E-commerce which is popularly known as efficient commerce or empowering commerce has been a game changer for the Indian economy. India is online shopping heaven for customers, with population armed with smart gadgets and phones which has made everything a click away for people. But Is E-commerce Hampering the Growth of Small Retailers?
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In the Global Payment Report 2016, Worldpay analyzed 30 markets around the world, including India, China, Hong Kong, Malaysia, Singapore, Taiwan, Australia and South Korea in Asia-Pacific. It was discovered that e-commerce is expected to multiply and that the growth will occur around the world, but the emerging markets like India will be taking the lead. E-commerce is expected to mature by 28 percent per year from 2016 to 2020. According to Worldpay projections, India will be the world’s second largest e-commerce market by 2034 owing to an upsurge in internet penetration and increasing mobile users in India.
There is no doubt that online retailing is capturing an ever-growing share of consumer spending. E-commerce has brought several choices, convenience and price efficiency to the modern consumer – all crucial components of the consumer decision making criteria. Online retailers continue to find ways to deliver goods quicker and cheaper.
But, e-commerce has also become a disruptive force by bringing in a lot of modifications in the existing business models and disturbing the businesses of small retailers in the country. But Is E-commerce Hampering the Growth of Small Retailers?
While in case of traditional brick and mortar shopping, people had to travel to the physical store to purchase items, e-commerce offers the convenience to order products while at the comfort of your home and get them delivered at your doorsteps. Traveling to acquire goods has been eliminated by the surge of e-commerce. So rather than visiting the nearby retailer, the consumers are now resorting to e-commerce for their daily purchases.
E-commerce players have plenty of suppliers with them. As a consequence, they can offer a wide variety of products to their customers. This is unlike small retailers who generally have a small, well-established network of suppliers and are able to provide an only limited variety of products. So, customers prefer to shop from their online counterparts.
Cost of doing business
Setting up an e-commerce startup is a low-cost affair in comparison to a traditional brick and mortar outlet. Physical stores need to pay a considerable amount as rent for the property. Also, there are several upfront costs like store signs, inventory costs, wages to staff, physical maintenance of the store and several others. Setting up and maintaining an e-commerce store is relatively cheaper, and hence the costs incurred in this case is lower.
Broader customer base
While a small retailer is able to sell his products only to a small group of customers, generally only the local customers, an e-commerce retailer can sell his products to a much wider audience, even internationally. Thus, he can sell his products to a worldwide audience and gains a competitive advantage over traditional retailers.
Open for 24*7
Unlike retail outlets that have fixed opening and closing time, e-commerce remains open for customers 24*7. This means that a customer can purchase a product even at 3 am and there is no time constraint attached for buying products. Thus they generate more business by being available all the time.
To attract customers to e-commerce most of the online retailers offer a deep discount on their product offerings. As the offer seems quite lucrative and convenient, several customers are shifting to e-commerce for their regular purchases. This has led to a decline in sales for small retailers as they are not able to lure customers by offering deep discounts.
However, e-commerce falls woefully short in delivering unique and qualitative experiences for shoppers. The ability for people to socially interact with the physical world as hunter-gatherers have guided their shopping behavior since the beginning of time and they are unwilling to give it up totally.
Why Consumers still prefer Retail Outlets for their Shopping Needs?
In India, shopping is synonymous with experience. The main reason why people visit a brick-and-mortar store is that they can touch and feel and experience the products. This is missing in case of online shopping, and hence people prefer to purchase from a physical outlet. This also presents them with an opportunity to go out with their friends and family, and enjoy while shopping.
In the case of e-commerce, it is generally observed that the customers are not particularly loyal to a particular site. It is quite easy to sway customers by offering deep discounts. On the contrary, in case of a physical outlet, customers are very loyal to the store and generally make purchases from the store which has been able to gain their trust. They also enjoy a personal connection with store managers or store employees. The stores also offer personal assistance to the customers and help them in making better decisions which are missing in case of online shopping.
No waiting time
In case of an e-commerce purchase, customers need to wait for a week or so for their products to be delivered. However, in the case of traditional retailing, customers can take home the products almost immediately after their purchase. Thus, there is no waiting time for the customers in this case, and hence they prefer shopping in a retail outlet as it offers them instant gratification.
Trust factor plays a vital role in case of physical stores. E-commerce always has a privacy issue, and people still resist from making online payments due to soaring cases of frauds. Physical stores rule out this risk entirely and offer customers the flexibility to pay via cash or cards for their purchases. They can also return the product almost instantly if they are dissatisfied with the purchase. Returning the items in case of online shopping is often considered to be a tedious task for customers.
Despite the rising popularity of e-commerce in the country, the overwhelming majority of retail sales still occur in physical stores. The most exciting aspect of this movement has been the demand from online retailers to add traditional brick-and-mortar locations as part of their distribution platform. This can be seen in Amazon’s recent move into neighborhood grocery/ convenience stores and physical bookstores. “Buy online – pick up in store” has been a direct result of the competition among online and physical retailers and this emerging trend is expected to continue.
The future of retailing lies at the intersection of the virtual world and the physical experience where the choices are infinite, the gratification is immediate, and the service is personal. The companies that can pair the two platforms to deliver their products in a manner in which the experience of the purchase is as rewarding as receiving the product itself will ultimately win.