-Sudhir Narasimhan
The recent `billion dollar day sale’ goof up by Flipkart is proof that online retailers are not yet fully geared up to meet consumer demand.
The failure also brought into sharp focus the predatory pricing tactics adopted by online retailers as vendors like LG and Sony joined Samsung to push for uniform pricing across channels. This might seem to favor the brick and mortar resellers, who account for 60 per cent of the sales of IT products, in the days to come. But the reality is that online retailers are here to stay. They have learnt their lessons from the Flipkart faux pas.
They are now aware of the kind of demand events like the `billion dollar day’ sale can create and they are preparing themselves to meet such demand. In the months to come you will see them scaling up their technology and logistics infrastructure significantly to meet any unexpected spikes in demand.
Given the massive funds they have access to, online retailers are capable of offering deals that are better than what any brick and mortar retailer can offer and show their losses as marketing expense in their books. Consequently, IT retailing will be a highly challenging proposition for those of you who have invested in brick and mortar retail stores in the months and the years to come.
The question is how do you survive against these highly organized players with deep pockets? Going online individually is not an answer, as you will have to invest heavily in marketing. Talking to your principals to have some kind of a price control regime might work to an extent. But your spends on real estate and manpower are more and it will be hard for you to match a volumes player who is capable of achieving greater cost efficiencies through superior logistics and online play.
I believe a collective approach to the problem might have an answer. Why not form a nation wide association of retailers to drum up greater support from vendors? You could also look at a collective online play where you can pool in your resources and also seek support from vendors. This will complement your brick and mortar business and eventually help you reduce your overheads in the long run. While online retail is gaining in popularity, an area that online retailers are yet to address adequately is the issue of support.
Many customers still prefer a friendly neighborhood dealer who can provide them support. If you can collectively drive this point home, customers might see value in buying from you rather than a faceless online retailer. What are your thoughts on facing up to the challenge posed by online retail? How do you propose to reduce costs and stay profitable? Do share your thoughts. We’d love to hear from you.
(The author is a consulting editor with Trivone Digital services and is reachable in sudhir.narasimhan@trivone.com)