Retailers gear up for e-tailing as consumers go online

Retailers gear up for e-tailing as consumers go online

Mumbai: As online retailing expands on the back of customer incentives and product discounts, brick and mortar chain stores such as Shoppers Stop Ltd, Lifestyle International (P). Ltd and The Bombay Store are reworking their Internet strategies to compete with e-tailers such as flipkart.com.

Other companies such as watchmaker Titan Industries Ltd and Lifestyle, which had no presence in the e-tailing space, are also in the process of creating a niche in the e-tailing space.

“Online retail will hit a $1 billion (around 4,910 crore at today’s exchange rate) turnover this financial year. The one category that is getting a boost online is books, followed by electronics," said Govind Shrikhande, managing director and chief executive officer, Shoppers Stop, which runs the book retail store—Crossword.

In 2011, the sales of books and electronic items in physical stores slowed as e-tailing sites grabbed market share, Shrikhande said. Towards this end, Crossword launched crossword.in five months back. It has also tweaked the strategy for its book retail chain of 80 stores to grow through the franchisee route.

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Watch what Lifestyle’s Kabir Lumba has to say about online retail and the company’s e-commerce plans.

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President and CEO of Lifestyle, Reliance Retail’s Bijou Kurien talks about the online market space and why the bricks and mortar model is still valuable.

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Govind Shrikande of Shoppers Stop talks about the impact of online retail on Shoppers Stop and how it plans to take its bookselling business forward.

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Kashyap Deorah of FutureBazaar talks about his company’s growth plans and why it isn’t in a hurry to integrate its e-commerce business with other operations.

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Likewise, futurebazaar.com— the e-commerce venture of the Kishore Biyani-led Future Group—has started selling the full range of merchandise available in its retail stores. A year-and-a-half ago it was relaunched as a deals site following an independent pricing strategy in the physical stores and online. In 2011, futurebazaar.com further tweaked its online strategy to include multiple categories as it plans to establish itself as a serious online destination for shoppers.

“Three things important for a futurebazaar consumer are price, access and convenience," said Kashyap Deorah, president of futurebazaar.com, which has in the last five years invested $20 million, raised partly from venture capitalists Sherpalo India Advisors Pvt. Ltd and Everstone Capital Advisors Pvt. Ltd.

Retailers like Titan, Lifestyle and Bombay Stores are also putting together their online plans. Titan, which sells watches, jewellery and eyewear under retail formats such as World of Titan, Tanishq and Titan Eye+, is in the midst of launching an integrated e-commerce platform for all offerings in the next couple of months, according to Bhaskar Bhat, managing director, Titan Industries.

“Internet retail is going to grow. It is an important channel of distribution," said Kabir Lumba, managing director, Lifestyle, who plans to enter the space “visibly soon" but did not want to put a timeframe to it.

Gift and home décor retail chain The Bombay Store, which recently launched a new venture—The Elephant Company—is piggybacking the e-commerce boom for the new venture and is in talks with as many as 20 online retailers. “We are tying up almost every other day with an online retailer," said Asim Dalal, managing director, Bombay Swadeshi Stores Ltd, which runs The Bombay Store. He expects 20-25% of sales to come from its online presence in the next three years versus 10% now for the new venture.

“Retail takes time to warm up to the online medium due to two reasons—the lack of touch and feel (resulting in a different user experience compared with physical retail) and the need to develop an ecosystem, which sometimes does not exist," said the Avendus report, adding that savings inherent to the e-tailing model—the reduction of inventory and high-cost retail space—provides e-tailers the margins to enable such incentives for consumers.

“Brick and mortar stores have to reinvent. Some of them are already doing it and have relaunched their websites," said Binny Bansal, chief operations officer and co-founder of Flipkart Online Services Pvt. Ltd, which runs flipkart.com.

He said that despite physical retail chains expanding online, pure-play e-tailers have an edge because they offer better service and selection. Flipkart expects to close the fiscal year with revenue of 500 crore to 600 crore. Its revenue in fiscal 2011 was around 75-80 crore.

“One of the big draws to shop online is the prices. Retailers can’t compete with pure-play e-commerce companies who have lower cost of operations and a dedicated logistics support. Even if they get the pricing right, they would cannibalize their own sales further, stressing the already stretched margins," said Arvind Singhal, chairman, Technopak Advisors Pvt Ltd, a retail consultancy firm.

The rapid pace of growth has also attracted the attention of venture capitalists, private equity firms and large retailers. According to VCCEdge, an online tracker of investment activity, in 2011 VCs and PE investors pumped $500 million into 67 deals, compared with 18 investments in e-commerce sites worth $112 million in 2010.

“Last year, close to 500 e-commerce portals were launched in India of which at least a half-a-dozen odd players would have revenues of over 100 crore in the next fiscal," said Mukul Singhal, senior associate at SAIF Partners Ltd, a private equity firm which has made early stage investments in Zovi.com, Inkfruit.com and Firstcry.com.

sapna.a@livemint.com

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