Monday 2 February 2015

Brands pamper small stores as e-tailers upset retail equations

Neighbourhood stores are gaining ground around the country as manufacturers of small appliances pamper them in the face of e-commerce players offering heavy discounts and increasingly weaning away customers from organised retail chains.

“The trade is disturbed,’ says Dev Anand, director of Sundev Appliances. “A customer goes to a retail shop, compares online prices on his smartphone there itself, and bargains for a better price. The offline retailer cannot afford to sell the product at the price offered by deeply-funded online players and so they come to us complaining about the pricing.”

According to T T Jagannathan, chairman, TTK Group, the heavy discounts provided by e-commerce companies have hit the business of brick-and-mortar retailers. “They don’t want to hold stocks for two months like they did in the past. The holding period has shrunk from months to days and the stock replenishment is getting delayed,” he said.

Organised retail chains are the ones that have to bear the brunt because the customers who go to their stores are usually the same people that also visit the e-commerce sites.

“Every manufacturer has to maintain harmony amid the channel conflict and as the number of channels increase the conflict will also increase,” says Sunil Wadhwa, CEO of Groupe SEB India, which has acquired Maharaja Whiteline.

“It is true that e-commerce has grown fast from nil percentage last year to five per cent of the sales this year. It may grow to 10 per cent next year. But we cannot afford to ignore other channels,” he said.

Manufacturers see traditional retailers, or the neighbourhood stores, as rather immune to the e-commerce threat. As the majority of the sales still come from that channel, they are keen to keep them happy.

“We produce exclusive models for the traditional retailers so that customers cannot compare prices online. We ensure that the retailers get respectable margins and in terms of pricing we try to be as fair as possible,” adds Wadhwa. Through the company website, the manufacturer also helps customers locate the nearest retail shop.

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