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Final Project

On

Impact of E-Commerce industry on the Brick and


Mortar Shops.
Submitted To:
Ms. Pratima Daipuria
Submitted By:
Vikash Kr. Sharma
Roll No: FB 13108
PGDM (2013-15)

Submitted for

Partial fulfillment of
Post Graduate Diploma In Management

Jagan Institute of Management Studies


3, Institutional Area, Sector-5, Rohini, Delhi-110085

TABLE OF CONTENTS

Declaration

Acknowledgement

ii

Preface / Executive Summary

iii

Chapter No.

Contents

Page

No.
I

Introduction

1-6

II

Research Methodology

III

Analysis and Interpretation

8-29

a) 4ps of Flipkart & Snapdeal


b) 4ps of Pantaloons & Big Bazaar
c) Strategies Adopted by both the sectors
IV

Conclusion and Recommendations

30-31

Bibliography & Reference

31

DECLARATION

I hereby declare that this project titled Impact of E-Commerce industry on the
Brick and Mortar Shops submitted by the undersigned to JIMS has been
carried out by me. Further I declare that this is my original work carried out under
the guidance of Ms. Pratima Daipuria (Faculty of Jims), in partial fulfillment of
PGDM Course for the award of diploma.

All the contents of this project report are true and to my best of knowledge have
not been submitted earlier to any other university or institution for award of Degree
/ Diploma / Certificate or published any time earlier.

Signature: Vikash Kumar Sharma

Signature:
(Ms. Pratima Daipuria)

ACKNOWLEDGEMENT

I would like to thank JIMS for rendering enormous support and providing the
grand opportunity to me to present this project. Their contribution to this defies
description.
I would like to render special thanks, packaged with sincere gratitude and respect
to Ms. Pratima Daipuria who has been my academic guide and has stood by me
all the time even after the college hours and has aided me to an uncountable
extent.

Last but not the least; I would like to thank the Professors of PGDM department,
my parents, as well as my dear friends who have equally contributed in making this
project a successful one.

Vikash Kr. Sharma


ROLL NO: FB13108
JAGAN INSTITUTE OF MANAGEMENT STUDIES

ii

Executive Summary

The future of e-commerce and the logistics to support it will be driven by a number of key
factors, namely ongoing and ever-increasing convergence in technologies, and the continued
drive to respond to changing consumer demand.
While the demise of pure-player brick-and-mortar is not foreseen, roundtable participants did
predict a greater convergence of brick-and-mortar and online/mobile, going beyond evolutions in
click-and-mortars to the emergence of retail experiences that combine the physical and virtual
aspects of shopping seamlessly. Global social media platforms like Facebook and Twitter will
increasingly act as key drivers to e-commerce, and future growth will likely be predicated on the
strong role of mobile technologies that integrate a range of existing and new features that will
lead to the ubiquity of hyper-connected, always-on consumers.
Meeting the demands of emergent consumer types will pose several challenges to the logistics of
e-commerce. One of the core issues to emerge from discussions is consumer demand for
perceived free delivery, predicted to remain prevalent. While there is of course no such thing as
free delivery someone has to pay for it figuring out how to provide what consumers perceive
as free delivery is a core challenge for all players along the e-commerce value chain. Consumers
will evaluate the final cost of goods purchased via e-commerce, delivery included, and will
increasingly demand a global price for any order delivery. Another issue for the delivery chain
was the issue of goods delivery tracking by consumers, or indeed proactive tracking pushed to
the consumer, which again implies costs. Consensus emerged that consumers would accept the
lack of tracking services and relatively slow delivery time of 7-10 days for low-value
purchases of less than say $10. Combined purchase value of above this level would trigger
consumer demand for tracking services.

The opportunities provided by cross-border are great, however again here certain friction points
need to be resolved in order to realise the full potential of cross-border e-commerce. Among
these are landed costs, returns and issues around companies differential pricing across markets.
The key priority identified for the postal industry is the provision of cross border visibility and
standardized tracking events and bar-coding.
Another major discussion point to emerge was around the trust issue in e-commerce. Participants
felt that e-commerce is a self-regulating arena where consumers display relatively sophisticated
interactional behaviours: consumers will not engage in business with brands they do not
implicitly trust. A benefit-of-doubt factor is prevalent for first-time experiences, however if the ecommerce experience does not fulfill consumer expectations, the retailers and/or channel may
not be afforded a second chance.
A further issue on the trust variable is that of the use of consumer details gleaned by e-commerce
players for promotional and marketing purposes. Most retailers offer consumer opt-outs, and
while opting out is generally not made as easy as it could be, it is not by consumers perceived to
be a deal breaker in the e-commerce. Millennials are far more trusting, who will spread trust to
other generations with time. However any perceived misuse of personal data will likely result in
consumers blacklisting the company, and to a receptive and wide audience thanks to social
media.
Lastly there are fundamental changes taking place today in the world of e-commerce which will
affect the future of how people shop, these forces are identified as digital, social, mobile and
local.

