This festive season, trends and business models of India’s retail industry is swiftly changing and transforming. In a major twist, it has been found that brick-and-mortar store owners are now buying deeply discounted products from online ecommerce portals, and then reselling them to customers via their stores.
This can be described as the reverse swing of ecommerce, and it is still not clear how this will affect the overall industry.
Is it good for brick-and-mortar store owners? Or is it good for ecommerce portals?
Or are the customers at the fag end of this cycle the real beneficiaries?
Or is this is a bubble which will soon burst?
Ecommerce Goes Retro: Offline Retailers Are Re-selling Online Products!
The rise of ecommerce has been fueled by massive discounts and offers, which customers couldn’t find in offline stores.
And this festive season, we saw the best of this deep discounting as ecommerce portals such as Amazon, Flipkart and Paytm Mall showered deals after deals.
Paytm has already committed to spend Rs 1000 crore on discounts and offers, and Amazon, Flipkart were not behind in matching them.
Now, due to this trend of offering online discounts, which offline retailers cannot match; they have now decided to buy discounted products from the online portals, and sell them back to the end-users, via their own physical stores.
Hence, in a way, they are targeting those customers who are not net-savvy, and are not aware of the ecommerce discounts.
As per industry reports, around 20% of all sales generated by ecommerce portals during Dussera-Diwali was churned out from these offline retailers, who are buying discounted products and reselling them back to customers.
Now, as bulk orders are not allowed on ecommerce portals, these offline retailers are creating 8-10 different accounts to order products at discounted price, and making profits reselling them back.
Which Products Are Being Resold By Offine Retailers?
It seems smartphones are the most popular products, when it comes to reverse ecommerce.
We have already reported how Flipkart claimed 13 lakh smartphones were sold in the first 20 hours of the sale. Now, it seems that these sales were a result of this reverse ecommerce phenomenon.
As per reports coming in, smartphones from iPhone, Oppo, Vivo, Redmi, Motorola and Samsung were most popular with offline retailers, and they optimally utilized the cash back and flat discount offers to buy them from ecommerce portals, and then reselling them to their customers via offline stores.
Bundled offers on FMCG products like detergents, soaps, sanitary pads, diapers, sauces, chocolates, juices and snacks were also used by offline retailers, and they heavily invested in them to make decent profit via their offline stores.
Confirming this development, Retailers Association of India, chief executive, Kumar Rajagopalan said,
“The online discounting this time has been far too much, especially in some categories and products. In fact, in a few smartphone models, it (price on e-commerce sites) is even below the distributor price. Hence, several smaller retailers are buying it online,”
As per FMCG companies, this parallel system of ‘new-age’ distribution can cause disruption in near future.
Mayank Shah, marketing head of the country’s leading biscuit maker, Parle Products, said: “A parallel distribution channel is being created, which is leading to lack of equilibrium through the distributor-retailer trade channels. In the long term, this can get disruptive.”
Is this ethical? Moral? We have no idea, but yes, this is a question of survival for offline retailers here, and they are doing everything possible to fight the odds.