Mint Money festival special: Online versus offline
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We are in the midst of the festival season and there has been a barrage of offers across various sectors. Numerous advertisements from both online and offline retailers could be seen as early as September. This time, the e-tailers have tried to one up the brick-and-mortar peers by offering app-only deals. While much of the festival season is left, it has been strong going so far. A recent Nomura Global Markets Research report—Holiday shopping season starts with a bang—said that quarterly expectations for India’s holiday sales are close to $4 billion. Read some of the other findings from the report with the stories. While most of the action seems to be online, offline retailers are trying to keep pace, if not in price then in service and customer experience. Mint Money takes a close look at different types of offers and how one can be a smart shopper. We take a look at popular segments of electronic gadgets, white goods, apparel, jewellery, furniture, and even real estate and gold, and bring to light some of the hidden details.
In today’s world, where technology upgrades at a fast pace, everyone wants to own the latest gadget as soon as it hits the market. The festival season adds fuel to the fire, with buyers spoilt for choice on both online and offline platforms.
This year, e-commerce participants managed to grab the first mover’s advantage and started their festival season sales as early as September-end. Earlier, the biggest sales used to happen closer to the main festivals.
You may have seen many advertisements by online portals in newspapers last month, and these are still continuing. In fact, according to a recent report by Nomura, in the sales by the three top ecommerce marketplaces—Flipkart, Snapdeal and Amazon India—mobile phones were the biggest selling category, followed by apparel.
Mobile phones are also high demand because manufacturers come up with new models almost every other month. Moreover, festival season sales woo customers by giving offers and “best-price” on their favourite gadgets. Among these, Apple’s iPhone has been a hot favourite with Indian customers. Mint compared prices of iPhone 6 16 GB across the mobile apps of the top three online retailers, and brick-and-mortar stores—Croma, Spice Hotspot and Vijay Sales—during the festive season sale on 15 and 16 October.
While physical stores were far behind in the price offering, online stores did offer good discounts. However, the maximum retail price (MRP) had high variations across e-tailers as well, which, in turn, meant big differences in the discounts offered. Even as Snapdeal and Amazon offered the phone at the same price of Rs.37,999, the former showed an MRP of Rs.56,000 and the latter of Rs.52,000, making a difference of around 5 percentage points in the discounts offered by the two. </p><p>
“The difference in MRP is mostly due to the different prices offered by the sellers on the online retailer’s platform (marketplaces). Also, it is a common practice in retailing to mark up price by a big margin and then sell on a huge discount, keeping the sales margin intact,” said Devangshu Dutta, chief executive officer, Third Eyesight, a retail consulting firm.
Apart from prices, the delivery time and charges also varied across sellers on e-tailers.
While the variation in online prices was high, the selling price quoted by physical retailers had miniscule or no discount on the MRP. Moreover, their prices were much higher than what online stores were offering. For example, for the Apple iPhone mentioned earlier, the difference was at least 19.7%.
However, the benefit of paying the extra money is that you can get the product at once. Also, the process of exchange is simpler as you don’t have to wait for the replacement to be sent as in the case of etailers. This factor is especially relevant if you are buying a product whose online and offline price is the same.
In October, Vipin Venugopal, a junior executive at a private manpower solutions firm in Mumbai bought a shirt by Pepe Jeans from an e-commerce website for Rs.600. “The price of the same shirt at the showroom was Rs.1,699. It was a steal,” said Venugopal. And seeing such mouthwatering discounts, Venugopal bought more things online for his sister, Vidya. “I bought a total of seven items for my sister during the online discounts. We had scanned showrooms for some kurtas, but online we ended up getting at least 40% discounts,” said Venugopal.
Going online to buy clothes could work in your favour, too.
