Online or offline: which path should startups take?

Ecommerce founders who are slowly embracing offline believe online is great to start a business, but offline is better to build trust and value. 

‘O20’ or online-to-offline is the new buzzword in ecommerce.

On Day 1 of TechSparks 2018, Kishore Biyani underscored the importance of building a “digital layer on top of physical retail”. He said Future Group is a “big proponent of O2O” and would soon launch experiential retail stores.

On Day 2, the founders of two pure play online ventures, which later got into offline, discussed the merits and demerits of O2O commerce. The consensus was this: Online is great to start a business, offline is better to build trust and value. Offline increases conversions too, especially in big-ticket categories like home decor, modular kitchens, etc.

So, at what point does an ecommerce firm decide to go offline? And what are the expected business outcomes?

Rajiv Srivasta, Founder and CPTO, Urban Ladder, said:

“Around three years back, we decided that we were more a brand and not just a marketplace. A brand needs to be where the consumer is. And today, consumers for this category are 99 percent offline. They ask us where our store is even as we deliver their online orders.”

Also, “online is still perceived as discounting. You will always be price-compared. We have a solid product. We didn’t want to play the pricing game. Offline helped us offer a sense of quality”, he added.

While brand-building is key to the long-term success of a business, as Biyani too stressed upon last evening, some ventures look at building a physical presence to establish their brand. Livspace was one.

Ramakant Sharma, Co-founder, Livspace, said:

“For us, the primary reason was to build trust in customers. We sell a complex design solution. Consumers started online, but seeing the products in a physical setup was as important. So, we redirected the online funnel to offline. Today, 95 percent of conversions are from offline.”

For Urban Ladder too, conversions increased as offline stores became operational. “There were 30X more conversions and the average ticket size grew 2X. Consumers were buying the bigger products offline, more than online,” Rajiv revealed.

Interestingly, customers tend to exhibit different buying behaviour even within the same demographic.

Ramakant said, “Online is more trusted in Bengaluru. Consumers believe companies heavy on social media. But, in Delhi or Greater Noida, online is considered fly-by-night. The trust and conversions are more if the brand has an offline presence. For new consumers, initiation of the process is always offline.”

The impact of emerging tech

Even as companies are caught in the online-offline conundrum, the rise of emerging technologies like augmented reality (AR) and virtual reality (VR) has added a new dimension to retail. AR and VR have the ability to deliver store-like buying experiences to customers from within the confines of their homes.

Rajiv said,

“VR will be as widespread as mobile in the next two to three years. VR needs a lot of bandwidth to function. 5G will make VR mainstream. But, VR devices are clunky. Once devices become smaller, adoption will increase. You would be able to see how furniture fits in your house without the need for a physical marker.”

Ramakant added, “Customer buying decision was earlier a four-week cycle. Now, it has reduced by a few weeks. Our VR setup is integrated with offline. A mix of VR and offline helps drive conversion efficiencies in the funnel.”

Despite the rising importance of offline, both founders said they would choose online if they had to pick just one. Rajiv said, “I would always start online.” Ramakant concurred. “Online gives you a kind of scale that is unseen. Every year we are growing at 4X.”

He adds, “But, to bring in more efficiencies in every dollar you invest, you need to mix both very smartly, such that both your brand positioning and conversion funnel become better.”

YourStory's annual extravaganza TechSparks brings together the best and the brightest from the startup ecosystem, corporate world, policy makers, and of course, the investor community. Over the years, it has grown to become India's most loved tech and startup platform for knowledge sharing and networking. The ninth edition of TechSparks also marks YourStory's 10th anniversary. A big thank you for all your support over the years and keep reading and watching YourStory.