Online Shopping Giants (Flipkart / Amazon / etc., ) vs Local Stores

This post is not for or against flipkart / amazon / other online shopping portals ….. or jobs they create or destroy etc., It is more on what the local shop-keepers / retailers can do to sustain themselves against plethora of such online shopping sites. For that, let’s understand the reason why consumers prefer to buy online

Why consumer buy online?

Among others, following three come across as top reason to buy online 

1. Discounts: Most of the items are almost always sold at discount. On top of that, sales promotion (based on deep discounts) are huge hit. Despite “recession” in India, recently Amazon and Flipkart sales generated Rs 19,000 crore in just 6 days. It is a different story that they continue to mount losses, their combined cumulative losses being much more than thousands crores of Rupees
2. Product Range: Without doubt, no local retailer (however big he/she is) can have a produce range as diverse and large as these online giants. There are crores (millions) of products listed by these giants online.
3. Convenience: Consumer can browse through crores (millions) of products, whenever they want (24x7), compare these products on various parameters, go through ratings and reviews provided by other buyers and order these products (from wherever they are) to be delivered at their door step. If product is not good or not to their liking, there are options to return or exchange. What other service does a customer need?

What local retailers and shop-keepers are trying?

Among other options, demanding from government for a level playing field (in terms of eliminating the deep discounts that these online giants provide) has been the most vocal demand so far.

Is this a viable solution? Can government really do (or want to do) something meaningful? 

• Even if government comes up with something, what’s the guarantee there won’t be an innovator tomorrow who will disrupt the entire ecosystem again?
• Forget new innovator, why will flipkart or amazon accept “defeat” so soon. They haven’t been pumping billions of dollars and continue to mount billions in losses just to pack bags or mellow-down as soon as government intervenes. For sure, Flipkart and Amazon are going to be around for long and will continue to disrupt the traditional model with lot more innovations
• Do not forget that though price (i.e. deep discounts by amazon and flipkart) is one of the major factor, off late it is not the only factor to shop online. By now, consumers are used to the comfort, range, convenience, etc., that online shopping provides. Even if government restrict deep discounts, there is no guarantee that everyone will turn away from online shopping.

For those who can recall, similar discussions / debates / sentiments where seen during the initial days of super markets like Big Bazaar, Spencer’s, Reliance Fresh, D-Mart, More, etc., What happened? Nothing. These super markets (or departmental stores or hyper markets, whatever you call it) still continue to run their own versions of sales, backed by the deep pockets of various super rice - millionaires and billionaires.

What can local retailers and shop-keepers do?

I feel it is time for local retailers to provide same experience that these online shopping sites provides. For obvious reasons, they, as an individual, cannot take on these online giants. These online giants are backed by folks having deep … deep … very deep pockets and can survive despite massive losses over consecutive years. Instead, all Indian local retailers and shop keepers should join hands and collaborate better.

Retailers and Shop keepers already have local and national level federations. At all India level, they should join hand and form their own one single online portal to sell items. This proposal portal should provide all the comfort and features (and much more) that amazon flipkart provides.

“Buy from locals vs buy from online giants backed by non-Indian corporates” appeal and awareness has been doing rounds for long time now. There are still many consumer who will buy from this proposed online store (even if items are not as cheap as on existing online giants) as long as this portal can emulate the “product range”, “convenience” etc experiences that flipkart/amazon provides.

Proposed portal should have checks and balances to avoid monopolies, say

• Seller should have a registered shop in India. Portal is not to replace stores but to provide stores means to sell online also
• Once a product is chosen, consumer can buy from local sellers only. i.e. buyer from any given locality will be shown seller in order of proximity based on distance, by street followed by pincode followed by area followed by city followed by state etc., etc.,
• De-list / black list a seller if his overall sales are at losses for two consecutive years
• And so on

You get the point, these folks should sit together to design and take it forward

Who will fund building and maintaining this online site?

• For Initial Development: Pool money from members to build technology platform. Assume there are 10 lakhs registered members across India and each contribute Rs 500, you have Rs 50 crores, more than enough to develop an excellent world class portal and host it on powerful servers
• For Regular Maintenance: Each member pay Rs 10 per month for keeping the platform up and running. 10 lakh members will generate Rs 1 crore per month, which is lot of amount for maintenance. Or this can be a small flat fee from all (say Rs 1) + small % of sales (so that sellers who couldn’t sell anything need not be burdened with cost of maintenance)

Again, you got the idea, numbers could be tweaked to arrive at appropriate business model.

What’s the catch?

Biggest issue is to get all local sellers across India to collaborate and come under a single platform. Is it easy? No. Is it impossible? Again no. Start small, at city or state or region level etc., Many will join as soon as they see the success of this platform.

Is this the only solution?

Perhaps, there are other viable options worth evaluating. Yes, local stores and retailers are getting impacted due to online shopping but pointing figure at perils of technologies, disruptive innovations, demerits of open economy cannot be the only solution. Time for store keepers also to get innovative

Point is, eliminating deep discounts alone will not be sufficient to turn away buyers from amazon flipkart. Rather than individuals having to go to stores, these giants have brought stores to their finger-tips. Consumer will not turn away from this experience soon.