How E com companies can embrace FRANCHISING to Grow & Make Sustainable Business Modelsonya chowdhry
I once read a wise man say : " Growth is Good but Growth with Sustainability is Better".
I have personally been a firm believer of Stability and Sustainability , as a larger principle in my life and I believe a country's economy or a business or an enterprise are no different to this principle.
Amazon , the Giant retailer and a name synonymous with E-commerce , was in news almost a year & half back when it opened it 1st physical store ( a bookstore) in Seattle's University Village. It was a very bold move then as none in the category and industry had taken this path before.
Lenskart , which started as etailer, today runs more than 200 stores , Firstcry, with more than 150 stores Caratlane with over 13 stores , Pepperfry with 10 + stores are all examples of online companies successfully building their offline presence and in many cases presence is dominated by franchising .
On the other hand , we have offline counterparts coming with online platforms like : Cliq by TATA, Ajio by Reliance , NNow by Arvind which are few of many big names we see ,have now adopted an omni channel strategy.
Hence , the success stories of originally e com retailers running brick and mortar formats and the big guns in the Indian retail industry ; who originally ran only physical stores integrating Offline and Offline resp. in their business model is a clear indication of the new trend of bridging both the worlds. While , it may be a new trend in India as also E com is a new entry ( as compared to the mature markets ) in Indian retail environment but in mature Ecom markets like the US , the development had started many year back with specialty and clothing stores like Warby Parker ,Casper , Bonobos all coming offline. So , the debate no is Offline or Online , But the bigger Question remains is that of SUSTAINABILITY of a Business Model .
With the E com buzz at its peak in the last 2 - 3 years with larger than life valuations and multiple rounds of funding , the euphoria has now come to an end now. But , there is large amount of capital being invested by PE & other foreign investors in the E -com space and hence , it will neither be viable to wind up as bad investments and nor realistic to continue putting more funds.
In this situation , there are only 2 areas to be addressed :
1. to have a healthy Bottom line .
2. run a business model which is build to Sustain.
We have read enough now about the highs and lows and more on what and why it didnt work in the e com industry but the time has come now , where we create a solution. Here , Franchising can play a vital role and here is why:
Our GDP which stands at USD 2.04 tn( nominal ) & 8 tn (PPP) is a very clear indication of our consumption. Being a developing country driven by consumption the gap between the nominal and purchasing power parity shall be high. Consumption is seeing a departure from un-organized to the organized sector.Franchising contributes , 1.4% of the Indian GDP and bound to double in the next 2 years owing to organized consumption.
Franchising , being a global phenomena , impacts all industries and majorly consumption led industries. Take a minute to think how your daily needs are being fulfilled and you will realize most of it comes from brands which franchise. The biggest names in world which are synonymous with Coffee, Burger , sandwiches in specific categories (of food) and Fashion , education, Retail , Beauty and our home grown heros like BATA, Sagar Ratna, Lakme , Naturals Saloon and many others you can reckon ; have just one thing in common ..... which is Franchising.
Franchising , addresses , 4 critical pain points , which any business has ( e-com/ market service place are no exception) :
2. TIME & SCALABILTY
3. UNIT ECONOMICS & OPERATIONAL EFFICIENCY
4. HUMAN RESOURCES
Franchising , helps in combating the above mentioned issues and lets the Entrepreneur/ Brand focus on its core competency where he can develop and improve his "on the business competency" by optimizing their back-end for scaling up and let the franchisee get "in the business role" to bring efficiencies on the ground.
Technology is the forte and the foundation of all or mostly all the e com businesses but I feel technology by itself is neither a business model nor a complete solution to the problems being faced , especially by the new age businesses. Hence , when such businesses bundled with franchising , will lead to Value Creation for all stakeholders.