The market share of online players is more than 12% of the overall retail market and this is expected to be at par with physical stores over the next 5 years.
The advent of e-commerce in India ‘smartly’ altered the shopping habits of Indian netizens. Anything and everything – from groceries to apparel to electronics etc. – is now just a click away. For a while, it appeared that ‘couch potato shopping’ was gaining prominence and disrupting the entire brick-and-mortar business.
It now emerges that this has not really happened. Despite causing disruptions, the ‘e-commerce effect’ was not enough to have a significant and lasting impact on the conventional retail formats.
For a while, online giants like Amazon and Walmart-owned Flipkart were basking in the rising success of the effervescent Indian e-commerce business arena. They were maneuvering strategies to penetrate deeper into newer markets by way of discounts for their customers.
And then, the Government pulled out a wild card – and thereby threw a major spanner in the works – with the new e-commerce policy.
It came as a shock for the affected entities, including consumers who were buried deep in the world of cash-backs and deep discounts. However, thanks to the new policy, traditional retailers now had a more level playing field and could regain a significant share of their brick-and-mortar stores.
New E-commerce Policy: Advantage Physical Stores?
- Formulated and cited to usher in price parity between online and offline retailers, the policy also intends to address the major issue of data colonization. Major policy highlights include:
- Online marketplaces must treat all vendors at par; the policy prohibits e-retailers from selling products via vendors in which they have an equity interest
- The concept of ‘exclusivity’ wherein players preferred to promote, market and sell certain products exclusively on their platforms shall no longer prevail.
- No e-retailer can control the inventory of the vendors.
- E-commerce players cannot influence the sale price of goods or services, directly or indirectly. Thus, special provisions of quick delivery and cashback presented by the e-tailers must now be applicable for all vendors on their platforms.
This move in some way aims to promote fair trade. While online giants will now need to urgently re-strategize their business, physical stores will benefit from this move. For instance, in absence of ‘exclusivity’, vendors will scout for alternate options such as physical stores to reach out to a wider network, including in the country’s hinterlands.
By opting for the offline route, they will now give a hitherto lacking ‘look and feel’ effect of their product to consumers. This will invariably create more demand for retail real estate and boost brick-and-mortar retail formats, which in some way are trying to adjust to level up with the new online revolution.
As is, the market share of online players is more than 12% of the overall retail market. This is expected to reach at par with physical stores over the next 5 years.
What Next for E-retailers?
Even before the announcement of the policy, e-commerce biggies including Amazon and Alibaba were striving to capture a larger pie of the physical stores in order to stay relevant in the ongoing retail boom in India. Rising consumerism in India is continuously prompting them to alter their business models. This policy change will now make them more ‘serious’ about investing in offline stores.
E-commerce players will also look to create new tie-ups with offline retailers or buy a stake in them. For instance, Amazon bought a 5% stake in Shoppers Stop way back in 2017. Today, its most-anticipated deal with Kishore Biyani-led Future Retail may see some positive signs. Whether or not this deal happens, it will eventually intensify competition in the market – and this will invariably benefit the consumer.
Last but not the least, vendors (smaller brands) who couldn’t afford or opt for ‘exclusivity’ and were eventually losing their visibility, will now have less to fear as they will slowly and steadily regain and retain relevance in the overall retail market place.
That said, there are certain loopholes in the policy which could be used by online players to ‘save their day’. Even if we do away with the ‘exclusivity’ in online retail, players may still continue to give offers and discounts. New Indian brands entering the market can still tie up with online players to market their products who, in turn, can limit their supply to physical stores. The norms on this are still not clear in the new policy.
After all, it boils down to survival tactics that may eventually save the day for online players. With billions of dollars at stake, they will surely work to find alternatives so as to remain relevant in the Indian retail growth story.