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Startups Moving Offline; Brick & Mortar Retail Makes A Comeback

While some startup analysts say, online-to-offline or O2O, is being heralded as the next big thing in India’s rapidly evolving e-commerce space, to some extent that is true.

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The Indian population has always been very choosy and picky about everything they buy. Whether it is a home décor item or food stuff, be it a garment or a piece of jewelry, they cannot buy without seeing, touching and feeling it. It is inevitable that they bargain on the retail price, you can blame the conditioning of the desi Indian mind.

Therefore, training Indian families to buy online was a humongous task. For a population which exclusively used to by offline, it is important for brands to build their business and image offline too.

Numerous startups which had begun their functions online first, have now started thinking about gauging the physical promiscuity with the customers. Few key reasons why companies that exclusively sold online so far are now looking to go the brick and mortar way. So, read on to know more about the online-to-offline trend among startups.

First in the crowd, was online furniture market place Pepperfry to decide to go offline with a 'experience zone' called studio Pepperfry in December, 2014 in Mumbai. This concept of studio has been well-conceived as customers can seek design inspiration and be benefited by the complimentary interior design consultancy extended by experts.Today, Pepperfry.com has 14 offline Studio across the country. Its aim is to reach 20M customers and create beautiful homes by 2020.

Pepperfry's closest competitor UrbanLadder also is taking a sharp pivot from being an e-commerce portal to a furniture brand, is also planning to set up offline stores. With online platforms becoming an extremely important part of how customers shop, offline retailers are fast realizing they need to reach out to the digital-savvy customers. Setting up a shop online, however, can be a daunting task, with multiple technologies, logistics providers and advertising strategies to choose from. And why do we say it’s unique to India, when it’s not?

The big daddy of e-commerce, Amazon, went the brick and mortar way with bookstores in the US in early 2015 and later in India. Retail expansion would be helpful for even the best online businesses to understand which sales tactics may work best in an online environment and this can become a double-advantage for them.

Another heavyweight, Jack Ma's Alibaba also made its offline foray in north China early this year. Big Indian portals like Myntra, online fashion portal owned by e-commerce giant Flipkart, is all set to launch offline 'experience stores'.

Most of the stores which are launching this year are going to be completely tech-enabled, high-tech stores and very interactive. This step has been on the minds of the marketers for a while now but the decision has seen huge progress after the e-commerce sales in the recent Diwali and the festive seasons.

Business was up 40 % this festive season and it was confirmed that online formed only a still a tiny slice of the pie. The total volume of online sales accounted for about $38 billion of India's total $600 billion retail market.

With 900M Indians still without access to internet, internet-based startups seem to be adopting the dual strategy of expanding both online and offline to reach out to every customer’s pocket. There’s no doubt that brick-and-mortar retail is a high-stakes business and even if seems the old way of buying things due to the stream of e-commerce startups, over 90% of shopping even in developed nations happens through physical stores.

To help retailers, bridge the gap between digital and physical commerce, and keep up with e-commerce competitors, dozens of startups have developed in-store technology ranging from shelf-stocking robots, to augmented reality displays, to Wi-Fi-based beacons that collect data on shopper behavior.

Many companies focus on optimizing existing store operations with the injection of cloud-based software and mobile apps, helping retailers manage things like employee scheduling, mobile payments, coupons, and shelf stocking. Others have paved entirely new paths for data collection and shopper engagement. Many even leverage frontier technologies such as artificial intelligence, augmented/virtual reality, and Internet of Things connectivity.

Brands like Warby Parker, Zap, InnOrange, Footmarks, Euclid analytics, Cloudtags, Grey Jean, Credda, Swirl, beabloo, eyeQ, MOVVO, lightspeed, ShopAdvisor, Shelf bucks and Birchbox have joined the cluster of startups to go offline and have started working on enhancing the in-store experience with digital tools. Large horizontal e-commerce which have broadly the same potential customers, are wooing them offline by creating physical touch points, such as experience zones and model stores.

While some startup analysts say, online-to-offline or O2O, is being heralded as the next big thing in India’s rapidly evolving e-commerce space, to some extent that is true. However, it seems the mindset shift of the marketer has not happened as rapidly. Most of the offline retailers who have ventured into the online space, their business strategy is unlike that of online players. They are offline players, who think hard ‘how can they leverage their offline presence while offering their products online’? That is not how it is supposed to work.

In 2015, the market saw many brands upping their ante in the O2O space. In December, mobile wallet and e-commerce venture Paytm acquired Near.in, a marketplace app that connects users with local businesses for home services in a bid to tighten its hold in the online-to-offline commerce space. And, in August, five-month-old budget hotel aggregator WudStay bought offline rival Awesome Stays to expand its reach.

Lenskart, founded in 2010, opened one of their first small physical store in Alaknanda, South-Delhi in 2014, and saw great conversion rates in just a couple of months. Since then, Lenskart has opened more than 250 brick-and-mortar stores across the country, and sells two lakh spectacles a month.

It has been aiming at expanding its footprint to strengthen its offline presence in tier-I, II, III and IV cities by opening stores. It  already has about 250 stores in 90 cities operating through the franchise route and plans to add another 240 stores taking the total tally to 500 by 2017-18.

Similarly, e-pharmacy business Healthkart which was an online firm has also moved offline. Though online scales much faster, but the health and nutrition business is more counselling led, hence having physical presence is one of the most natural progressions.

Chaayos, perhaps, is the best example of a brand straddling the offline as well as the online world, in a bid to catch the customer. There are three models — cafe, kiosks and chaai-on-delivery. Investors are certainly giving a thumbs up to such experiments.

With online platforms becoming an extremely important part of how customers shop, offline retailers are fast realizing they need to reach out to the digital-savvy customers. Setting up a shop online, however, can be a daunting task, with multiple technologies, logistics providers and advertising strategies to choose from.

So, a lot of companies are working and contributing in this shift in their own unique way, such as Capillary Technologies which provides inventory and customer relationship management solutions to retailers, is going multi-product to tap market demand and drive growth. With brands increasingly pushing for higher sales in offline stores and the omni-channel market, the software-as-a-service (SaaS) provider has shifted from a single-product philosophy to launch a suite of four new products to bring SaaS players offline.


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online tto-offline startups physical market

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