Madhav Chanchani, The Times of
Bengaluru, 28 June 2016
If traditional retailers weren't so busy creating
digital avatars to take on their new-age rivals, they might have
noticed online stores gaining a firm foothold in their territory, one
store at a time.
Some of India's largest online stores including baby products retailer
Firstcry, eyewear brand Lenskart and furniture marketplace Pepperfry
are beginning to see significant contributions to revenue and
bottomline from their physical stores.
"We get significant revenues from our offline business and we are
already EBITDA-positive (profitable from core operations)
collectively," said Supam Maheshwari, chief executive of Firstcry,
declining to disclose specific numbers. Firstcry was among the earliest
online retailers to open offline stores in 2012.
Encouraged, online retailers are preparing to rapidly expand their
offline presence in the coming years, opening a new front against
traditional brick-and-mortar stores that are struggling to wrest
similar success online. India's largest business groups including
Reliance Industries and Aditya Birla have launched online apparel
stores in the past year, and Tata Group's jewellery and watches brand
Titan Company is acquiring online jeweller Caratlane.
Firstcry and Lenskart have opened hundreds of stores through
franchisees, boosting their sales. The physical stores of companies
like Caratlane and online lingerie retailer Zivame function more like
showrooms, tending to be smaller than those of their brick-and-mortar
peers as they keep limited products and use a central inventory.
More importantly, building a physical presence helps these retailers
tap those millions of customers who are still uncomfortable shopping
online. Take, for instance, a Firstcry customer who recently posted on
the company's website that 'Aloe Veda Castor Oil' was not available at
its Ernakulam, Kaloor franchisee in Kerala.
She urged Firstcry to make it available at that store so she could
purchase it as "I don't like online shopping." To capture these
customers, Firstcry plans to ramp up its offline presence to 700 stores
in 3-4 years from about 170 now.
"We have seen that offline customers are also transacting online and
vice-versa, so joint cohorts are much higher," said CEO Maheshwari.
Cohorts is repeat customer purchase, which helps measure if a company
is making a profit on each acquired customer, a metric closely watched
Firstcry's offline network is already bigger than its competitor
Mahindra Retail's Babyoye, which was known as Mom & Me before
Mahindra group acquired online baby products retailer Babyoye in 2015.
Babyoye, which runs 115 owned stores, has announced plans to open new
stores through the franchisee route like Firstcry.
Mom & Me made revenue of Rs 210.5 crore and net loss of Rs
118.9 crore in fiscal year 2015, according to Mahindra &
Mahindra's annual report. Firstcry reported revenue of .Rs 118 crore
and loss of .Rs 63 crore for the same year. As for Pepperfry, which
plans to double its store count to 16 this year, "offline stores are
the best marketing channel we have started," said CEO Ambareesh Murty.
"It helps us provide that reassurance to customers that we are a
specialised player and translates to trust in the brand." Also,
customers walking into physical stores tend to purchase more often than
online buyers and at a higher average price, he said.
Pepperfry opens stores based on customer purchase data of the previous
24 months, which helps it zero in on pin codes with high customer
density. By opening stores in such areas, it is also able to drive
supplychain efficiencies as more orders from an area translate into
lower average cost of delivery.
"These players are already established leaders in online space. The
question they are addressing is how do you redefine the market to grow
be-cause only 5% of Indian customers have bought online," said TCM
Sundaram, managing director at IDG Ventures India, an investor in
Lenskart, Firstcry and Zivame.
Online shoppers in India are expected to increase from 50 million to
150 million by 2020, according to a recent report by Google and AT
Kearney, adding that not having an omni-channel presence in categories
like consumer electronics, home furniture and personal care could cause
retailers "to lose out on 20-30% of potential buyers." Experts spout
the adage that retailers need to be where the customers are rather than
choose one basket.
business is not divided in black-or-white between old-world physical
retailers and the upstart online kids - at least the consumer doesn't
think so," said Devangshu Dutta, CEO at retail consultancy firm Third
Some online retailers agree. "The idea is to create an eyewear brand,
and channels keep changing. We want a store in 372 towns in India that
have a population of over 50,000," said Peyush Bansal, CEO, Lenskart.
The company has 200 stores from where customers can book products and
pick up later from the store or get these home delivered. The company
charges a franchisee fee and pays a commission to store owners on each
sale, while it manages the inventory and customer experience. It plans
to expand to 400 stores by the end of the year. Lenskart, with
annualised revenue of about Rs 300 crore, is targeting Rs 2,500 crore
revenue in the next four years. Bansal expects the physical stores to
contribute about half the revenue in the next two years. Lenskart
competes with Titan's eyewear business, which earned net revenue of Rs
372 crore in fiscal 2016 from its 404 stores.
in The Times of India)