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FUTURE TRENDS IN ONLINE AND OFFLINE RETAIL IN INDIA

Article · July 2015

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INTERNATIONAL JOURNAL OF MULTIDISCIPLINARY EDUCATIONAL RESEARCH
ISSN : 2277-7881; IMPACT FACTOR - 2.972; IC VALUE:5.16; ISI VALUE:2.286
VOLUME 4, ISSUE 7(3), JULY 2015

FUTURE TRENDS IN ONLINE AND OFFLINE

RETAIL IN INDIA

Oly Mishra Dr. A. Prasad

Research Scholar in Management Professor in Management
Dept. of Humanities and Social Sciences Dept. of Humanities and Social Sciences
Andhra University College of Engineering Andhra University College of Engineering,
Andhra University,Visakhapatnam Andhra University,Visakhapatnam

Introduction:

Retailing is the largest private sector industry in the world

economy. It is the final stage of economic activity. It occupies an
important place in the world economy. It is a dynamic industry. In the
past decade the retail industry has undergone a transition in the world.
Most of the countries of the world have made rapid progress in the
retail sector.

The latest or the most recent format of retailing is Online

Retailing. This is also known as e-retailing or e-tailing. It is a business
model that executes a transaction between the business man and the
final consumer. These transactions are conducted over the internet
through electronic means.

Online Retailing or E-tailing is defined by Meuter et. Al (2000)

as a virtual realm where products and services exist as digital
information and can be delivered through information based channels.
This is the most innovative and challenging contribution to the retail
industry. The last two decades have witnessed a remarkable growth in
the Online Retailing business globally.

Present scenario in Retailing:

The retail formats have been evolving over time. The earliest
form of retail was barter system. It was followed by other retail formats
like Kirana store, departmental stores, co-operative stores, super
markets, malls etc. The latest format of retail is Online Retailing.

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Every format of retail has evolved as it has provided some additional

advantages over the previous formats. In India, people were used to
buying products from the traditional formats of retail until the advent
of internet in India. With the widespread development of modern
technologies and internet, Online Retailing or E-tailing has gained
popularity. The main objective of E-tailing is the use of electronic data
for planning and executing the distribution, pricing and promotion of
goods and services. It creates an exchange opportunity that satisfies
individual and organizational objectives. It includes a variety of
activities like online advertising, e-mail marketing, search engine
optimization and online networking. The other formats of retail that do
not involve the usage of internet like Kirana shops, super markets,
malls etc are known as Offline retailing. In other words, the physical
formats of retail are considered as Offline Retail. In recent times,
Online Retailing has become more popular than the Offline Retailing.

Baker (2005) gives some of the main reasons for the increased
acceptance of Online Retailing in India as follows:

1) Online Retailing is easily accessible and it provides more options of

products when compared to other retail formats.

2) It allows consumers to purchase goods round the clock.

3) It is easier to search for products in the Online Retailer’s website

by the use of search engine.

4) Online Retailing provides consumers with complete details about

the product and it also provides reviews by customers who have
used the products earlier.

5) The products available online have better deals and discounts.

In spite of all these advantages, there are certain limitations of

Online Retailing. According to Sharma (2011) the disadvantages are:

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1) The consumer is not sure about the quality of the product that
he/she has ordered.
2) Since the consumer places an order by seeing only the image of the
product, he is apprehensive whether he /she will receive the right
product or not.
3) There is also uncertainty about the availability of the stock of the
product with the Online Retailer.
4) The mode of payment i.e. by debit card or credit card or net
banking is another matter of concern for the consumer as they
prefer cash payment. This is mainly due to the fear about the
security of the transaction.
5) The consumer does not receive the product immediately. The
transportation of the products takes some time.
All the above stated limitations of Online Retailing are the
strengths of Offline Retailing. In the year 2014, Online Retailing
Companies have been in news. Some of these companies have been able
to raise huge amount of money from private investors and they have
been recording huge amount of sales and earning high amount of
revenues.

Online Retailing in India began with small products like books,

compact discs etc and then it gradually moved towards sale of apparels,
consumer durables etc. Initially there was lot of resistance towards
Online Retailing. The retailers felt that consumers would prefer
purchasing goods from Brick-and-mortar stores only. But with the
increased popularity of Online Retailing in India, the Offline Retailers
are feeling threatened. They believe that Online Retailers are eating
away their market share and sales. Bisen (2013) estimated that India
will have about 330 million to 370 million internet users in 2015. This
shows that India has huge growth potential in internet. This implies
that there is huge growth potential in Online Retail also. So, it cannot
be ignored by Offline Retailers. This is the reason why Brick-and-
mortar stores are also going online. The owners of Brick-and-mortar

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stores and other Indian conglomerates involved in Brick-and-mortar

retailing such as Reliance Industries, Kishore Biyani’s Future Group
and the Tata Group are also planning to go online. The Retail sector is
large and there is huge scope for all forms of retail. So, Online and
Offline Retail can co-exist.

