Recently the Flipkart mega sale did not go right for a,b or c reasons and led to a lot of backlash and discontent among buyers. Some traders took advantage of this situation and complained to the commerce ministry on "Predatory Practices" ruining their livelihood.. Immediately an ED investigation was started and today we hear news of 1000 cr. fine being potentially (not actually) slapped on Flipkart. Flipkart is being called names in some social media circles and the whole thing looks like an effort to demonize online retail companies like flipkart, snapdeal, amazon, myntra, jabong, etc ...
But does this represent the truth ? Let me put some pain points of classical brick and mortar retail vis a vis online retail from a consumer perspective:
(1) Product Availability - In some categories of products like electronics, the neighboring store (however big or small it is) simply will not have the range of products that online retail can. So if you are looking for a particular tablet (say the latest Notion Ink Cain or the old Sony Transistor), you do not find it easily in the local market. But go online, you may get it at one or more of this mega stores. In one sense, these online stores bridge the retail divide between the well of and the not so well off consumers.
(2) Price - In many cases, their is a very huge markup being charged by brick and mortar retailers to earn profit margins and may for their infrastructure and supply chain costs. I recently bough an HP printer from flipkart for Rs. 4200/- whereas all the small and big stores in town are selling it for Rs. 5800-6000/- (MRP or even above). In general it is usually cheaper to buy online.
(3) Pre-sales and Post-sales support - A brick and mortar retail will not allow you to evaluate or test a product before buying. They have only some pieces on display and you cannot evaluate them in any way. The showroom sales people will never guide you to buy the right product (they are technically challenged in most cases as well as have a vested interest in selling what they are stocking rather than whats the right choice for the customer). More so once you are buy the boxed piece, you are on your own. If something doe snot work and fails the moment stuff moves out of showroom, they have no responsibility and will promptly direct you to the nearest (or usually not so near) service center. The same happens with online retail (though in some cases there are return facility). So I would call it a tie here.
(4) Time and Effort to shop - Its hard to find a product in local stores sometimes. You have to keep calling or visit them one by one to see whether they have it, which is very time consuming and effort intensive (especially in big cities with their large commute distances, busy lives and traffic snarls). Unless you need something IMMEDIATELY or RIGHT NOW (like medicines), it is hard to justify why we need to take this pain. Compare this with online retail. You can use a price comparison site to see where you are getting the product at best price, go there and complete the order in 10-15 minutes. The product will come to you now.
(5) Environment - Their are so many shops selling same or similar products. That i think is not environment friendly. If we have only few shops, then we use less energy and the space can be used for other commercial or residential purpose.
So as a buyer from a metropolitan area having access to 24x7 internet on Mobile Devices or PCs, access to credit cards, online retail is way superior option compared to brick and mortar retail. So who is predator from a buyer perspective. The brick-and mortar store (big or small) and its trading & distribution ecosystem or the online retailers ? Why as a consumer I should settle for a vastly inferior shopping experience & still pay more ?
Their are, however, some handicaps of online retail too:
(a) Online retail cannot ship everywhere (small towns)
(b) Online retail needs Internet connectivity. And still 80% of the country's population does not have access to it.
(c) Many buyers may have access to Internet but may not have access to credit cards and Internet enabled bank accounts to make online payment. The online retail industry has worked around this by offering COD (but still that's not available at all locations and for every product).
(d) In some cases like garments, you need to wear a product on yourself to see how it looks and feels Fit differs with every brand even if size is same.
(e) Vegetables, fruits, etc are not mass manufactured. You want to see the product, pick and choose what you want. And you need a brick and mortar store for that.
If you see (a)-(c), these are limitations that will be overcome with time and smartphone and internet access tele-density increases in India as well as most population have access to online banking and credit. For (d)-(e), I am not so sure and is an open area of innovation for the Internet companies on how they can make the consumer select and pick what he wants. Maybe it will work for some and not for most. Then there is of-course the issue that millions of people work in these traditional brick and mortar retail and distribution (trading) channels and what happens to them and their livelihood. Take example of STD booths and travel agents (the former have already disappeared and the latter are on their way out). This is a risk of/ multi-brand retail (whether FDI is their or not). This is a valid short term concern and a very sensitive one for people employed in the traditional trading and retail business. But isn't it so in manual labour based manufacturing as well as robot automated ones (and yet we have not stopped robotic research and development).
In long term, I feel the needs and desires of the many should be prioritized over the needs of the few (traders and retailers) whether they belong to the brick and mortar industry or online retail. India does not need to blindly kill or discourage the online retail business as it is definitely more innovative and value creating than traditional brick-and-mortar retail in many cases. It is upto the brick and mortar stores to innovate, provide better value and compete in this changing environment, where they are feeling threatened. And the same applies for online retail in areas where brick and mortar retail has an edge.
In the animal kingdom (as well as business), Extinction is a natural phenomenon in the changing environment, but so is evolution. Those species who resist or do not adapt die out. But iife goes on. Flipkart will improve next time or the time after that and so on, even if it is incremental. Hope the new Modi sarkar blindly does not play into the hands of one community in this tussle (and start harassing online retailers for eg.). It should help creating a fair, open and innovation driven business environment.
