Traditional Indian Retail faces a new Threat – New Age eCommerce
Tougher times seem to be coming on to traditional retail dealers, if the current online business scenario keeps on playing longer. This means that the money that eCommerce vendors are spending to entice customers is far more in volume than what the traditional retail sector can pump in. eCommerce websites like Flipkart.com and Snapdeal.com have been spending mega money to pump up their reputation and financial power, and the figures are staggering. Private investors have poured in something like $ 2.3 billion into these companies so far according to recent statistics.
The firepower that eCommerce groups in India have gained as a result of this investment is overwhelming shoppers with bargains and deals that many brick-and-mortar retailers such as Future Group cannot match. Kishore Biyani, who is the head of Future Group, which runs a host of chains such as Future Retail Limited and Future Lifestyle Fashions, mentioned that the entire game centered around money and that the eCommerce industry had money to experiment while his group did not have this kind of money to spend without a meaningful purpose.
Nevertheless, perceiving the threats that could affect them in the foreseeable future, many Indian brands are now investing in eCommerce as an addition to their already existing brick-and-mortar infrastructure. Many traditional brands such as Nalli Silks, Croma, Arvind Brands, and others are going online. They are heavily investing in marketing and entering new advertising scenarios such as social media. Many traditional retailers are forging partnerships with websites such as Flipkart.com and Amazon, which have ample money in their kitty, in an attempt to put their own stuff on the internet, without having to undergo heavy investment in starting their own online venture.
However, this leads to a half baked situation, wherein the traditional retailers are still vulnerable to being overtaken by their better funded rivals in the country. This is making traditional retailing feel undefended, compared to the fast pace of modernization adopted by their eCommerce counterparts. The issue complicates here because the traditional retail which comprises of unorganized shops and bazaars are the backbone of Indian economy, which are at a risk of being shaken up by competition for their perceived slow pace of modernization. Many companies are striking deals with major eCommerce firms to display their products online. Given the fact that organized retail is growing huge from $46 billion to $ 182 billion in 2020, and that e-tail is growing at an equally scorching pace from $ 2.3 billion to $ 32 billion by 2020, companies who had been shielded by previous Indian protectionist policies are now facing the brunt.
Some of these companies have been very traditional until now, with a fierce commitment to physical sales in the real world. However, they are now extending their old world charm to the virtual world, where they are still learning the ropes of how online retailing works. Indeed, some of these traditional brands see eCommerce as the next big thing, being a disruptive force rather than a unifying or collaborative one. They foresee a large chunk of the market moving away to eCommerce, and these very same companies are vying for a large chunk of the share there. Hence, it is evident that they want to set up their online shops before their traditional and loyal customers move away to other markets.
With the previous Manmohan Singh government having opened up the economy to foreign players, but having left the states to decide on whether to let in foreign retailers or not, the traditional protectionism for Indian based companies has been threatened. Nonetheless, large chains have been absent, but what is taking shape is the growth of local online market places, which are being supported by billions of dollars coming in from abroad. These locally based players are coming up in a big way with the help of foreign funding they have been receiving. For example, while Flipkart.com attracted $ 1 billion in a round of funding from foreign investors, Snapdeal, yet another Indian eCommerce company raised $ 627 million from a Japanese investor.
As it goes, traditional companies are on the look out to neutralize the threat of eCommerce by offering eCommerce itself as a new-age option to the already existing brick-and-mortar component, that has existed since a long, long time. Rather than bowing down the the perceived might of eCommerce, they are looking to open up a new trade channel with innovative delivery concepts and models, where they will vie on play an even game with the new eCommerce trends in traditional markets.