Pure-play online brands are setting up brick-n-mortar stores not only to give customers a feel of the products but also because profit margins are higher
Despite the booming e-commerce market, digital native brands are increasingly venturing into offline retail. It started off with e-fashion behemoth Myntra opening its offline outlets, Roadster Go, with plans of launching over 100 offline stores in the next two years. Now, many other digitally-savvy brands are employing this strategy.
The online-to-offline trend is popular in major markets globally. Data by JLL Research shows that the top 100 digital native brands have plans for at least 850 physical stores in the next five years across the US.
Experts say retailers have realised that physical stores hold greater appeal and can garner in better revenues for brands.
A survey by Visa Cards on festive shopping and spends reveals that during the Diwali period, about 66% of the total spends were recorded at offline stores. “For key occasions and festivities, citizens still prefer a personalised experience, accompanied by touch-and-feel,” says TR Ramachandran, group country manager, India and South Asia, Visa.
Festive seasons are highly imperative for any brand as a major chunk of sales are witnessed during those periods. Therefore, establishing a physical presence has assumed greater importance of late, feel experts.
“The offline space plays a huge role in expansion and sales as most visits to a store convert almost 70% of window shoppers to real-time buyers. Offline, in fact, acts as a brand window for products. Customers are able to view products at their convenience, get a 360-degree view while trying them on and get a real feel of the texture and material,” says Shivani Poddar, co-founder, FabAlley and Indya.
Nisha Khiani, business development and marketing head at jewellery brand Isharya, concurs. Khiani believes that the touch-and-feel of the product is the best way for consumers to discover certain brands, “especially since one of our USPs (unique selling propositions) is quality and finishing. Getting an intrinsic brand experience is crucial towards creating brand loyalty.’’
Luxury brands particularly vouch by the offline channel as the well-heeled clientele that such brands attract seek to experience the rawness and culture of the products, and get associated with it, says Yogesh Chaudhary, director, Jaipur Rugs Group.
Brands acknowledge that online does not always work out to be more cost-effective for them. Although online saves real estate costs and rentals, as well as store maintenance and infrastructure costs, it does carry a considerable amount of packing and shipping costs, especially when products are returned. Industry estimates state almost 30-40% of all apparel bought online gets returned. “And the hidden costs attached to picking up the returns, taking it to the warehouse and later delivering another product, all at no costs to the consumer, proves expensive for brands in the long-run,” said an expert.
Another area where online proves costlier for brands is in the space of discounts. Poddar says offline stores limit discounts to certain seasons like Diwali, etc, while online is incessantly flooded with discounts and sales any time of the year. “Thus, offline margins are slightly higher,” adds Poddar.
Retail consultancy AlixPartners states that profit margins for online brands on an average hover at 30% or below as against the 32% witnessed by offline stores.
Brands like Jaypore, which entitled itself as a “curated online shop’’ for handpicked and handmade products, went offline recently by launching two stores. Puneet Chawla, CEO, Jaypore, says they witnessed traction with their events when they visited cities with trunks full of merchandise and “realised the instant feedback received at events was highly valuable. Therefore, we felt venturing into offline was natural.’’
Jaypore aims to open 10 more stores by the financial year 2019-20. Isharya, which went offline in 2017, is poised to open its “fourth, fifth, sixth and seventh outlets, with plans to open a handful of more stores by next year,’’ says Khiani.
BEHIND THE SCENES
- 70% – Of window shoppers convert to real-time buyers at offline stores
- 30-40% – Of apparel bought online gets returned
- 30% or below – Profit margins for online brands as compared to 32% for offline stores
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "E-commerce")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}