According to a survey released in October by industry body Assocham, the most popular e-commerce websites—Flipkart, Amazon, Snapdeal, Myntra and Jabong—have been doling out price cuts or discounts on purchase of popular brands of apparel, footwear and electronic goods, coinciding with the festival period. The growing trend is being attributed to the fact that all reputed Indian and international brands have tied up with these websites and their goods are being offered to consumers at much lower prices than in their retail stores.
“For the past couple of years, discounts on websites have been good. The discounts are now coming down but the reality is that consumers are checking out online platforms for apparel. When it comes to clothes, so far, pricing has been the key parameter rather than convenience,” said Saloni Nangia, president, Technopak Advisors Pvt. Ltd, a New Delhi-based retail consulting firm.
Mint did an online and offline survey of major apparel brands and found that select products available on e-commerce websites were cheaper by up to 20% as compared with the same products in a mall.
“Most of the discounts are given by the portals directly for customer acquisition and I don’t see this changing in the next 18-20 months at least,” said Nangia. According to an April report by UBS Securities India Pvt. Ltd, by the end of the calendar year, fashionwear, including apparel and footwear, is expected to be the largest retail category online, with sales of $3.9 billion, bigger than sales of electronics and consumer durables at $3.5 billion.
Retail analysts also believe that as Indians evolve in terms of fashion, buyers will slowly move towards curated merchandising than just looking at discounts.
“You can expect niche businesses to evolve where discounted pricing may not be available,” said Nangia.
What you get
E-commerce websites, too, are evolving. Some of them now provide trend and style guides along with discounts. Flipkart, for instance, has a feature called ‘Image Search’ where you can browse through an assortment of clothing. You can click on a picture and search for similar products on the portal’s mobile app.
Many of us might be doing this: you go to a mall, and if you like a product, immediately go online on your smartphone to check for any price differential. However, before clicking on the ‘Buy Now’ option, do factor in other costs such a delivery charges, if any. Apart from that, since most of the websites now act as a marketplace (products are provided by multiple parties; transactions go through the website), you may want to check the delivery duration when buying from different sellers.
Earlier, if someone wanted to buy an appliance, she would go to not one shop but many, look at the product, compare prices and only then buy. But today, shoppers are willing to skip the physical inspection and buy the product online if the price is right. In fact, prices for white goods such as televisions, washing machines and refrigerators are usually lesser online than in-store. For instance, the Samsung 32J6300 32 inch Full HD Smart Curved LED TV was available on Flipkart for Rs.42,290 while the price was Rs.49,900 at the Samsung store. The same was the case for an LG 6 Kg fully automatic top loading washing machine. The price was Rs.13,770 on Amazon.in during its festive sale, while offline store Croma was selling it at Rs.16,300. Another advantage of buying online is that you can read reviews of other buyers before you choose a product.
However, while buying online, it is important to compare prices across sites and also look at the delivery and installation details. It would be advisable to go through comments posted by other buyers on social media websites or the portal itself, as sometimes the installation and delivery is delayed or even improper. For instance, Mayank Agarwal from Delhi bought an Onida AC from Flipkart. “It promised free standard installation, but the installation team did not call or turn up even after 11 days. I was getting repeated calls from Onida dealers who were charging Rs.1,500 for standard installation, which was otherwise to be free.” Mint had sent an email to Flipkart seeking a comment regarding the complaint, but the e-tailer did not respond.
Another issue is warranty and customer service. Online buyers of large appliances often don’t receive proper warranty or customer service from the brand. Take the case of Vijay V. from Chennai, who bought an LG refrigerator from Amazon. “LG customer service denied replacement of parts when I encountered a manufacturing defect even though it was under warranty,” said Vijay. In an emailed response to Mint, an Amazon spokesperson said, “If the customer reaches out to us during the return window applicable for that product category, we would initiate returns or replacement of the product. Brands are obligated to honour the warranty for a genuine product irrespective of the sale channel.”