iii

INTRODUCTION

Although the recent development of the Internet has skyrocketed business sales for the average
e-commerce company, there are many advantages that they are missing out on that a brick and
mortar organization can provide. So where is the ultimate middle-ground a firm can search for
when aspiring to provide quality products and quality customer service in the most efficient
way? The following is a discussion on the differences between brick and mortar retail and ecommerce followed by a description of what the final solution is to solve this problem.
In a world where technology is changing every day, traditional businesses are becoming more
developed and taking advantage of the many positive attributes that e-commerce can offer. While
traditional businesses (brick and mortars) have recently been faced with stiff competition from ecommerce; traditional firms are attempting to survive by making an evolutionary leap into the
electronic medium. As the overall business climate continues to change, traditional firms are
beginning to add new capabilities that are conducive to the Internet. The question is, what is the
middle-ground solution to allow companies to truly reach their full potential? In order to fully
understand why this giant leap is necessary, it is essential to first understand a brick and mortar
versus e-commerce. Once this is fully recognized, it is essential to look at the advantages and
disadvantages of each so that one can truly understand why adaptation is necessary for survival.
A brick and mortar refers to a company which possesses a building for operations (Brick and
Mortar Business). These traditional businesses deal with customers face to face; therefore, they
are able to provide customer service better than a click and mortar.

pg. 1

Difference Between E-Commerce and Brick mortar shop:


E-Commerce, consists of the buying and selling of products or services
over electronic systems such as the Internet and other computer
networks. Brick & mortar refers to a company that possesses a building
or store for operations.

Types of E Commerce:
The major different kinds of e-commerce are: business-to-business (B2B); businessto-consumer (B2C); business-to-government (B2G); consumer-to-consumer (C2C); and
mobile commerce (m-commerce).

B2B e-commerce is

simply

defined

as e-

commerce between companies.

Types of Brick & Mortar Shops:


A traditional "street-side" business that deals with its customers face to face in an
office or store that the business owns or rents. The local grocery store and the
corner bank are examples of "brick and mortar" companies. Brick and mortar
businesses can find it difficult to compete with web-based businesses because
the latter usually have lower operating costs and greater flexibility.

pg. 2

Advantages and Disadvantages of E-Commerce:


1. Cost Effective
The entire financial transactions will eventually become electronic, so sooner conversion is
going to be lower on cost. It makes every transaction through e-commerce payment a lot cheaper.
2. Higher Margin
E-commerce also enables us to move better with higher margin for more business safety. Higher
margin also means business with more control as well as flexibility. You can also save time from
the e-commerce.
3. Better Productivity
Productivity here means productivity for both companies and customers. People like to find
answers online because it is faster and cheaper, and it costs a lot cheaper expense as well for the
company.
4. Quick Comparison
E-commerce also enables you to compare price among several providers. In the end, it leads you
to smart shopping. People can save more money while they shop.
5. Economy Benefit
E-commerce allows us to make transaction without any needs on stores,
infrastructure investment, and other common things we find. Companies only need well built
website and customer service.

Disadvantages:
pg. 3

1. Security
Customers need to be confident and trust the provider of payment method. Sometimes, we can be
tricked. Examine on integrity and reputation of the web stores before you decide to buy.
2. Scalability of System
A company definitely needs a well-developed website to support numbers of customers at a time.
If your web destination is not well enough, you better forget it.
3. Integrity on Data and System
Customers need secure access all the time. In addition to it, protection to data is also essential.
Unless the transaction can provide it, we should refuse for e-commerce.
4. Products People
People who prefer and focus on product will not buy online. They will want to feel, try, and sit
on their new couch and bed.
5. Customer Service and Relation Problem
They sometimes forget how essential to build loyal relationship with customers. Without loyalty
from customers, they will not survive the business.
The disadvantages are not impossible to avoid. If we have enough management on risks, we may
really get a lot more advantages from e-commerce. The advantages are surely teasing, and we
will enjoy such easy transaction these days. Enjoy more your internet browsing and enjoy more
your e-commerce activities!

