Online retailers are working on building their offline presence. India’s largest e-commerce retailer Flipkart in conjunction with its logistic company eKart is providing customers with ‘experience zones’ to facilitate buying and pick-ups for consumers at their convenient time. In due course, these experience zones evolve to offer value-added services like spot trials, reverse pick-ups, instant returns, cash on returns, and exclusive product demos. The experience zone initiative stems from the customers’ dissatisfaction with the delivery process due to unavailability of delivery at preferred timings and restricted entry of delivery persons into office complexes, gated communities, and educational institutions. Through the experience zones Flipkart is also contemplating its rural expansion strategy as it proposes to expand into Tier-4 towns and rural areas by making them serviceable from a pick-up centre. This is a reliable alternative to door-delivery in remote areas where logistics add significant costs.
Amazon, as a major competitor of Flipkart, has come up with a similar model and added pickup services with BPCL’s In & Out stores and with kirana stores in Bangalore for in-store pickups by customers.
A leading online baby products portal called Firstcry.com is expanding with an offline presence and increasing the number of its stores, as a large proportion of baby product sales still happen offline. Currently they have around 70 stores through a franchisee model in Tier-1 2 and 3 cities across India. Similar to Flipkart’s experience zones, Firstcry’s stores act as experience centres and provide the touch-and-feel factor for customers. The physical stores display 300 to 400 brands, whereas through the kiosks in the physical stores customers can browse through approximately 70,000 SKUs, order online, and get the product in the store within 2–3 days.
The e-commerce industry is replete with examples of online retailers like Myntra.com (fashion), Zivame.com (innerwear), Bluestone.com (jeweller), Healthkart.com (fitness products), and Lenskart.com (eyewear), who are trying to start an offline presence by setting up stores and trial rooms with different modalities. The physical stores enable these retailers to reach buyers in smaller towns and cities as a major segment of sales for these companies happen in the smaller towns. The stores help to establish customer trust and build the brand as the buyers are reassured that there is an actual store to go to if they face problems with the products. In the long run, this offline strategy also helps the online companies to attract investors for funding.
The Hyperlocal e-Commerce Model
As per a report by retail consultancy firm Technopak, market share of the grocery e-store has been estimated at less than $100 million but is expected to cross $25 billion by 2020, growing at a rate of 25% to 30% year-on-year in major Indian cities. This segment has resultantly attracted funding and a few major players like BigBasket, Local Banya, Grofers, Zopper and PepperTap have started operations in this space. While companies like BigBasket source from wholesalers and stock their inventory, players like Zopper, Grofers and PepperTap operate a hyperlocal model.
The hyperlocal model is an on-demand delivery model that takes groceries from a neighbourhood shop and brings it to the consumer’s doorstep. Customers use the website/app of the hyperlocal retailer to order groceries and the retailer delivers the groceries through its delivery boys deployed at the mid-level grocery shops that have tied up with it. For its services rendered, the hyperlocal retailer charges a commission from the sellers. Ordinarily, the neighbourhood stores use their in-shop attendants to double as delivery boys when required. The hyperlocal retailer offers the owners of these neighbourhood stores professional logistics and technology support to attract customers and helps the grocery stores to compete with both the leadership development goals of modern retail and e-commerce formats that are increasingly denting their business. For the hyperlocal grocers, it is a very asset-light business model as they do not need to carry their inventory (the products the retailers carry is their inventory), do not have any warehouse requirement (the retailers’ shop is their warehouse), and does not involve any high-cost delivery infrastructure. They divide the area of operations into different zones, with one shop in each zone that caters to a catchment area of 3–4 km in the immediate vicinity. The available stock items of the shop are accessible on the website/app through which customers select their products.
Numerous challenges are faced by the hyperlocal retailer start-ups in identifying the right local stores for supply, right talent for vendor acquisition and fulfilment, maintaining the quality of the products to be delivered, logistics, retention of delivery staff, maintaining customer satisfaction, and raising investment funding to enable the growth of the company. Such business models have many crucial components that must work in tandem and it calls for adequate strategic planning to sustain the business. While Zopper with its focus on electronics category is looking at expanding its city reach and doubling its gross sales, PepperTap failed to raise sufficient funds to sustain its growth and closed down.