Today’s post..one that emerges after a long-ish interval, is slightly darker in tonality…
The landscape has changed so much that its difficult to imagine the amazing so called short sightedness of my own views of a year ago.
And pray, what is it that has changed so dramatically, which has forced me to examine my own views about modern retail so dramatically.
E-commerce, in one word.
The rise of e-commerce in India has been spectacular, to use a tired adjective.
Flipkart, Amazon, Snapdeal, Jabong have been the key players in the “general merchandise” or the “something for everyone” space.
Niche players like Zivame, Fabfurnish, Babyoye & Lenskart have coasted over their initial teething phases and are now attracting global investor funding, with the ambition to become part of the daily existence of their shoppers.
So where does the rise of e-commerce leave our good old brick and mortar retailer players..
In a very tough space, honestly….
The only category that remains fairly unaffected today by the ecommerce onslaught seems to be FMCG – though that too is increasingly looking like a fortress under attack – the insurgents being local portals like Localbanya et al.
Modern trade/organized retails faces high barriers like constantly increasing overhead costs (manpower, facilities, rentals et cetera). E commerce has a lesser set of variables to deal with.
Ubiquitous internet access means more power to the shopper – who can now postpone the purchase “impulse” for a better deal from a dot com retailer. And when I, as 30+ individual was able to make this behavioural change, I am sure the younger generation will find it a way of life.
Add to this the convenience of home delivery, avoiding the parking and traffic hassle, options to pay in EMIs, means that suddenly, high margin categories like apparel, consumer durables, and electronics suddenly face solid competition from the e-retailers.
Such has been the impact of this threat that leading players like Sony and Lenovo have issued advisories and restricted warranty benefits to online purchases, amidst increasing resistance from the traditional dealer channel on pricing (online prices in a large number of cases being lesser than the landing rates of traditional retailers)
It is a convenient armchair theory that India will go the way of the mobile phone in this space. Though I don’t have exact data, I remember from my telecommunications engineering class that India had one of the lowest tele densities in the pre mobile era. Within ten years of my engineering graduation, it turns out that India has leapfrogged a large number of economies on this parameter.
With a bleak foreign investment prospect, increasing pressures on profitability, and a dynamic competitive environment, I feel that a large chunk of modern retail is headed the way of the pager…an equipment seen only in the earlier seasons of House MD !