Retailers have understood this fact and the recent events in the
Retail sector substantiate this point. In October 2014, Future group has
tied up with Amazon and Croma (the Tata Group chain for electronics)
has tied up with Snapdeal. This indicates that the power of Online
Retail has been understood by the leaders of Offline retail and they are
ready to adapt it in their business model. This is one major change that
has been observed in the Online Retailing space this year. Such kinds of
tie-ups are beneficial for both the parties, i.e. the Brick-and-mortar
stores and Online retailers. It is a win-win situation. Such tie-ups imply
that there are increased interactions between the Online and Offline
retailers.

Future models of Retailing:

Online Retailing is the latest format of retail. But it has created

resentment in the minds of the Offline retailers, so in future, the
business models will have to include both Online and Offline Retail.
Following are some of the models that can be implemented:

Chart-1

Future Models of Retailing

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VOLUME 4, ISSUE 7(3), JULY 2015

These models are explained as follows:

1) Click-to-Brick Model: In this model the Online Retailer can

display their products on their website and keep stock of the products
in their Brick and mortar store houses. The consumer can get
information about the product on the website of the Online Retailer
and can also place order on the website. Then based on the location of
the consumer, the product can be dispatched from the nearby store-
house of the Online Retailer to the consumer. Thus, the Online Retailer
will not have to incur additional costs of transportation.

Chart-2

Click-to-brick model

This model has some limitations. They are:

a) The Online Retailer and the Brick and mortar storehouse

should have an agreement on the way in which the revenues will be
shared between them.

b) The Online Retailers will have to study the location and

demand of the consumers and then decide the number of Brick and
mortar storehouses that they should set up. Otherwise they will incur
losses.

Example: The tie-up between Amazon and Future Group.

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2) Hybrid Model: This is another format in which the Online

Retailers are going Offline. They are setting up their own offline stores
so that they can reach the local customers. One of the major
disadvantages of Online Retailers is that they have to create their own
customer base unlike Offline Retailers who get customers
automatically. By going Offline the Online Retailers are increasing
their customer base and also occupying more mind share. The main
intention of going offline by many Online Retailers is to be in touch
with their customers and to reach out to them in another way. The
major limitations that Online Retailers are facing can be solved by
following the hybrid model.

According to this model, the customer can visit the website of

the Online Retailer, search for the products that he/she wishes to buy,
check for its availability and place the order. They need not make the
payment immediately. Then, they can go to the Offline store of the
Online Retailer, touch-and-feel the product and if they are satisfied
then they can make the payment. In this manner, the limitations of
Online Retailing can be overcome. It fulfills the need of Indian
consumer to touch-and-feel the product before purchase and also
addresses the fear of making payment online. The consumer checks the
quality and availability of the product and takes the product home
immediately. This model also provides the Online Retailer with a
chance to display their products.

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VOLUME 4, ISSUE 7(3), JULY 2015

Chart-3

Hybrid Model

In spite of all the above advantages, this model also has some
limitations. They are as follows:

a) The setting up of Offline store of the Online Retailer will

increase the overhead costs of the Company (cost of building, salaries to
workforce etc) which will lead to increase in the price of the products.

b) This model is possible for the Online Retailers who sell

specific products i.e. it deals with different varieties of one particular
product line. An Online Retailer that sells wide variety of products or
products across several verticals will incur lot of expenditure if they try
to adopt this model.

c) Two separate teams will be needed to manage this model. One

team will take care of the Online Retailer’s website and the other team
will manage the sales and revenue in the Offline Store of the Online
Retailer.

Example: Fabfurnish.com, Lenskart.com.

3) Brick-to-Click Model: This model is a combination of traditional

retail and Online Retail. Rather than looking at Online Retailing as a
threat, the traditional retailers are partnering with e-commerce portals

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and are looking at online shopping as an additional channel for

reaching customers. Some of the oldest names in Brick-and-mortar
retail are clearly smitten by the Online Retailing bug. Traditional retail
brands like Sari major Nalli Silks, jewellery retailers GRT Jewellers
and Kirtilal Kalidas, and garment retailer Arvind Brands are going
online. They are going Online by investing huge amount of money
in marketing and adopting new technology. We can now find age-old
companies like Metro shoes, GRT Jewelers etc online and they are also
doing well. This kind of initiative has been taken up by the traditional
retailers so that they can give access to all its offerings to a wider
customer base that too from the comfort of their homes.

