Impact of online retail on offline retail

The other day we had to buy a couple of electronics items, and we went to this long line of electronic stores close to home. Since what we were looking for was closer to the long tail, we eschewed the small “standalone” stores and went to the chain stores. And the service at each store was simply underwhelming.

Sales staff seemed extremely demotivated, and seemed to have no incentive to make a sale. There seemed to be no senior sales staff around who would guide these staff to serve us well. They just stood by standing around, and the only thing they did was to pull out the item that we requested, and then look at the price tag and tell us the price.

With the coming of online retail, one reason for people to shop offline is service. When we had to buy a refrigerator recently, we wanted some human help in determining the pros and cons of various brands, and which are the faster selling ones. And off we went to the nearby (standalone, non-chain) “white goods store”. And we had booked a refrigerator on our way out!

What online sales is doing is to set a higher bar for salesmanship in offline stores, and stores need to recognize this. Just standing around when a customer shops and showing him price tags will not cut it any more – what offline stores need to figure out is what service they can offer that online stores don’t. And provide that aggressively, in order to not lose business to the e-retailers.

Another advantage for offline stores is in terms of letting the customer touch and feel the goods – a refrigerator or a washing machine or a television, for example. The downside is that inventory costs can be prohibitive and there are only so many models that the retailer can put on display – but then based on sales patterns they can choose which models to actually put on display (the top selling ones).

One reason mobile phone sales have so easily moved online (Moto and Xiaomi, for example) is that even at an offline retailer you don’t have much opportunity to touch and feel a mobile phone – in a large number of cases it’s dummy models that are stuck there rather than working ones, and that doesn’t particularly add value to the customer in terms of purchase decision.

Finally, based on my limited sampling of “white goods” stores on 10th Main, Jayanagar 1st Block, Bangalore, I think the coming of online retail is not going to affect the standalone family businesses (that the BJP seeks to protect) as much as it is going to affect the chain stores. The former are agile and able to adapt to customer needs. It is the latter that are sluggish and seek protection.

5 thoughts on “Impact of online retail on offline retail”

  1. E-retailers should also improve their service. I recently bought a water purifier from a e-retailer. The estimated delivery time was about 7 days.The cost is less than Rs.2000 and to wait for such time for a basic product is baffling.

    1. Agree about that, but I think they are improving faster than offline guys are keeping up. So I see more of a tilt towards online retail.

  2. Agreed that knowledge-able offline sales people can be effective differentiators. But even there the edge is slipping away because of online user reviews. The aggregate of the user reviews, I find, trumps the knowledge of many in-store sales folks.

    Regarding the physical touch-n-feel as a differentiator, most people are checking out the stuff in-store and after zero-ing in the model they want to purchase, look for the best deal online. If earlier it used to be research online and then purchase offline, now it is more moving to shortlist online + check offline + purchase online. Of course, I am over-simplifying but you get the general drift.

    A day may not be far away when physical stores will charge you to just check out the goods. Of course, they need to differentiate between genuine purchasers and those who will go back and buy online. A payment system for such a model already exists in many shops – the parking tickets set-off against the purchase price 🙂

    1. I think the long-term steady state will be where stores on high streets will be primarily used for checking out stuff and not for buying. Basically these will be “brand stores” whose primary purpose is in some sense advertising. I clearly see this happening for clothes at least in the near future.

      Stock tip: short malls

  3. My fear is that eventually e-com may end up like airlines : good for society/consumers, bad for investors. I heard some vendors are selling to e-coms which then discounts it online and then these vendors buy their own stuff back keep the profit and then sell it thorugh offline channels at normal price. Indian traders/vendors are too business savvy for these ecoms to beat.
    My view is that ecoms may end up displacing wholesalers/middlemen rather than end retailers. There may be some niche where they
    will kill retailers (electronics/books/etc – Dell already sells online- stuff sold by model number/specifications). For personalized items brick model will continue to be relevant.

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