ONLINE RETAILING - BRICK-AND-MORTAR COMPANIES 'FLIP' AT THIS NEW 'MANTRA'

By Ruma Dubey

Rs.2000 crore! That’s the dream number which other e-commerce sites will now be fantasizing on. The Flipkart- Myntra deal has left everyone stunned. And we say stunned because this is India’s first ‘online’ deal, which in many ways, indicates the way in which retailing is headed in India.

A few months back we were literally shocked to hear Facebook, which is essentially a ‘computer’ social network, taking over a mobile phone application – What’s App for a jaw dropping $19 billion. And it also bought over another app – Instagram.

So multi mega billion dollar deals in the USA and now in India re happening in the world of e-commerce. And that somehow must be quite disconcerting to the small retailers, like the one near your home and many more such apparel, cosmetic, medical, electronic and general stores across India.  It also must have forced a rethink for big retailing giants too – right from Trent, Pantaloon, Big Bazaar, Westside, Croma and et al. If this is the kind of valuation for a company which does not have any manufacturing facility, no assets really to talk about; what does this mean for the brick-and-mortar companies?

Flipkart and Myntra deal might have happened to collectively beat Amazon but the fact that today such deals happen, for online retailing shops is a big leap forward for India’s e-retailing or e-tailing companies are they are called. This deal has initiated a major debate all over – does this mean the death knell for brick and mortar companies? Now that would be too drastic – think about it; without these real manufacturing companies, what can be sold in the virtual world? So the underlying truth is that for the likes of Flipkart, Myntra, Jabong, Snapdeal and even Amazon to survive, we need the brick-and-mortar companies (BM).

But yes, what probably needs to change is the attitude of the BM companies. 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 with an online presence. 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 Flipkart does, do you think the ‘secondary’ e-tailing sites will survive? If companies  can see what they manufacture sell 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. Its 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 to your doorstep, that too at much cheaper rates? Today, the urban dwellers might be frequent users of e-tailers but surely it is going to catch up all over. CLSA has put out a report and it has stated that e-commerce presently accounts for less than 1% of the total retail market in India but is by far the fastest growing retail channel. It is estimated to grow to as much as $22 billion (excluding travel) in five years from $3.1 billion as of now.

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 - Myntra deal shows that we are at the cusp of a new era and the brick-and-mortar need to wake up and see the writing on the wall.