The year 2015 is passing by as it leaves
behind some mixed retailing memories.
For modern retailing in India FDI policy
hurdles have been looming large as a spectre that seems to haunt the sector. The
year’s policy issues in retailing peaked when two different writ petitions were
filed in the Delhi High Court against ecommerce companies – one by the footwear
retailers association challenging that FDI norms are violated and the other by
Retailers’ Association of India on behalf of modern retailers seeking FDI policy parity with ecommerce
companies. The Court has ordered the Enforcement Directorate to probe 21
ecommerce companies for any violation. Ecommerce companies argue that they
carry out their business only on a B2B model as they facilitate the business
between the seller and the customer! The matter is still under judicial
consideration. In truth, they sell the products and services to customers
directly, though listed sellers raise each sales invoice but they collect the
proceeds on their sellers’ behalf!
Small and medium retailers across the
country especially in towns and villages are flourishing as a principal result
of good availability of quality Fast Moving Consumer Goods (FMCG) and many new
product launches in the right value price-points favoring the mass consumers,
still augmenting internal consumption. Maggi had its testing time but it is
currently coming back to life like a phoenix in the marketplace. Brick and
mortar retail growth is stunted and the pace is reportedly at around 6%, which
too is contributed to, perhaps only by inorganic growth. Above all those domestic big
retailers, who depend only on FDI to benefit, are still waiting in the wings
for divestiture (though with their mounting troubles of gross merchandise
mismanagement and product value run down by way of going on huge discount sales).
Online and multi-channel retailing have been
the focus of brick and mortar retailers in the year that is passing by, while
the online retailers were seen to be enthusiastic about opening physical
stores. Industry experts have opined that this validates the need for the
co-existence of one another! The ecommerce companies have placed trust on brick
and mortar retailing as they have opened their physical pop-up retail stores in
2015.
Online retailers had a ‘treasuring’ as well
as a testing time in 2015. Industry reports said that the Indian ecommerce
space may be in for a shake up in 2015 because they feared a fall consequent to
the poor performance of online retailers in the last two fiscals. Key players
like Flipkart and Snapdeal continued to acquire funding with increased
valuations during the year. Both companies have banked on their Gross
Merchandise Value (the worth of goods traded through the portal), which is
currently considered to be a key yardstick for performance for online retailers
as these companies have been posting huge financial losses. GMV for the online
retailers has been reported to be growing at a very fast pace. Strategic
initiatives like the Big Billion Day Sales of Flipkart, Weekend Super Sales of
Snapdeal have been undertaken to increase sales by creating a huge hype across
the nation that reportedly saw millions of app downloads! Online retailers line
Myntra killed their websites and went with their app only in 2015, which is seen as a
daring move to confidently depend on the migration of customers to mobile
shopping. Online retailers like Firstcry, Fabfurnish, Lenskart, etc. opened up
their offline presence as well. Amazon opened its first offline bookstore in Seattle in
the USA in 2015 while many bookstore branches closed their doors or de-risked
their space deployment in India during the same period.
The Industry looks forward to the growth of
the online sales customers who would again facilitate the tremendous increase
of the business. The brick and mortar retailers would have to count on their
efficiency while 'piggybacking' on successful malls in cities and high streets in
towns. The towns may be their best bet in future if at all they try to match
the growth pace of their online counterparts.
Fortune yet lies in the bottom of
the pyramid for organized retailing in India!
Happy Retailing Year 2016!!
- Dr. Gibson Vedamani
The shift towards e-commerce platform is inevitable, with the rate at which the IT sector is blooming any kirana shops without proper systems shall be blown away. The answer lies in coexistence of both medium to mutually benefit each other. Though online FMCG platforms operate without geographical boundaries their operations are restricted on local availability of FMCG goods pertaining to delayed delivery, which cannot be tolerated in this segment. Its a paradox in itself. Hence in my view the emergence of Local Hyper Market Model is the saviour bridging the gaps of inefficiency in both trades, this could retain our centuries old trade format meanwhile catering to the GenY&Z in flavours they like(online).
ReplyDeleteJust my opinion but Hyper local market model has a long way to go in terms of development and refinement to sustain in the retail ecosystem.
Online penetration in terms of FMCG/Supermarket products is poor not only consequent to the reasons you have cited but also because of infeasible margins, low ticket sizes, etc. that make deliveries difficult. So the kirana format may not face competition from onliners now. Also, we should not forget the fact that we have customers who are the Gen Y&Z as you have mentioned, are in a different 'consumption avatar' in the semi-urban and rural markets. Traditional formats may not be under threat but the modern retailers definitely are facing the music. Co-existence of physical and online formats will continue to happen - but, healthily or not would be the question that one may need to answer (the challenge for online retailers is the sustenance of their low pricing and timely deliveries whereas the same for brick-and-mortar formats would be to retain their customers)!
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