Amazon is opening its own brick-and-mortar stores in the US and tying up with ‘kirana’ stores in India. Offline retailer has already won this battle as online retailers are trying to copy offline here.
Advantage of mobile
But the war is happening at all stages of the funnel. The disadvantage in the initial stages of the buying process is making offline retailers ignore their last stage advantage. In fact, many are thinking their last leg advantage as a burden because it is a fixed asset. Fixed asset is a disadvantage only when businesses can’t utilize its whole potential. Offline retailers are not able to utilize the full potential of their last leg advantage because they are losing in search and discovery. So, fix the problem of search and discovery rather than creating a clone.
The fix for this is to bring search and discovery online. If offline retailers are ready to bring their inventory in local stores online, they will be able to give a good fight to online retailers in search and discovery leg. Mobile has presented an opportunity to create hyper local search and discovery platform. Offline retailers should bring their inventory feed online via mobile to be discovered by people who stays in proximity of their stores. It is also an opportunity for an entrepreneur to create a mobile platform where offline retail stores can showcase their inventory.
Many retailers opened their inventory to Google in the US for local inventory ads. Results were extremely encouraging (Link). In my opinion, even Google has a limited role in this inventory showcasing. At best, Google solves search problems (buying pre-decided things), only a dedicated mobile app showing inventory of all stores in the neighborhood can solve discovery problem (impulse purchasing). This app should work as a search and discovery engine for nearby store’s inventory.
Offline retailers should be ready to provide inventory feed to any such incentive. This sort of app can only make offline retailers competitive. If no entrepreneur is ready to grab this opportunity, offline retailers should come together and create an online platform targeting search and discovery part (in the US retailers came together to solve payment related problem by making a common payment app CurrentC). This could be a win-win solution for all offline retailers and associated entrepreneur. It will also make online retail competitive.
It was an oft-repeated statement that organized and unorganized retail both will stay in India. Same is true for offline and online retail. Indian consumer needs both. But both need to get their business model right. Bleeding is good for a spectacle, but only healthy wholesome companies can create long term value in the ecosystem.
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- eCommerce industry
- Online shopping
- Future Group
- offline retail
- Online retailers
- Company Expansion
- search problems
- offline retail industry
- win-win solution