Small retailers dump brick & mortar outlets for webstores

Ashwin Sonani is like any of the thousands of apparel merchants in the diamond polishing city of Surat. Except, the clientele for his designer georgette and chiffon sarees, lehengas and chaniya cholis comprises not just neighbourhood Gujarati women and children, but from as far as Guwahati and Dispur in Assam and Durgapur and Siliguri in West Bengal.

Sonani, an engineer by education, dumped his brick-and-mortar saree business four years ago to trade through different e-commerce channels.

Today, his clothing brand Diva sells through 40 webstores and garners a turnover of Rs70-80 lakh per month.

“Selling online has meant huge uptake in business. Physical stores restrict customer base. I had never thought my business would see demand from places like Korba, Bhubaneswar, etc,” said Sonani.

Like Sonani, Anurag Ravi, a New Delhi-based retailer who sells sunglasses, handbags, travel bags, kurtas and jewellery, has seen a surge in business since going online a year ago. “From revenues of Rs2 lakh per month when I started online, today the monthly turnover is almost Rs12-14 lakh,” says Ravi, who sells his products through eight portals.

Varun Agarwal of Praful Sarees is another upcoming retailer who sees roughly 3,500 transactions per month online. “The number has been growing 5-6% every month.”

Several new and small retailers are chucking the brick-and-mortar route for e-stores.

Not for nothing is the e-commerce industry estimated to be worth nearly Rs8,000-9,000 crore.

Amit Maheshwari, vice-president, fashion merchandising, at online shopping firm Snapdeal.com, says they receive inquiries from over 1,000 every month from retailers and shop owners who are interested in trading online.

“Small traders need a good platform to reach customers and market their products. We get inquiries from places like Tirupur, Benaras and Ludhiana.”

Going online is seen far more advantageous than putting up stores or selling through multi-brand outlets. Location stops being a limitation since the shipping and delivery is often handled by e-commerce firms who take a commission on the transactions.

“The South brings 60-70% of the business,” says Ravi.

Moreover, the number of stock-keeping units (SKUs) online is far greater than in stores. “We currently have 500 SKUs. Through MBOs, we can keep only a limited number,” says Ravi.

Further, transactions done in a day online far outnumber those through a physical outlet. “For every 10 units of watches sold through a shop each day, nearly 100 watches can be retailed online,” says Saurabh Kapoor, director, operations, Destination World, a corporate merchandising firm.

Also, as online is bereft of all the overheads attached with physical stores, the prices are 40-50% lower, says Kapoor. “So, a customer can get the same product at a major discount, while a retailer can sell more units as there are no geographic limitations and pricing is less. It’s a win-win for both.”

As such, for smaller retailers, offline typically means selling through MBOs, “since opening individual stores calls for heavy flow of capital”, says Subhanshu Singh, who retails jewellery online.

“But in MBOs, smaller brands do not hold much negotiating power. We cannot effectively push our products, ensure transparency or monitor sales and pricing”, he says.

Starting solo outlets involves huge costs, including rentals, manpower and inventory costs, says Ravi.

Sonani, who stopped selling through MBOs after going online, also points out that store owners tend to push back unsold products after many months, “when they go out of fashion”.