BIG BILLION DAY - WAKE UP CALL FOR BRICK AND MORTAR COMPANIES
By Ruma Dubey
“Rs.1 crore sale per minute?”
It was with a sense of disbelief and awe that Rajubhai, who owns a small electronic shop at the end of a busy street in Mumbai reacted the Rs.600 crore sales in 10 hours news of Flipkart.
He said, “ I am not able to generate even Rs.50 lakh per month, so how come this online shopping is doing so much business?”
That is surely the big question which every small retailer across India is pondering upon. Why small retailer, even Kishore Biyani seems perturbed and he along with other apparel retailers are wondering if they need to order a CCI probe into Flipkart for selling goods at discounts below the cost price, which they say is anti-competitive.
World across, this $100 million sales in 10 hours, that too on one website has caused a furore of sorts. It goes on to show the potential of India, which has become all the more relevant after the thumping success of Alibaba IPO. Online retailers are suddenly the talk of the town and everyone now seems to want a bite into this juicy pie. Tata group is already planning on a big bang entry into ecommerce – this is to be led by Tata Industries. Tata already has an online electronic site through Croma but what it is now looking at is like a site like Amazon or Flipkart, where any vendor can sell his product on its platform.
Yesterday, Raymond announced its foray into ecommerce with the launch of Raymondnext.com, its official online store. And this will be the trend soon, with each and every company, be it metal or consumer electronic goods or apparel, we are sure to see more and more of these brick- and- click kind of companies.
The potential of ecommerce in India is immense, probably bigger than Alibaba. Currently online sales generate for just about $5 billion per annum and this is against the retail industry’s size of over $500 billion. Accel Partners, a fund investing in ecommerce has put out a report stating that online retailing accounts for just 0.3% of total retail sales across India. And this we are talking about given the limited internet penetration in the country.
There is no doubt that this one-day sale, irrespective of the flak it is currently receiving on the social media, is truly a milestone in Indian retailing. This one day has shown the potential which India has and is sure to change the attitude of the Brick-and-mortar (BM) companies. It is clear as a day that they can no longer rely only on their showrooms or selling through malls; it is imperative that every big manufacturer, be it iron ore, TV maker or even services, has to provide all its products/services online. Thus we can say that slowly but surely we will see an erosion of this wide gap between BM and e-tailing companies. If Bombay Dyeing is able to sell its own products, through its websites, at good rates, offering discounts like the way e-tailing sites do, promises delivery like the way Amazon does, do you think the ‘secondary’ e-tailing sites will survive? If companies can sell what they manufacture directly, that would be the best way for BM companies to not just boost their valuations but survive and evolve with the changing times.
BM companies need to rethink what they now call their sales team. It is no longer just about opening shops or going for franchisees, it is about now having an efficient, equally employed, online sales team. There is news that BM retailers are now giving these e-tailers a hard time, asking them to cut down their discounts. This is surely because they realize the potential of these websites and the way it is eating away into their own websites and ‘real’ sales.
E-tailing is still at a nascent stage in India as majority of the people still need the touch-and-feel factor before buying anything but this is changing. What a pleasure to order grocery online and avoid the traffic, queues, jostling and pushing and the trouble of lifting all the bags, if you can get the very same goods, delivered at your doorstep, that too at much cheaper rates? Today, the urban dwellers might be frequent users of e-tailers but it is bound to catch up all over.
The clash between online and offline will only intensify but both have to understand that neither of them can today survive without either of them. The Flipkart one day sale shows that we are at the cusp of a new era and the brick-and-mortar companies need to wake up and see the writing on the wall.