Whats ailing brick and mortar Retail in India?

… its definitely not the Online explosion!!

Why is the great Indian retailer sleeping through the biggest retail boom India has ever seen? Imagine the work and time it took to achieve the valuations achieved by online retailers. Then think: why are traditional retailers unable to compete with the new kids on the block? What’s happening in India as a result of online shopping is no different than what’s already happened in developed markets. What happened in the U.S. was an unexpected tsunami; what’s happening in India is different. We knew about the tsunami. We know about its consequences. Why, then, is the traditional retailer watching his space gradually being taken over? Why is he sitting still, hoping that he will be left untouched while others will be washed away with the tide?

Maybe it’s not that dramatic. Maybe traditional retailers do have some aces up their sleeves. Unfortunately, I don’t see anything. The online space is hot, with investments pouring in, valuations rising exponentially, bubbles being made and busted every day. It’s exciting. Look all around: from the Economic Times to Business TV programming, retail is being taken over by the new kids!

the corner shop!

That makes me think: is it just that? New Kids vs the Old Block? I think it is. It appears that old-school retail is unable to formulate a new operating concept. It is trapped within a “scarcity of ideas” around the old format and customer perspective. Why can’t brick-and-mortar stores — combined with fantastic high street locations and great online offerings — manage their inventories though faster logistics and simultaneously offer an amazing in-store experience to customers, something an online retailer would die for? Why aren’t we seeing a hybrid retail model emerging across formats and segments? Why can’t the two retail worlds be merged to create the ultimate retail experience for consumers?

Of course, it will not be not a cakewalk, what with franchise agreements, long leases on stores, trapped dealerships and logistics agreements. But I’m sure it is possible if there is a rainbow on the horizon. Otherwise, what’s the alternative? The bricks-and-mortar store will lose considerable market share and be relegated to niche segments, while online stores will take over sales of most day-to-day goods. This will shake up not only traditional retailers, but also real estate and city infrastructure.

Target Open House prototype

What if stores could become “experience centres”, rather than just sellers of goods? They do that today, but the retailer might lose the end conversion if the customer experiences the product in the store and buys it online! The retailer loses the customer at his point of sale and ends up footing the rent bill, while the online store captures the market generated by the bricks-and-mortar store. In order to sell to every customer who experiences the in-store products, the store needs to become a Intelligent Store — a space that’s clever, smart and simultaneously online and offline.

It’s a brand-new idea: a format that can take advantage of the best of both worlds and lead the way. After all, nothing is more precious than the experience of a real product before buying. If only the store price was the same as the online price, or the product was available for me to buy at 11 p.m. or 4 a.m. — whenever I’m in the mood to buy!

There are many tech solutions available today. If bricks-and-mortar retailers had new blood, they would have generated this new format organically. We don’t see it happening because there is a lack of innovation in the physical space. Meanwhile, the online champions are making their killer moves. As a result, physical stores are bleeding from their top and bottom lines.

This opportunity exists for every retailer. But positive results will only come after they forge a fresh new approach. They have to first junk their advertising formats, stop the bizarre marketing expenses, and trim and retain the retail format at the store level. This will be the most difficult part, as their old-school staff must be untrained and retrained in the new ways. Monitoring the stores will have to move from turnovers benchmarking to customers that they were able to successfully pass the experience. Clever sale models have to be developed to monitor conversions from in-store experiences to online sales, and customer care and support must be reinforced. That’s the Achilles heel of online players. While the physical stores are superbly poised to deal with the issue, they do a sad job of it. Lastly, it would require a new kind of branding for stores that position themselves as the cutting edge of the retail experience. They must offer a sensory overdose that can never be had while interfacing with a glowing screen.

The challenges thrown up by the online explosion are twofold. On one side, we have the new buying model that’s being exploited by the online retailers. While on the other side we have a new kind of customer awareness, and a new marketplace for a differently conceived product ranges across all segments, from food to tech to fashion. That’s the space where a conventional retailer cannot only thrive, but also lead. This changing perception and need is an emerging trend. It requires positive reinforcement to become a seeded idea. This positive reinforcement can be best provided by a physical player. Once successful, it will very quickly move to the online format. Once the positive reinforcement has been absorbed and accepted by consumers, they can move their consumption practices to the online platform. Since the retailer exists across both platforms, they stand to benefit from the entire lifecycle of new product innovation and consumption, thereby creating a market — and holding on to it.

I see a great opportunity in this union. India stands at the crossroads where both worlds still exist. If this new model can be invented, it can flow to the rest of the world.

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