Is Retail fighting a losing battle?

Retailers are worried as online shopping is sweeping through the country and its huge market. Breaking records of the best offered discounts, monstrosities like Flipkart and Amazon have shocked with their one day sales records.

Increasingly customers are choosing to buy online due to the prices and the comfort of being able to shop from anywhere. And this festive season the offline retailers are bracing for a dip in sales of electronic goods and utility products.

In the past 2-3 years, the e-commerce industry has proliferated tremendously. An increasing number of Indians are ready to shed off the importance given to touch-and-feel and are ready to buy a product at the comfort of their couch. Moreover, consumers are more open to financial transactions over the Internet.

With e-commerce players Flipkart, Snapdeal and Amazon pitching for more orders, offering hefty discounts and freebies in the virtual world, vendors in the real world are crying foul of unfair competition and a non-level playing field. In spite of all the accusations, there’s been an increase in the number of people now preferring online sales.

Moreover, the growing competition among e-retailers for ramping up sales at any cost is affecting retail business severely as they do not see the kind of footfalls they got even a year ago. Their continued survival could depend on the brands’ support at this stage – but not every brand is giving that.  

Though the annual sales turnover of the offline retail sector is estimated to be $25 billion (Rs.150, 000 crore) as against $3 billion (Rs.18, 000 crore) of the emerging e-tail sector, many retail formats are feeling the heat of their tech-savvy counterparts.

The rise of online stores has also led to a practice known as “showrooming”, which fills retail businessmen with ire. People visit the shop, ask to see a dozen different products and enquire about it. And then when the time comes to finally buy, they say, ‘this is cheaper online.'”

The e-retailers sell goods at factory price and save on overheads by delivering them to buyers through courier, but the offline retailers have to factor intermediary costs and profit margin within the MRP (maximum retail price). Plus, the e-retailers do not pay value added tax (VAT) on sales, as they claim to be just shipping the goods from source (factory) to end-user.

The Billion Day Heart attack

The online price war, triggered by Flipkart’s ‘Big Billion Day’ sale on Oct 6, with steep discounts, crazy deals and lucky draws on a range of products, has brought to the fore the threat the sun rise e-tail sector poses to the traditional retail sector.

Flipkart claimed that it got a billion hits and sold products worth $100 million (Rs.600 crore) on the day, with a whopping five-lakh mobile handsets, five-lakh clothes and shoes and 25,000 television sets flying off its shelves within hours of opening its discounted sale.

With Snapdeal also offering same day similar discounts and lower prices on a host of like products as Flipkart, traders expressed concerns over the fallout of cut-throat competition among e-retailers on their retail sales.

The Confederation of All India Traders also urged the commerce ministry to regulate e-retail business and trade practices of its companies, as they were offering huge discounts during the ongoing festival season.

Worried over the impact of e-commerce on their business, many dealers and traders appealed to the state government to bring e-retailers under VAT net and ensure a level-playing field for their survival in the long-term.

According to a survey by Assocham (Associated Chambers of Commerce & Industry), online shopping growth is projected to zoom 350% during Diwali and may result in footfalls at shopping malls in Chennai plunging to 46% this month.

The survey also found that e-commerce sales in August and September grew 200% from 120% a year ago (2013), with mobile sales booming 100%, as more and more consumers tend to shop online, which is fast, with simple payment and quick delivery service.

Retail Shopping has now taken the back seat!


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