And how many of us prefer to go out to a store to shop?
Would huge brands like amazon or flipkart let the brick & mortar shops survive ?
Or would these huge brands eventually run out of investor funds and shut down ?
Good morning fellow toastmasters, let us try to foresee who would survive in a war of E-commerce vs Brick and Mortar stores.
Let me tell you a story
During my wedding, my better half wanted to get a lehenga of my choice. I was surprised because for me there are only 6 colors – red, yellow, orange, pink, blue and green, whereas her eyes can see multiple colors in each of these color.) For example she could see multiple shades of red – light red, dark red, blood red, maroon. Similarly for green there is light green, grass green, dark green, lime green, etc. I think i spent at least 2 weekends roaming with her in chandani bazaar and karol bagh. I cannot even count the number of shops we visited. And i know that i was of little or no help to her. Now, if we had flipkart or amazon in those days, it would have been a lot easier for me.
There are people who want to see, touch and feel a product before purchasing. Also there are people who want to take the product home immediately. These are the two downfalls of shopping online. You cannot know how the cloth will feel. So online shopping for electronics and electricals is easier. Because you do not need to touch and feel the product. You know that all products that belong to a model will be similar. Shopping online for footwear is a bit dicey. You know the size you wear, but different brands may have different sizes and there are cases in which for one brand you would be wearing a size 7 whereas for another brand it would be size 8.
What prompts us to shop online is the large amount of inventory and the discounts that are available online. And the luxury of having a product delivered home without stepping out of the house. Now-a-days, returns are also easier. It takes time, but then there are some benefits as well.
The question that comes to our mind is what is required to run these online or offline stores?
Both require rent and electricity. Offline store would pay rent and electricity for their shop where they put their products on display. Whereas e-commerce sites pay rent where they have their offices. They also pay a lot of rent on warehouses where they hold their inventory, whereas offline stores do not require such large warehouses. But then they have limited variety, whereas online sites have huge variety. Offline stores pay small salaries to the sales team they have, whereas online stores have to maintain a highly paid technical team and computers – servers. Offline stores do marketing locally so the marketing expenses are low as compared to online stores which have to do marketing at a countrywide scale which is very expensive.
If we look at the sales figures, online stores have a conversion rate of 2-3%. That is out of 100 people visiting the site only 2 make a purchase. This can go up to 8% with proper marketing, discounts and intelligent listing of products. On the other hand, offline stores have a conversion rate of 15-30% which depends mainly on the season and discounts. So out of 100 people walking into the store, at least 15 make a purchase.
If we look at both of them, ecommerce stores have made it easier for people to shop. But if you have time and want to feel the product before you buy, you can still walk into a store and purchase it. Which tells us that both online and offline stores would co-exist. E-commerce sites have realized that it takes huge effort to maintain a huge inventory. And in order to cut costs, they are moving to marketplace model. Where they would compliment the sales of offline stores. In a marketplace model, the online stores will eventually get product from an offline store and deliver it to the customer. Nobody can predict the future. We can only speculate it.