BackRetailers increasingly eyeing hybrid model
After seeing sales hurt by e-commerce boom, several brick-and-mortar retailers are now pushing into online retail
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Bangalore/Mumbai: Retail companies are increasingly looking at adopting the hybrid retail model, which involves having both an online and offline store presence, executives at the Bangalore Brand Summit said on Friday.
After seeing sales hurt by the e-commerce boom, several brick-and-mortar retailers including Arvind Ltd, Reliance Retail Ltd as well as smaller firms such as Chumbak Design Pvt. Ltd are now pushing into online retail.
“We noticed last year that the online business was growing phenomenally without us paying much attention to it and have now decided to invest much more online," said Vivek Prabhakar, chief executive officer (CEO) at Chumbak.
The firm until 2012 was focusing much more on growing its offline presence, but now spends an equal amount of effort on growing both the online and offline business, said Prabhakar, who was speaking at the Bangalore Brand Summit, which was jointly hosted by Hindustan Times and marketing consultancy Paul Writer.
Online retail is worth $3.1 billion, or 10% of the organized retail market, and is estimated to grow to $22 billion, or over 15% of the organized retail market, in five years, according to a November 2013 report by brokerage firm CLSA.
Textile maker and retailer Arvind is close to launching an e-commerce platform, Mint reported earlier this week. Reliance said in its latest annual report that it would launch a commercial website this year.
Arvind’s proposed entry into online retail reflects the changing approach of traditional organized retailers towards the online medium.
The growth of online retailers such as Flipkart and Snapdeal has hurt offline retailers, as customers have been drawn by attractive discounts. Many retailers had asked brand manufacturers, which are also suppliers to online firms, to get e-commerce sites to reduce discounts, Mint reported on 16 March.
These steps are unlikely to work as analysts say e-commerce has become too large a medium for brands to ignore, and the best approach for offline retailers would be to make a serious attempt at having some kind of an online business.
“We at MTR believe that e-commerce is going to be the next big thing," MTR Foods Pvt. Ltd marketing head Vikran Sabherwal said. “In future, from what we understand, a lot of FMCG (fast-moving consumer goods) routing distribution will be through the online medium."
Not everyone agrees, however. “E-commerce works for things like apparel and electronics," Murali Krishnan, CEO at supermarket chain Nilgiri’s, said at the Bangalore Brand Summit. “But for staples and groceries, margins are too thin for e-commerce. Plus, I doubt if anyone would want to buy things like paneer online."
Hindustan Times is a publication of HT Media Ltd, which also publishes Mint.
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