Omnichannel will dominate retail in a decade: VCCircle Consumer Summit
Adopting a mix of an offline and online strategy is necessary to succeed in retail as a standalone approach will never work, said panellists at the News Corp VCCircle Consumer Investment Summit 2018 which was held in Mumbai on Tuesday.
The day-long event saw participation from some of the top enterpreneurs and investors the consumer space.
Speaking at a session titled 'Building Offline & Online Channel - Managing Complexity and Delivering Success', Supam Maheshwari, co-founder and chief executive officer of baby products e-tailer FirstCry, said both online and offline channels offer value proposition and provide a window to the consumer.
“Pure online makes sense for certain products and categories, while pure offline can make sense for certain categories,” Maheshwari said.
However, going by FirstCry's experience, he believes that offline stores will become profitable much faster than a pure online strategy.
The panellists also agreed that running an omnichannel business means having the right team in place.
Nihir Parikh, chief business officer at beauty products e-tailer Nykaa, said that it is important to have one team in place to run an omnichannel company.
“If you start splitting these things from day one, you will be two separate companies, an e-commerce and a retail company,” he said.
Maheshwari concurred, adding that a pure offline team will never work for online and vice-versa.
Shilpa Kulkarni, managing director at early-stage investor Zodius Capital and director of lingerie e-tailer Zivame, said that the channel, whether offline or online, doesn’t matter so long as the brand is where the consumers are.
"Offline doesn’t necessarily mean setting up your own store, it could mean being available in large format stores, being available in trade and being where the consumer touch point is,” Kulkarni said.
Taking an offline approach also means stretching the balance sheet with regard to inventory.
“If I put my product [Zivame], which is a long tail category, in 30 different places versus having it in a central warehouse, it brings stress,” she said.
Another challenge that the panellists spoke about is figuring out the customer experience in the omnichannel space.
Adapting the online play to the offline world is difficult, said Parikh. Nykaa tries to apply what it has learned from e-commerce to the physical world.
“The same USPs of online cannot translate to offline so you have got to figure out the customer experience because online, we have over 1,000 brands and a lakh of SKUs [stock keeping units]. There’s no way a store can accommodate that,” he explained.
According to Parikh, the offline world offers certain value addition.
“We’re seeing a higher percentage of sales in the physical world versus the e-commerce world. Categories like lipstick which are very experimental, we’re seeing a disproportionate amount of sales online because they [customers] want to see a much larger range, so figuring those sub-categories where you can add more value to a consumer’s journey is also being differentiated,” he explained.
So how do brands and companies maintain that customer experience?
According to Kulkarni, Zivame relies on data analytics and technology to understand its consumers and thus retain them. The company’s inventory allocation is based on analytics.
For Nykaa, adding physical stores seems to have worked.
“Around 80-90% of people know of Nykaa before walking into the store,” Parikh explained.
FirstCry has already automated its inventory.
“Both worlds are very different. Offline runs on bestsellers so you automate that inventory,” Maheshwari said.
The company has developed an Auto Replenishment System (ARS) across all its stor es where its standard products are automated. For its fashion products, it has built a technology model where customers can place orders at the stores.
Besides automation, FirstCry leverages CCTV footage to gather insights into customer data.
Going forward, the panellists predicted that an omnichannel strategy will completely take over.
“In the next 5-10 years, retailers in metro cities will evolve to omnichannel. There will be no pure offline or online play,” Maheshwari said.
He added that retailer will reach a point where a customer can window-shop online and then be able to buy the product at the store nearest to him or her. Contextual aids online will help a customer buy offline, he added.