OPINION

Impact Of E-Commerce On The Physical Retail Sector

The advent of the e-commerce boom brought about a paradigm shift in operations in varied sectors across the globe. Just as any novel force stands to challenge the status quo of the traditional ways, e-commerce disrupted various businesses including the apparel retail industry. As per the latest KSA Technopak Report, while India’s GDP is likely to grow by 7%, the apparel retail sector is expected to grow by CAGR of 9.7% for next 10 years.

Back in 2014, the Morgan Stanley Report had predicted the e-commerce growth at 37% CAGR that is close to USD 13bn for the year 2018. The prediction is very well coming true! Apparel e-commerce has eventually grown by 45% CAGR in the last 5 years and is expected to take on the value of a whooping 7bn - 8bn by 2020. The numbers in the reports, while being clearly indicative of where the apparel sector is headed, also speak volumes about the unprecedented growth of the apparel e-commerce segment. Of course, it can be argued that there is no disparity between what proportions of sales are coming from increased consumption and what are stemming from the share of the retail industry. But, the argument doesn’t stand to change the consumption trend or consumer preference and their growing lean towards apparel e-commerce.

However, the retail sector has also brought about significant changes in keeping with the evolving trends and preferences and the landscape at large. Retail spaces are taking innovative measures to attract the customers and give them a comprehensive shopping experience. Let’s dive deep into how the impact of e-commerce is re-shaping the apparel retail industry.

Omni / Endless Aisle

I have always believed in the amalgamation of virtual endless aisle inside retail stores, which is simply making available interactive tabs and surfaces for the consumer to pick and choose, customize and even have the product delivered at their doorstep. The retail space makes the selection process easier for the customer and adds to the whole experience of receiving endless options, to making purchases from the store as well as opting for customizations and home-delivery of products through the virtual experience. Stores are looking at various versions of implementing such practices to deliver a better customer service.

Personalization

Store managers and staff leverage their direct connection with the consumer to deliver truly personalized recommendations. Brands also take educating and training the store managers and staff seriously. The customer gets to try on clothes based on their body-types and accordingly ask for required garments to make purchases on-the-spot. The whole activity stands to be a major differentiator that continues to pull customers into the retail space.

Discount Parity

Today, brands have become extra cautious that the discounts they offer in-store and on the brand’s e-commerce platform match each other. This new practice now directly translates to higher discount rates in the retail stores; it has brought about the consumer to believe that the offerings post-discounts are available at more or less similar price-points, as on the brand’s e-commerce portal. As a result, there is a shift in consumer bias toward e-commerce, who are now also seen browsing retail stores during discount periods.

Newer Markets

E-commerce came and won over consumers, including those in Tier 2 and Tier 3 towns who may not have access to certain brands available in the cities. However, when e-commerce proved the sales potential in these cities, brands were quick to open their retail outlets in these regions since the market was already being built by e-commerce, and they could then leverage the standing through retail outlets.

Mall Culture

E-commerce obviously creates the convenience of buying from home and hence, footfalls drop in physical stores. To overcome that particular challenge, malls are carrying out on-ground activations, discounts, compelling events such as food fiestas and offering crèche facilities as well as indoor play areas for kids, all of which assists with attracting consumers. During festivals like Diwali or Christmas, malls also have local celebrities visit stores. Brands happily partner with the malls to create a buzz and deliver a luxurious experience to encourage more footfalls in stores.

Rationalised Rentals

Indian retail rentals have been one of the highest in the world, and that is gradually changing. It is interesting to witness the numerous sectors e-commerce has impacted. With a drop in footfalls at retail stores owing to e-commerce, the rentals are being renegotiated and moreover, are now being linked with sales. The practice has marginally reduced the pressure from the brands, and profitability is not as deeply impacted.

Dropped Prices

E-commerce assists local manufacturers to reach out to potential buyers across the country/world at once. This gives consumers the choice to receive great value and infinite options with hundreds of manufacturers reaching out to them. Inadvertently, premium brands have to retain or reduces prices; and while margins do come under pressure, brands are hopeful that it will always add up to corresponding sales.

In a nutshell, the consumer has emerged as the king, with heavy discounts on e-commerce platforms, as well as with privileges in-store and a more refined shopping experience at malls. It is certainly a major win for the consumers, while the brands, manufacturers and the supply chain at large grapple and adapts with the evolution of the landscape to deliver more value to the customer and maintain its standing in the markets.

 

Authored by Vipul Mathur, Brand Marketing Expert and Brand Head, SKULT

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