Traditional Retailers vs. Online Retailers in India
The whole Indian retail industry is facing a huge problem due to the advent of online retail companies. These online retailers have got massive funding and are aggressively expanding into many categories. They not only offer greater choice and quality, but also lower prices. This is turning out to be a huge headache for the traditional retailers. These companies cannot compete either in choice or quality or price. The online retailers are copying the Amazon model of offering products at wafer thin margins. Shopping in India is not easy given the traffic and problem of getting the right product and model. The prices quoted are also much higher, given that retailers keep fat margins as their turnover is much lower. There is also the problem of counterfeiting and service. Online retailers on the other hand, are all going out to ease the life of the consumers.
Also read on GWI Pros & Cons of FDI in India Retail .
They offer return policies and great payment options. Cash on delivery is available from all major online retailers. They also solve the problem of counterfeiting, which is faced by the Indian consumers. In small towns and villages, there is no substitute for online retail as brick and mortar retailers for many products are absent. Mobile internet has made Internet accessible to vast swatches of the Indian population and they are rapidly turning towards online retail. Local retailers are facing huge headaches and they have complained to the CCI about these companies offering products at below cost. They also are complaining that the retailers have raised money from outside investors which is not allowed.
Offline retail in India does not have a chance against online retail due to the many structural disadvantages. The rental and real estate costs in India are exorbitant and add up to the costs of the products. Online retail does not suffer from this disadvantage and they also have to pay lower taxes and duties. With the Indian consumers getting more and more comfortable with online payments, the future for the small retailers are quite bleak in my view. Unless they offer value added services, they will have a difficult time in surviving. These complaints will not solve their structural issues. Even the large retailers had complained to the electronic product companies about predatory pricing. They said they would refuse to carry the products unless the online retailers stopped passing on the dealer commissions and discounts to the consumers. I think the success of online retail is a great thing for consumers. They are brining greater choice, lower prices and better quality. All these things which people in other countries take for granted is not available in India. The offline retailers will have to up their game if they want to survive. They will suffer the fate of the travel agencies if they don’t.