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Brick and mortar stores go online to survive e-tail surge

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While online retailers are bound to eat into the market share of brick-and-mortar players, the pace at which they add share will slow down.

By Kritika Agrawal and Rakshita Sareen

While online retailers are bound to eat into the market share of brick-and-mortar players, the pace at which they add share will slow down. “We believe the incremental disruption of online retailers on physical retailers is reducing,” analysts at Jefferies wrote.

The share of online retailing is expected to go up to 8% by 2030 amounting to $170 billion from the current 3% or $18 billion. During this time, the Indian retail market is tipped to grow by 9% as unbranded and unorganised players lose market share.

One reason for this is that brick-and-mortar retailers are all rolling out an omnichannel model. In its annual report for 2017-18, Shoppers Stop said: “This year the company will focus on strengthening its e-commerce presence to build on the investments made over the last three years to drive more than 100% sales growth, and to create seamless experience across online and offline in order to drive digitally influenced store sales, as well as adoption of digital channels by store customers and on leveraging its partnership with Amazon.

Companies such as Arvind Fashions moved online with NNNOW, a virtual high street, where each brand from Arvind has its footprint and maintains its own website. Trent Ltd uses both Tata CLiQ and is completely omnichannel. Over 60% of the orders it delivers on Tata CLiQ come through the omnichannel process and products are picked up from the stores and delivered to customers.

Reliance Retail recently said the curated online fashion platform has built a strong base of loyal customers with two-thirds of the revenue originating from repeat customers. The company had said, way back in 2015, it was poised to launch multi-channel shopping for all formats as that would offer customers both choice and convenience. “The opportunity is to integrate an offline-online’ model which can truly differentiate the customer experience”, it had said.

The government’s move to curb irrational pricing by online marketplaces which offer steep discounts will also help level the field.

In an interview after the changes in the FDI policy for e-retailers in late December 2018, Rakesh Biyani, joint MD, Future Retail, said the FDI-funded discounts had made it difficult for offline retailers and others to sell. “The changes will bring a level-playing field in many categories,” he had noted, adding that they would help local businesses build a robust model.

The impact of online retailing seen between FY14 and FY15 also coincided with discretionary slowdown, analysts at Jefferies noted. Though there was a pick-up in online funding during FY18 and FY19, growth in offline retail is strong, they said, suggesting that there was a good scope for both segments to co-exist.

If the share of online retail in India is to increase to about 8% by 2030, hitting $170 billion, it would imply a compounded growth of 21% over FY18-30.

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