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Why e-commerce might be winning the battle against conventional offline retailers

Bhupendra Khanal
posted on 25th June 2015
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I always thought e-commerce would remain niche, and that offline retail would remain the norm, the significantly dominant channel. Needless to say, I don’t think so anymore.

Offline retail has several advantages:

  • customer habits
  • better space for displaying a great mix of products
  • placement in areas of customer flow (like shopping malls) etc.

They also have more established players, who have been doing business for a very long time. Thus, they understand the supply chain and art of selling better.

Even with so much of firepower, they are losing. Several major retail houses are being forced to cut down in size, pushed to a niche category, selling out of certain parts or completely thrown out of market.

My friends believe it's VC money that's creating the whole online drama and once that dries up, online retailing will see a major fall. That may be partly true.

This brings me to the main point; is the VC money the single biggest factor? I don't agree.

OFFLINE-ONLINE-RETAIL

The biggest differentiator is - the data and the intelligence practice

I am a big sports lover, particularly football.(I support Argentina and Barcelona.) How many retailers know this? I doubt anyone does, not even major multi-brand retailers like Shoppers’ Stop or JC Penney, or sports gear makers like Nike, Adidas or Puma.

It’s a sorry state of affairs that the only information they have about me is my phone number and my transaction details. That, too, is possible only if they have an active loyalty program of which I am a member. In rare cases, companies have my email ID.

Now, consider Myntra or Jabong.They know what I browse, what I buy. They can discover my interests not only from my purchases but also from my browser history.

These companies ask me to login through Twitter, Facebook or LinkedIn. Then,they can access my public profile and my public conversations. They not only know that I am a football fan, they also know that I love watching movies and discussing economics.

How to utilize it?

Next time there is a World Cup, Euro Cup, La Liga or anything else, Myntra can directly help me by providing the ability to quickly buy the latest jersey. They can also invite me for chat sessions or call me to participate in their campaigns.

Puma, Adidas may still benefit by indirectly selling their stuff, but they lose by not being the leader in the customer's memory. This spot has been taken by e-commerce companies.

How did this happen?

I believe that it’s about attitude and not about options.

Offline businesses have never been about the customer, they’re always about the product.

You keep the product, find the right mix of what customers buy, display theseon the shelf and wait for customers to come in and buy your product. So offline companies have intelligence about mix, color preference in mass, running fashion trends and more. But they have no idea about individual customers.

This comes with their attitude of going with the flow and mass acceptance. This is the same reason why they prefer TV, radio and newspaper ads and spend very less on social/digital.

But, how can offline guys do it even if they want to?

Now consider these scenarios. Most retailers have huge social followings (even though very few have good social/digital strategies in place). These social followings can be mined.

Retail stores can collect data about the customers, by giving them a form to fill, that asks about their social profiles, and their top five preferences. But this cannot be a one-time activity; it must be an ongoing one. Remember, for e-commerce players, you have incentive to signup in the form of rewards.

Third, they should stop thinking about loyalty program guys as solely holding the responsibility of gathering data, and empower them with analytics, to win the big retail battle.

Enterprises need to take the lead. Vendors/partners will do what is expected out of them or what is asked for/paid for.

Understanding customers to customer- and not sale-centric marketing

I like these two furniture e-commerce companies, Urban Ladder and PepperFry.However, I hate the number of mails they send. I only buy at most ten pieces of furniture a year,sofour mails a week just pisses me off. This is a problem these e-commerce companies have.But actually, I am fine with receiving five mails a year from any good retailer.

If companies have good analytics and data practices and time their emails very well, this can be of immense value to the company and even greater value for the customer.

I watch movies a lot, so I would be happy to receive a movie voucher. I like football too, so I would like to get a voucher related to that as well, especially during league time. I would love to attend a sports-themed party and would gladly pay for it. Every customer is happy out their information, provided you show him some value (could be a league fixture table or a free ticket to the stadium). What I wouldn’t be interested in is the emails that your inexpert, possibly understaffed marketing department feels the need to send every single person on their mailing list. This will only show me that neither am I special for you, nor is her job valuable for your business. [I being the customer]

What next?

So the next time a company goes out of business, doubt its ability to understand its customers, ability to drive useful insights and ability to use these insights for highly-targeted and value-based campaigns.

Amazing Supply Chain + Good Location + Old and trusted Brand < Good Customer Data + Great Analytics Practice + Effective Communication

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