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From Kirana To Malls To Online Shopping: Are We Getting Closer To Utopia?

Published by MBA Skool Team in Operations & IT Articles category Last Updated: June 26, 2012Read time:

Flashback: Some 15 years back….

Life was unimaginable without the neighboring shop of the friendly Patel Uncle. Be it cooking oil or the purchase of chaval daal, Patel was our savior. He seemed to know what the best product available in the market is and many a time had the privilege to choose the brand for us.

“Yeh waala sabun lelo, scented hai”, would be his expert advice which was accepted by everyone in the family with full magnanimity. If we wanted to buy clothes, home appliances and crockery, a monthly visit to ‘the market’ was inevitable – a well planned family excursion!

Flashback: Some 5 to 6 years back….

A glamorous and more enticing entity entered our lives. It caught a lot of attention because it seemed to be like an all-rounder. It was cooler, claimed to offer items cheaper than our friendly now-not-so-expert Patel Uncle and was packaged more glamorously. The Mall Culture had arrived and people were taken by awe. Slowly, this so-called ‘organized retail’ stealthily came creeping into everybody’s lives and it looked like – it was here to stay!

Back to the Future…..

It’s the year 2012 and the cycle seems to be repeating itself. There is something that is more exciting now. Welcome to the world of Online Retail. Not only does it offer you more variety, but also claims to sell products at insanely cheapest prices. Web Portals shouting out best deals, 50% off and attractive discounts are a commonplace. Online Retail, which began with a limited items like books and online tickets slowly diversified into gadgets, clothes, accessories to even perishable items and grocery!

So from local kiranas to big malls to online shopping, we wonder what has been causing this shift? Is there an underlying pattern? What is so unique about online retail that it is so quickly taking over many kinds of traditional modes of shopping? A close examination of this trend leads us right back to the basics, the 4 P’s of marketing- Price, Product, Place and Promotion. This entire phenomenon simply reinforces the fact that these four dimensions are absolute game changers.

The Fall of Kirana and the rise of Mall Culture

India- which was a nation of shopkeepers slowly got a makeover of organized retail. Though the skeptics had initially brushed off shopping malls as a passing fad, the Indian Consumer with his characteristic unpredictability proved the pundits wrong. By 2010, organized retail revenues touched the mark of $23 billion. The Growing number of Mega stores and the decline of Local Kirana were mainly due to:

1. Strong Supply Chain Logistics:

Local Kiranas had major constraints, especially in terms of the variety they stocked, display of items and had to sell their products mostly at MRP. The supply chain was long and elaborate. The large number of middle men added several intermediate costs and left very little power to the shopkeepers to attract customers. On the other hand, bulk purchasing helped big retailers to offer commodities at much cheaper rates. Mega stores like Reliance Fresh purchased vegetable and cereals straight from the farmers, and effectively eliminated a thick layer of middlemen from the picture thus cutting costs.

2. Concept of Retail as Entertainment:

The concept of “Retail as entertainment” came to India with the advent of malls. Malls offered a plethora of attractions from high profile shopping, impulse eating establishments, a glitzy and glamorous environment to shoppers who were more concerned about quality than budgets. Mall leveraged heavily on comfort, diversity, luxury, entertainment and convenience, something that a neighborhood shop could never provide. Slowly shopping was transformed from a need driven activity to a leisure time entertainment.

3. Shopaholic’s Paradise:

People visited malls even without any urgent buying requirements. The attractive promotions, offers, variety and diverse range of products ensured that a consumer ended up buying something anyway. Malls became an addictive phenomenon and many people slowly drifted towards the mall culture for the sheer thrill of it.

4. One Stop Shopping complex:

One destination with perfect ambience was a shopping mall’s USP. Consumers could complete all their shopping activity in a pleasant environment without any inconvenience. The concept of ‘Complex within a complex’ added to the convenience factor.

Soon, this trend called organized retail became a norm and everyone believed it was ‘The Thing’. But wait, was there something else slowly growing in the background, something more exciting than the malls?

The E-Retail Era

Just when the Mall culture was catching up, the Internet crazy generation slowly deviated towards a more tech savvy way of shopping. On the investors’ side, the rising real estate prices has increased the entry barrier of setting up a shopping mall making it a high investment and high risk activity with a long gestation period.

More and more buyers are opting for e-shopping and this change in consumer behaviour can be attributed to the following few reasons:

1. Convenience: Shopping online is a very convenient option as one can shop as and when he/she pleases at any time of the day. This is especially beneficial for those who work late or do not have much time for shopping. Also, shopping can be done in a matter of few minutes thus saving a lot of time and effort.

