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The New Ecommerce Rules & Brick & Mortar Retail

There is no doubt we should have a level playing field for all ecommerce operators, but it would take years for any new sites to come to anything near the global players in size, diversity and efficiency in every area. And what is to say that eventually the larger local operators will not start creating monopolies and taking control of the supply chain themselves? Is this not happening in the case of large brick and mortar retailer chains even now?

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In a world where online business is becoming the norm, it is surprising how our government seems to have decided to make life more difficult for international ecommerce giants. You may even be tempted to think that there is a move to eventually push them out of the country.

Having returned to a small village on the outskirts of Dehradun after many years, I cannot but marvel at the ubiquity of ecommerce in the lives of ordinary people. It is not just the easy availability of goods at the doorstep, but also how common consumers have learnt of and have started using products which perhaps a few years ago they would not have known existed.

Of course, the big two ecommerce sites dominate the space, but let’s understand why they do so. They have brought to the country, practices honed across geographies around the globe, and while we may in many ways be different from other countries in so many others especially human and consumer behaviour, we can be very similar to our peers.  But besides how they treat the customer – with equal respect - they have perfected the skill of making the product available within really reasonable time frames.

*How Ecommerce Sites Help Build Customer Awareness
At a Retail Summit that I had attended in Mumbai some years ago, a speaker I think from Croma, excitedly informed the audience that they had just launched their ecommerce site and one of their first orders was for a Play Station from a very small town deep in Bihar! He got a big applause because it underlined the fact that there were people across the country who wanted products, but had no local access to them. They could now be reached.

Interestingly, the benefit of global sites also rubs off on other websites offering similar or even different products. A friend recounted his search for a brush cutter for his garden. He had no clue where to find a shop to go to and get it. He did not know where to call as he did not even know what the product was called. After searching online, he came across a farm and industrial equipment webstore from Kolkata which had brush cutters at good prices, but the descriptions and images were just not helpful for a novice like him to make a selection. So he looked on the Global sites and they served up a whole bunch of what is called A+ product content in eEComm parlance, on ‘brush cutters’. Armed with the knowledge, he went back to the earlier site and bought one from there. A loss for the international site? Yes. But a win for ecommerce.

*What about the ecommerce universe?
The data on the business of the two major sites (combined around $10 billion in 2020) and the number of sellers that they have working through them, (which is in the hundreds of thousands) does not need to be repeated. But can someone tell me how someone sitting in some far corner of the country making antivibration pads for washing machines or a trader selling brass and iron door handles in Jaipur can even dream of being able to sell his products across the country? This is happening on the sites today.

Even if for a minute we accept the criticism that setting up companies to consolidate disparate products and selling them on the sites created monopolies, don’t forget why these companies exist. This was a direct response to the no multibrand retail diversion which the UPA II government had created, supported by most Opposition parties, to allow foreign retail companies into India, and so (now was born in 2012.

Look at the range these so-called front companies offer. Everything from home hardware to copy paper to make up brushes, to three million other products which they get from a host of suppliers across the country. I suspect that if this unnecessary multi-brand restriction was lifted (hard to find a justification for its existence), the raison d’ etre for these companies would evaporate and this debate would soon disappear.

There is no doubt we should have a level playing field for all ecommerce operators, but it would take years for any new sites to come to anything near the global players in size, diversity and efficiency in every area. And what is to say that eventually the larger local operators will not start creating monopolies and taking control of the supply chain themselves? Is this not happening in the case of large brick and mortar retailer chains even now?

*But the Traders Are Unhappy!
Of course they will be. We have had some poor years with people avoiding the markets. Those who were progressive had tied up with the ecommerce portals or started their own eShops, and would be thanking their stars that they still continued to get some online sales. Contrary to common thought, while you can set up an online portal in half an hour, creating an actual online business and running it efficiently is a different matter. For one, it is not cheap, which is why you have angel and venture capitalists hovering around.

But more importantly, how many proposals have come from trade or retail representatives suggesting how to actually improve the business of their members.  While they are needed, simple solutions like free parking, staggered timings and tax cuts have been done to death.

Added to that, most traders have not tried to upgrade or improve themselves or their operations. Even in what you would call high-end department stores, the experience is far from satisfactory. We still have a guy sitting at the exit struggling to compare the bill with the goods! My nephew recounted recently how in this swanky sports store the two cashiers took five minutes together, to calculate that they had to return Rs 400 to him as he had overpaid (!). In today’s retail, reducing friction that dilutes the experience, is paramount. And if friction exists or grows, it pushes customers to find other options, including ecommerce.

The point is, most of our offline markets are no longer fit for purpose. Reaching there through the traffic is a nightmare. After struggling for parking, you may end up walking 10-15 minutes to reach your destination (unless you become a public nuisance and park right on the road – the preferred option for many - and reduce the traffic movement to half). The shops are not zoned, so if you go to the main markets in most cities you have to visit the already crowded city centre. This arrangement barely worked 20 years ago, but with the explosion of the cities into all directions and their markets remaining the same, it is like putting a litre of water in a rubber bottle which is made for 250 ml. It is just waiting to burst.

The real solution would be to create alternate marketplaces -and I am not talking malls here - complete with facilities including proper access and egress, parking, cheap and close storage of goods for the traders, and other amenities like toilets, banks, food joints etc. spread across different parts of the city where there is adequate space. So there could be a hardware market, a furniture market, a lighting market, a furnishings market, an auto parts market etc.  The idea is not unique, a small example is the Lighting Market behind Delhi’s Khan Market that reduced the load on the old market at Chandni Chowk.

It may not be an easy sell for trade bodies to overcome the inertia of people who have been used to doing business in a particular way for the last 50 years. But if they want to remain relevant in the years ahead, it cannot be through blocking more efficient alternatives.

If there are areas where ecommerce portals are going against the law of the land, hold them liable. But do not damage the ecommerce ecosystem (which incidentally, is reported to comprise a mere four per cent of total retail trade) saying that it is being done to help small and medium traders.

More time and energy needs to be spent to come up with practical, positive and holistic solutions, rather than displaying unrequired bravado with world class benchmark setting companies. It’s great to have a ‘we can do it better’ attitude and in many cases we have done it. But also don’t forget George Fernandes’ famous - 77.

The writer has over 30 years senior international experience in Retail, Marketing and eCommerce. His views are personal.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Magazine 13 Sep 2021 ecommerce retail

Ajai Kumar Dayal

The author has over 30 years’ experience in managing and consulting on big brands, retail, and ecommerce. He has been a commentator and columnist in many publications.

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