DEALING WITH THE ONLINE ONSLAUGHT

An Eucliea Consulting Insight Sharing

TRENDS SEEN BY RETAILERS Based on our Consulting Practice with Retail Customers

Online Retailing Is Seen As A Major Threat –

Assumptions that are seen to affect business

• Large range of SKU • Seen as a very large multi-brand store, getting squeezed in the range

• Seen to give good discounts – little or no retailing costs as required for stores

• Manpower, Showroom, Rentals etc. are very high for retailers

• Wide reach • Online stores can reach every household

• Access to small towns

• Uniform customer experience • Convenience of 24x7 shopping

• Shopping from the comfort of the home

• Consistent shopping experience thru website

• Difficult to protect the franchisee network • Cannot ignore the online channel, but discounts affecting the direct channel

• Is affecting retail sales of all types of products

• It is a 24x7 store

VALIDATING THE ASSUMPTIONS Is the threat creating a business changing proposition?

How threatening IS the online channel

• Large SKU range

• It is true that the SKU range is much greater than one would see in

a large multi-brand store

• However buyers invariably tend to narrow down searches based on

the brands they know.

• The level of trust in unknown names is very low in online purchase,

hence are avoided more

• THIS ASSUMPTION IS A FALSE POSITIVE

• Seen to give discounts

• Perception is true, Save a few brands, in most cases there is a

perception that online gives high discounts

• All on-line companies are into losses

• THIS ASSUMPTION IS TRUE

How threatening IS the online channel - Contd

• Wide Reach of On-line Stores • Research show that most of the business of on-line stores is from

the urban centers

• Internet facilities in rural / less-urban areas are limited and scratchy

• THIS ASSUMPTION IS FALSE

• Uniform Customer Experience • Online stores requires you to surf to find out what you could be

looking for

• It provides only a limited information about the product most of the times

• There is no ambiance – a must for shopping as against buying

• Yes, the experience is uniform, to the extent the website can provide

• THIS ASSUMPTION IS FALSE

How threatening IS the online channel – Contd.

• Difficult to protect the franchisee channel

• The discounting factor of the current online channel would tend to

disrupt the franchisee / dealer network channel if it typically falls into

the product categories like

• Products that are well researched before the purchase (like electronics)

• Products that are non-differentiated

• Products for which the emotional content is low (like household products).

Emotional content is like feel, blend, texture and similar consideration

• THE ASSUMPTION DEPENDS UPON THE PRODUCT LINE, NOT

UNIVERSAL

• Is a 24x7 store

• THIS IS A CORRECT ASSUMPTION

•

ONLINE STORES – BUILDING THE SCENARIO

What the online store is currently addressing

Online Stores – Emerging Scenarios

• Online stores will be disruptive for a small product range only • Products that belong to the buy category, not shop category.

• Products where the rational elements of the purchase matter most – Electronics, Household products and similar categories

• Products that are known and is required for archiving – example books, DVD and similar

• Products where delivery is not required to be instant

• Online stores cannot create a shopping experience

• Currently the discounts offered is to build a base • All online companies are not making profits

• Once the pressure of profits builds, discounting will reduce

• Online will remain attractive for the convenience buying

SOLUTIONS FOR THE RETAILER How to embrace the changing environment

How to handle the online shopping

• Improve the quality of the retail environment • Focus on converting outlets from “product available locations” to

shopping experience locations – e.g. Hamley

• Develop consultants for your product line, not retail sales force manning counters – e.g. Apple Stores

• This is important as retailer need to offset the „trauma‟ of reaching the location because of the „hostile‟ external environment – Noise, Pollution, unruly crowds, parking issues, poor quality roads etc.

• Work towards creating differentiated product • Need to stand out in the crowd in what ever way possible

• If the product cannot be the differentiator, the total offering package has to be delivered as the differentiator

• Embrace online stores if your product line is not bought on emotional experience

APPRECIATION OF OUR WORK

SOME OF THE REFERRAL LETTERS

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