Chart-4

Brick to Click Model

The limitations of this model are:

a) Two teams will be needed in this model. One team will have
to maintain the website of the retailer and the other team will have to
maintain the Brick and mortar store.

b) The retailer will have to supervise the price that is charged

online and in their Brick and mortar store. There should not be any

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VOLUME 4, ISSUE 7(3), JULY 2015

discrepancy in the price charged online and in the Brick and mortar
store.

Example: Raymondnext.

The co-existence of Online Retailing and Offline Retailing will

help in providing the consumer with the ultimate shopping experience.

Advantages of the Co-existence of Online and Offline Retail:

Instead of competing with each other, Online and Offline

Retailers should co-exist. This will be beneficial to both forms of retail
as well as to the customers. Some of the advantages of the co-existence
of Online and Offline Retail are as follows:

1) This will lead to the creation of a level-playing field as equal

opportunities will be provided to both Online and Offline Retail. This
will remove the resentment that was created in the minds of the Offline
Retailers when Online Retailing became popular.

2) Co-existence will also increase the customer base by

improving customer engagement. Indian consumers buy from Online
Retailers as well as Offline Retailers. When both forms of retail co-exist
then the consumer base will increase due to the removal of the virtual
gap between the Online and Offline shopping experience.

3) There will be a control on the price charged by Online as well

as Offline retailers. Every retailer will try their best to provide the price
advantage to their customers. So the consumer will eventually gain.

4) Co-existence will lead to creation of employment

opportunities for skilled as well as unskilled labor. The skilled labor
will be needed to maintain the Online website of the retailer while the
unskilled labor will be needed to manage the Offline store.

5) This will promote entrepreneurship by providing support to

the small and medium scale enterprises. The products of these

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enterprises will get a market and they can expand their business and
market share. Ex: Snapdeal has signed up with India Post to sell the
work of the weavers of Varanasi through their website.

6) This will also help in reduction of cost of transportation and

distribution of products which will lead to reduction in the price of the
product.

7) Co-existence will also provide better customer service. The

Offline store will be useful in resolving the grievances of the customer.
Ex: Return of product.

Limitations of Co-existence of Online and Offline Retail:

In spite of many advantages of co-existence of Online and

Offline Retail there are some limitations also:

1) The co-existence of Online and Offline Retail can be done

through tie-ups but such tie-ups are possible with large scale offline
retailers like Future Group, Aditya Birla Group etc. The Online
Retailers cannot have tie-ups with small scale offline retailers like
Departmental stores or Kirana shops.

2) The co-existence will require maintenance of two separate

teams by the Retailer. One team will manage the website and the other
team will take care of the Offline store. This means that the Retailer
will have to incur more costs. This will eventually increase the price of
the product for the consumer.

3) The retailers will have to take special measures to ensure that

the same price is charged for the same product Online as well as
Offline. This is cumbersome and time consuming activity.

4) The co-existence of Online and Offline Retail is possible for

retailers who have single or few varieties of product. It is difficult for
retailers with many varieties of products.

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Conclusion:

Retailing is an activity that leads to the fulfillment of human

needs and wants. It has been evolving since the Barter system into
different formats. The current format of Online Retailing has gained
immense popularity due to the advantages it offers. But this does not
imply that Offline Retail will cease to exist. Both forms of Retail have
their advantages and limitations. But when these two forms of Retail go
hand in hand then they have more advantages than limitations.
Gnanasambandam (2012) forecasted that by end of 2015, about 75% of
new users will access internet only through mobile or tablet. He also
mentioned that approximately 12% of the global total number of
internet users will be from India. The projected growth in India’s
Internet users is likely to be the highest incremental growth in the
world. This emphasizes that the acceptance of Online Retail is essential
for Offline Retailers.

Hence, the future of retail lies in the co-existence of Online and

Offline Retail and not in competing against each other.

References:

1. Baker.C (2005). Weighing online marketing’s benefits.

Multichannel News, 26(21), pp-91.
2. Bisen, A., Singh P., & Anand, A. (2013). E-tailing in India:
Unlocking the Potential. Technopak, 8, pp-1-17.
3. Gnanasambandam, C., Madgavkar, A., Kaka, N., Manyika, J.,
Chui, M., Bughin, J., & Gomes, J. (2012). Online and upcoming:
The Internet’s impact on India. McKinsey & Company, pp-1.
4. Meuter, M., Ostrom, A., Roundtree, R., & Bitner, M. (2000).
Self-service technologies: Understanding customer satisfaction
with technology based service encounters. Journal of Marketing,
64, pp-50-64.
5. Sharma, D.P. (2011) e-Retailing Principles and Practice. New
Delhi, Himalaya Publication House., pp-410.

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