These just might be the reasons why it won’t hurt to spend some time and effort to check out in-store deals as well. Brick-and-mortar stores have some advantages that online portals don’t offer. For example, you can bargain for a better price or ask for better freebies. You can even ask the store if it can reduce the cost of the freebies from the product’s cost. Also, the installation and warranty might be much better as stores have in-house staff for installation and give the warranty upfront along with the bill.
As regards payment, the finance options are almost the same for both. Equated monthly instalment (EMI) options are available with most online and offline retailers. For in-store purchases, you can make a downpayment, take the product and pay the rest as EMI. Online purchases, however, require either full payment or full amount needs to be converted to EMI. Also, in-store finance offers include EMI at 0% interest; online retailers only offer EMI through credit cards where processing fees might be high.
It’s no surprise that you can now buy diamonds online; it is convenient and the choice is immense. At the same time, unlike buying a pressure cooker or even a mobile phone, you have to be very discerning about buying jewellery. It’s not a standardised product; every piece of jewellery is unique. When you deliberate jewellery shopping this festive season, consider your options—online and offline—after evaluating the merits.
According to Neha Kapadia, partner, Design Jewels, a Mumbai-based jewellery store, “Nine out of 10 times, jewellery is purchased from the ‘trusted family jeweller’. This person knows your taste, quality requirements and there is familiarity. Then there are those who buy from bigger shops though this usually turns out to be more expensive. But in buying online, the element of negotiation—be it in price, design or quality—is missing.”
With your family jeweller, there is comfort in showing old pieces, spending time talking about redesigning and creating a more contemporary piece and that hits home. Most people don’t really want to buy jewellery in a hurry.
Moreover, festive and wedding jewellery are large spends. So, one needs to be conscious about quality. While it is simpler to understand the purity levels in gold, with diamond jewellery, there are multiple factors to keep track of. Every stone has a cut, colour, clarity and carat, according to which it is priced. It’s hard enough trying to decipher these on your own through a website, let alone trying to figure out whether pricing matches the specifications. However, jewellery bought online also comes with a certificate, so the quality is assured.
Calvin John, vice-president, offline marketing, CaratLane.com, said, “In case of solitaires, we have certification from only internationally accredited laboratories; for other jewellery, there is Indian certification. As a first step, when a customer makes a purchase, she can view the certification online itself. And the certification is sent with the delivery.”
When it comes to design, though, Internet is your oyster—you can browse through not only traditional Indian designs but also global trends. “People often choose designs online and then come to a store to get it made.
But this isn’t new; earlier, too, designs were chosen from magazines and other places. Only the medium has changed,” said Saurabh Gadgil, chairman and managing director of Maharashtra-based PN Gadgil Jewellers.
The online experience is getting enhanced with mobile apps that help you see how a pair of earrings or a necklace would look on you (use the app to upload your photo and superimpose the chosen pieces on it)—sifting through hundreds of designs becomes a job on the go. But the look and feel can be different on a screen than on your person. For that, many retailers let you call the piece home and try it on before you buy.
John said, “The concept of looking for jewellery online was far fetched till a few years ago. Now people have started buying. The quality of user experience has evolved; we have a 3D virtual app to show how jewellery will look on you.”
While online purchases offer various advantages, convenience is the most important. It’s too tempting; say, you have seen a pair of gold and diamond earrings. They look nice and get delivered right to your doorstep, along with the relevant certificates. You avoid the traffic jams and the nasty look that the sales person at the jewellery store gives after you decide not to buy any of the 30 pairs that she has shown you. Moreover, as geographical mobility increases, people may no longer have access to their family jeweller.
There is also a price advantage while buying online; experts say prices could be cheaper by as much as 20-30% given that online retailers don’t have to keep an inventory of jewellery and have almost no real estate cost to bear.
But the choice between online and offline isn’t always simple. Kapadia said, “Despite certification, most people are not well versed with quality and price specifications. So, most online sales are restricted to smaller pieces, (usually) of lower quality and smaller budgets.”
