Making sense of the online to offline shift
Online-to-offline, or O2O, is being heralded as the next big thing in India's rapidly evolving e-commerce space. As large horizontal e-commerce players go after the same set of customers, many of them are wooing them offline by creating physical touch points, such as experience zones and model stores.
"We are watching how this online-to-offline and offline-to-online shift is unfolding," said Avlesh Singh, co-founder and CEO, WebEngage, at the just concluded Techcircle India Ecommerce Summit 2016. According to him, while most of the offline retailers have ventured into the online space, their business strategy is unlike that of online players. "Offline players think how can they leverage their offline presence while offering their products online. Even if they have a lot of leverage, they definitely lack the expertise and technology to put it all together."
In 2015, the market saw many brands upping their ante in the O2O space. In December, mobile wallet and e-commerce venture Paytm acquired Near.in, a marketplace app that connects users with local businesses for home services in a bid to tighten its hold in the online-to-offline commerce space. And, in August, five-month-old budget hotel aggregator WudStay bought offline rival Awesome Stays to expand its reach.
Initiatives in the reverse direction are also growing. India's largest business conglomerate, The Aditya Birla Group, in October last year, launched its fashion portal â€“abof.com â€“ to sell apparel, footwear and accessories, highlighting the growing importance of e-commerce for brick-to-mortar retailers.
One of the first brands to venture into the offline world has been Lenskart.com. In order to attract customers who do not buy spectacles without trial, the eyewear company opened stores that just have display stocks and take orders, but don't sell. Lenskart now has 150 stores in less than 10 months. And, to deal with each touch point, it has got one online head, one offline head, and one cross-over head.
"This is what our consumers wanted," says Peyush Bansal, founder and CEO, Lenskart.com. The average turnover of these franchisee-led stores is about Rs 88,000 a month, he adds.
While 1MG (Healthkart) founder and CEO Sameer Maheshwari says its debatable whether the e-pharmacy marketplace is an online firm or an offline firm. "Obviously online scales much faster, but the health and nutrition business we are into is counselling led," he says. The startup , which has two offline stores, sees a lot of people taking advice from counsellers or store managers on new products and their side effects, which otherwise is difficult to communicate in the online model.
Commenting on 1MG's offline play, Maheshwari says, "The offline channel is underdeveloped in the health and nutrition space as there are only around 1000 outlets in the country. So we really see an opportunity to open 50-100 company-owned outlets." IMG is ready to work with third-party retailers to sell its products, he adds. "For us, offline is a combination of our own stores plus third-party stores."
Chaayos, perhaps, is the best example of a brand straddling the offline as well as the online world, in a bid to catch the customer. Nitin Saluja, founder and CEO of the tea (chaai) retailing startup, says, "We make money from all three models -- cafe, kiosks and chaai-on-delivery. Our business was never driven by whether we want to be an omni channel company, or online to offline company. Our aim was to capture all those five times a day when you consume chaai."
Investors are certainly giving a thumbs up to such experiments.
"As an early investor in e-commerce, I'm quite excited with the opportunity that lies in this online-to-offline shift," Karan Mohla, executive director and head of digital consumer investments, IDG Ventures India, concludes.