2. Better Prices: When buying from stores, consumer has to accept the price the vendor is charging. This is not the case when it comes to online shopping. Consumer can make comparisons from various sites and get the best price.

3. Global Shopping: When shopping online, consumer can shop from various sellers all around the globe. Shopping is no longer limited to one geographic location. This barrier is completely eliminated when it comes to online shopping.

The Rise & Rise of E-Retail

Online shopping which was once restricted to booking train tickets, has seen unprecedented growth in the past couple of years. According to a BCG report, the e-retail industry of India is expected to grow 10 times to $84 billion by 2016 compared to 2010. This phenomenal success of e-retailing can be attributed to 3 main reasons:

1. Internet Population: With more than 100 million internet users, India is the third largest internet market in the world. This isn’t all, the government’s National Broadband Plan worth $4.5 billion is expected to add another 160 million internet users by 2014.

2. The Rising Middleclass: Sounds cliché’? Not really. The rise in number of jobs, thanks to the technology boom, has made sure that most of the middleclass families have enough money to spend on consumer durables. The average annual income of a middleclass family now ranges between Rs 5 and 10 Lakhs per annum. The rising middleclass, which is tech savvy enough to understand the nuances of online shopping, is the biggest driver of the online retail growth.

3. Young India: With more than 75% of the internet users under the age of 35, India is one of the world’s youngest internet populations. This Youngistan not only has much more disposable income than their parents but are also unafraid to spend it on Books, Apparel, Movies, Shoes and a horde of other consumer goods on the internet.

Small Town’s the Word

If you thought that it’s the Mumbaites and the Kolkatans that are fueling the e-retailing growth, then think again. According to an eBay Census 2011 study, 3,311 Indian cities shopped online between July 1, 2010, and June 30, 2011 and more than 1,267 of these were non-metro cities. The survey further states that although metros remain the biggest contributor to the e-tailing pie with a 51% share, almost 40% online shopping is done from Tier-2 and Tier-3 cities while a healthy 9% internet shoppers are from rural India.

It is also estimated that more than 60% of online shoppers would come from beyond the top 8 metro cities by the end of 2012. So, why all of a sudden Small Town is the WORD? A major reason for this is that small towns lack the kind of brands and variety of consumer goods available in the larger cities. More and more of the rising middleclass now come from the non-metro cities. Brand consciousness has risen among them and so has their aspirations to own better products. Unfortunately, local stores are unable to satisfy this hunger and people are eventually turning to the internet for such products.

However, despite this phenomenal growth in the non-metro market there is still a lot to be done. For instance, an Edelweiss study states that only about 10,000 of over 150,000 pin codes in India are covered by the delivery services of the internet shopping sites. So there is a huge challenge of reaching these places and making them participate in this online revolution. Also, even if India boasts to be the world’s third largest internet using country, the truth is that the 100 million users represent a paltry 8% internet penetration.

The Future of Online Shopping: A Step Closer to Utopia???

So, where is Online Shopping really headed to? With hundreds of e-retail sites coming up every month and squeezing the already squeezed margins, the e-commerce industry is looking at an inevitable consolidation. And if you thought that this is something that will take place in a distant future then look around. Flipkart has already acquired Letsbuy.com and with Amazon’s entry a lot of unprofitable e-businesses are going to shut their shops eventually. Just like the physical retail industry, the online industry will be run on the Darwinian principle of ‘Survival of the Fittest’ with only the key players staying in the market almost resembling an oligopoly.

Now, if you think that Uncle Patel’s store that was almost ruined by the Malls is now going to be uprooted by the e-retail storm, think again. Small retailers are also being helped by the e-retail sites and some are seeing their glorious days once again. Sounds unbelievable? Just log in to Snapdeal.com and you will find thousands of deals on a myriad of products being offered by small retailers. Amazon’s Junglee.com lists several sellers each offering their own prices for the same product and the customer is free to choose his seller.

So, does that mean we have reached a stage where the offline and online retailers can co-exist and have an almost symbiotic relationship? Are we entering a society where only buyer is the King? Are we inching a step closer to Utopia?

This article has been authored by Meera Joy Malekandathil and Prashant Bankar from NMIMS.

Image(s): FreeDigitalPhotos.net

Views expressed in the article are personal. The articles are for educational & academic purpose only, and have been uploaded by the MBA Skool Team.

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