You may not be ready to spend lakhs on buying diamond sets online, but it’s convenient to try out a pair of contemporary earrings, which will cost a few thousands, or, even buy standard gold coins that you have to gift during the festival season. Many websites offer a good return policy as well and have a try-at-home facility for some of the products. You can leave your details on the website and a counsellor will get in touch and bring you the desired pieces to be tried at home. If you like something, you can immediately make a payment. But if you don’t like any piece, you are not obligated to buy.
There are, however, some basic checks to do such as read the return policy, compare prices based on quality, delivery time, and others. Gadgil believes that the online jewellery platform caters to a new segment and a customer will rely on both channels for an overall experience. For heavy and high-value purchases, however, customer behaviour is likely to remain biased towards the family jeweller or a retail store.
—Lisa Pallavi Barbora
New furniture also features in people’s festival buying list, and this time around, many online portals are trying to cash in on this. Just before the festive season began, e-tailers Flipkart and Amazon.in started offering furniture on their websites and apps. During its Big Billion Sale, Flipkart had dates dedicated to this category of products. Furniture portal, Pepperfry, has its ongoing Mega Diwali Sale with up to 51% off on products as well as extra 10% cashback for purchases above Rs.40,000.
Offline retailers, too, have hefty discounts. Durian Industries has up to 50% off on its products. Luxury furniture store, Furniturewalla, too, has a similar offer. Even your local shops and markets will have festival offers on.
Since the furniture market is largely unorganised, there isn’t a standard benchmark for prices. As an example, we looked at the prices of a king-size bed with matt finish and storage. At Durian, the post-discount price was Rs.53,000, on Pepperfry it was Rs.43,946, and at Urban Ladder it was Rs.41,799.
E-tailers are able to offer steeper discounts because of the margins they enjoy, said Arvind Singhal, founder and chairman of Delhi-based retail consultancy, Technopak Advisors. “Pricing in this segment is opaque. There is a lack of transparency as to how the pricing has been arrived at. The offline furniture companies usually operate at a 60% margin over the retail price. And online firms, it can be 10-15% above this,” he said.
So, yes, the online prices seem better, but here a few things to keep in mind before you start shopping. For instance, you cannot opt for cash on delivery for more expensive items. At Pepperfry, it is above Rs.3,000, and at Urban Ladder, above Rs.25,000 (no such limits at brick-and-mortar stores). But you can pay via Net banking, e-wallets and even in instalments.
Furniture online portals also offer much more choice, and because of the convenience of being able to browse through many products comfortably, many consumers are now making even big-ticket furniture purchases online, said Kashyap Vadapalli, chief marketing officer, Pepperfry.com.
However, not everyone is comfortable doing so. For example, Manish Ambwani, a human resources professional from Delhi, recently purchased a shelf for the living room from an online furniture portal. “Both, my wife and I work, so we did not have the time to go to different shops to make a decision. But for now, I would still buy bigger products from a store where I can see its quality,” said Ambwani.
The other aspects that make shopping online convenient are quick delivery and return policy. But this can be a cumbersome process with furniture. Delhi-based Reena Singh, founder of Khushi Pediatric Therapy Centre, wanted to buy a green coloured bookshelf to match the colour of her organisation’s sign. Since she usually does most of her shopping (be it clothes, home appliances and gadgets) online, she thought to give furniture a go. But not only did it take a month for the bookshelf to arrive, it was in a different colour (turquoise blue). Though she immediately returned the shelf, it took another month to get the refund.
“Read product details carefully when buying online—size, material, care instructions, warranty, shipping, payment and refund. This will ensure that there is no dissonance when the product actually arrives at the customer’s home,” said Prithvi Raj Tejavath, vice-president, category management, UrbanLadder.
Also, read through customer reviews about products and the service. Try to buy from only the bigger and better known sites, especially if you are buying expensive products. Also, do keep in mind that when buying online, you will not get the delivery immediately, unlike in a physical store, where the product usually gets delivered to your house that very day.
—Tania Kishore Jaleel