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2015-02-12

Why retailers should go digital

Consumer's paradigm shift to the online market is driven by the sheer power that e-commerce gives the unbeatable convenience of buying from the comfort of home.

Traditional ways of conducting business is seeing slower growth in the era of digital boom. Of late, the e-commerce market has been seeing never-heard-before phenomenal growth patterns. According to a report by eTailing India, the e-commerce market in India will hit the $25 billion mark in 2015, a huge 50 per cent jump over the $12-13 billion revenues for 2014. There are popular success stories such as Snapdeal and Flipkart, which have seen an almost exponential expansion of small business ideas owing to the online business boom.

Scores of businesses that have tided over the rough times in the past, and in fact flourished thereafter, will find themselves facing challenges, if they continue to deny and thereby resist being a part of the online boom. For instance, it is getting extremely difficult for the physical stores to keep up with their online counterparts without adopting digital initiatives. In fact, a lot of their customer base is shifting to their online competitors, leading to revenue losses.

The consumer’s paradigm shift to the online market is driven by the sheer power that e-commerce gives the unbeatable convenience of buying from the comfort of home. Where else can you shop 24x7 at your convenience? Coupled with the variety of products available for sale and their irresistible prices, customers couldn’t have asked for anything better.

Stiff competition among various e-commerce companies for customer acquisition, translates into exciting deals and innovative discounts, services and schemes that the consumer finds enticing.  These factors have been the key drivers of the online boom.

In order to survive in the face of the changing market dynamics, retailers have no choice but to build-in online selling into their overall marketing strategy. Retail, until recently, was evolving at a manageable pace that retailers could cope up with. But today, aggressiveness and rapid adaptability are a must to survive in the market. The sooner retailers realise this and jump onto the online bandwagon; the better chances they have to stay competitive and meet customer expectations. The early birds will get the best share of the pie, and will also be able to take the lead in the market.

There are several advantages of online retailing that the brick-and-mortar companies can no longer ignore:

Accessibility: An online store offers customers the convenience to place an order anywhere, anytime they like, as per their convenience. Chances of higher sales therefore increase manifold, since they no longer need to physically visit the store to buy any product.

Wider market base: The boundaries of distance and geographies are no longer a constraint for reaching out to new markets. The Internet has opened up a flood of newer worlds and newer markets, which can only spell more business.

Lower operational costs: Maintaining a large physical store is much more expensive than managing the online counterparts. There is no pressure to maintain inventory and block precious money. Revolutionary online models such as the e-commerce marketplace have created stunning success paths for the e-tailers.

Convenient marketing: E-tailers can make extremely good use of social media marketing platforms to create a buzz around their products quickly. Reaching out to a sea of audiences, the electronic format is far more cost-effective and almost viral as opposed to traditional marketing, since physical printing and mailing costs are done away with.

However, several brick-and-mortar companies that are currently market leaders in the domain are happy maintaining status quo so as not to disrupt their market position, not realising that they stand to lose in the bargain, should a competitor make the first move of taking the e-commerce route.

For instance, finding that sales on e-commerce websites were threatening offline sales, several top-class electronic goods manufacturing companies like Lenovo, Samsung, Sony, Panasonic and Canon had banned online sales of their products last year.

Closing a door of potential opportunities is definitely not a smart solution. Taking advantage of the e-commerce edge, Chinese smartphone maker Xiaomi Inc. entered India via e-retailer Flipkart.com in July 2014.

Only selling online, they were able to bring marketing and distribution costs to a minimum, which in turn enabled them to sell high-end feature phones at low prices. Owing to this, Xiaomi's Indian customers spanned 1,000 cities just six months after entering the market.

Recently, Unilever has decided to increase their global sales significantly via the online channel, estimated equal to Hindustan Unilever’s business. In the process, it plans to use its large distribution network to its advantage. This will allow both, the company and the distributors to see a quantum jump in their revenues and grow alongside, while the customer gets to experience the best of both worlds.

Ultimately, the way forward for companies, that want to dominate the market would be to find a synergistic mix between online and offline sales. When the momentum of the technical innovation, that is the basis of new-age e-tailing, meets the expertise and experience of the traditionally successful retail brands, bold new success stories of reaching untouched skies are sure to take form and make news.       

The writer of this article is Ashish Jhalani, an Angel Investor, Mentor & Advisor, Founder – eTailing India and Co-founder, Indian School of eBusiness. 

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