Advisory Apr, 22 2011

Reverse Trend: from Online to Offline Stores

Franchisors and retailers across the country are exploring online and offline modes of expansion for their business. Few of these are making a move from online to offline mode and others from offline to online mode. Read on to know more...

By Ramanjit Kaur
Feature Writer
Reverse Trend: from Online to Offline Stores

The traditional way to get started with a business is to build a brick ‘n’ mortar store to sell various products and services. The new age retailers and franchisors, however, are exploring the scope to initiate their businesses online first and their taking on to the offline mode (virtual). Deliciousnow, is the most recent addition to the list of such companies.  The company started with an online gourmet store, and has recently announced its plans of opening physical stores in the various metropolitan cities of the nation via franchising. Bigshoebazaar.com, is another big online retailer that sells shoes, apparels, fashion, jewellery, bags and accessories online and also supports a chain of franchised stores across the nation. Nevertheless, there are many other online portals that are still to have physical presence yet, which includes eBay, Indiaplaza, Flipkart and so on.

Potentials in online and offline stores

No doubt an online shopping portal is an emerging concept and is continuously gaining grounds in India but when it comes to the expansion of business; it becomes difficult for an entrepreneur to grow his business only via online store.

Offline stores are essential

  • For expansion of the brand:  Offline stores are quite essential for the expansion of the brand. As Bigshoebazaar.com’s Director, Manmohan Agarwal says, “We look at online and offline retail formats as equally dynamic. But expansion of online business via franchising is restricted because there are not many people who understand the online business and how it is to be promoted and how it is to be run successfully to generate profits.” 
  • For experience of the product: The first hand experience of a customer is what matters the most in a business for repeat footfalls. With a physical store, this experience is in the hands of the business/ franchise owner to offer the best and customer friendly services thereby ensuring repeated footfalls. Customers always prefer to go out and shop what they find is best and comfortable for them as online shopping do not give them the option to wear a pair of shoes or a dress to check out the fit and comfort before buying them. In other words, shopping experience is well translated through offline stores than an online shopping portal.

Online stores are essential

  • For large and quick footfall on daily basis: The online portals always have a mass appeal. As Agarwal says, “The biggest strength of an online store is that you have an ability to get in a large and quick footfall on daily basis and generate revenues whereas an offline store of 2, 000 sq.ft just cannot even of having 100, 000 footfalls every day.”
  • For low budgets: As online stores are present only in an abstract form so there is very less amount of investment that is required which is quite high in case of offline stores.

Comparing Pros and Cons

Retailers usually develop their online portals for marketing purposes and generating revenues through the pay per click arrangement. But launching a brick ‘n’ mortar store after establishing an e-commerce business clearly indicates the value of physically located outlet over an online portal. Though both have their own pros and cons:

Investment: Setting up a web portal may look an easier way to get started with a business but in reality an e-commerce business is not just about developing a website. As Agarwal says, “We require an investment of Rs 25-40 lakh with an area of 1, 200 sq. ft for an offline store against an online store that costs much higher. The logistics costs and marketing costs for online business are much higher than for offline stores.”

Logistics: When operating an offline store, an entrepreneur needs not to worry whether the shipment has been delivered to the client on time or not. On the other hand, in online stores, an entrepreneur needs to keep a track of the shipment and the timely delivery of the product or the service to his customers.

Inventory maintenance: Logistics cannot work effectively and efficiently if the inventory for the products is not maintained properly. As Agarwal says, “We promise and deliver 48 hours shipping, this happens only because we have our 100 per cent own inventory model. We buy and then sell as opposed to other players who first sell and then buy and ship it. This is the fundamental difference than what others are doing.”

Payment mode: Lastly, the mode to pay online bills should be an easy experience for the customers. Retailers facilitate the customers with the various modes of paying the bills. They can cash on delivery, or pay bills through credit or debit cards. While in case of offline bills, the mode of payment is easier and convenient.

Franchising the concept

Franchising requires lot of communication between the franchisor and the franchisees. It is also difficult to find capable partners for the expansion of the franchise business in case of online franchise company. Also it is difficult for franchisees to get an idea about the performance and authenticity of the franchisors. Franchisors having physical stores can easily invite partners for the expansion of their brand. Also all the aspiring entrepreneurs are not internet savvy. Such entrepreneurs always prefer to have first experience the look and feel of the brand before making an investment into it.

In nut shell, both the concept has their importance in today’s retail scenario. While online brings in quick traffic, offline retail successfully retains the traffic. Though online retail is a marvelous business concept and getting popular in India too, but it will still take time to fully develop as the Indian customers still preferred to go and experience shopping than sitting and clicking on the products to buy them.

Related: Short cut for long lasting franchise success

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