Advantages and disadvantages of Brick & Mortar Shops:


Credibility

One of the advantages of this type of business model is that it lends you some credibility.
To get started with a brick-and-mortar business model, you typically have to INVEST a large
amount of money in infrastructure. Customers and other businesses know this and it establishes
pg. 4

your commitment to the market place. Anyone can get started with an online business for a few
hundred dollars. Starting a brick-and-mortar business says that you are in it for the long haul.

Selling Perishables
If you are in a business that sells perishable food items such as a grocery store, having a

brick-and-mortar location gives you an advantage. While some companies sell food online,
having an actual store that people can visit gives you the edge in this market. Shipping fresh food
is challenging and often leads to spoilage or damage to the food. When you have a brick-andmortar location, it allows you to receive food and sell it in a timely manner so that it is fresh
when it reaches the customer.

Multiple Payment Methods


Having a brick-and-mortar location also allows you to accept multiple payment methods

from your customers. When you can increase the number of payment methods available, it
increases the chances of getting a sale. For example, if you have an online business, you can
typically only take payment by credit card, debit card or through a third-party payment processor
like PayPal. If you have a brick-and-mortar location, it allows you to accept cash and checks as
well.

Different Customer Base

Having a brick-and-mortar location allows you to gain a different customer base than
what you get with an online store. There is still a consumer demographic that does not feel
pg. 5

comfortable shopping online or using the Internet in general. For example, some elderly
customers do not use the Internet and have no desire to do so. If you have a brick-and-mortar
location, it can give you the chance to service these customers who would otherwise not be
reached in the market place.

Disadvantages:
Rent:
Leasing commercial space is among the largest expenses offline business owners pay. And it isn't
cheap, ranging anywhere from $12 to $40 per square foot -- and maybe more in big box
shopping malls. Additionally, lessees may be under binding contract for years, even if the brickand-mortar business goes belly up before the terms expire.

Employee Costs
Offline businesses need employees to perform the functions of the company, be they service or
product based. For instance, a retail store needs people to ring up sales, stock inventory and clean
the facility. A service-based outfit requires people to perform the service offered. At the very
least, it will have a payroll. While it's good to provide these perks, businesses seek to make a
profit and this element can subtract from the bottom line.

Startup and Overhead Costs


pg. 6

Brick-and-mortar businesses typically require larger monetary INVESTMENTS to start and


maintain. Other sizable costs include utilities, business insurance, property taxes and
merchandise inventory. This is before the owner pays workers and herself -- and turns a profit.

Local Limitations
Brick-and-mortar businesses can reach only so many customers unless they are a major player in
their industry. If your intention is to serve only local clients, this may be fine. But if you aspire to
have a national or even global presence, a fixed location -- and the costs that incurs -- may lessen
those chances.

OBJECTIVE OF THE STUDY


To find out the Impact of E-Commerce business on the traditional Brick & Mortar
shops.
The Various strategies applied by both the sectors in order to curb the competitors.

RESEARCH METHODOLOGY:
The data collected was secondary data through the various websites and portals of
the company. There are also certain articles of newspapers which were collected.
The companies which were mainly focused were:
pg. 7

Flipkart
Snapdeal
Reliance Retail
Big Bazaar
Pantaloons
The 4Ps of the above companies were analyzed and the strategies used by both the
sectors were discussed in details.
Analysis and Interpretation
E-COMMERCE
2014 will go down as the year of e-commerce, firing aspiration of the Indian youth and middle
class while the coming year will be even more promising both for consumers as
also entrepreneurs, with average annual spending on online purchases projected to increase by
67% to Rs 10,000 from Rs 6,000 per person, according to an ASSOCHAM-PwC study.
The Flipkart incident resulting in inconvenience to enthusiastic customers on the Diwali offer
should be taken at the most as one-off case and not be used as a ploy or an ammunition to subject
the fledgling and a hugely promising e-commerce space to regulation over and above the rules of
the game which are applicable to normal business, ASSOCHAM said.

pg. 8

There is vast opportunity for e-commerce in India which can have a couple of players like
Chinese e-commerce giant Alibaba if the Government is successful in rollout of its Digital India
project, union minister for communications and information technology, Ravi Shankar Prasad
said at an ASSOCHAM event in New Delhi.
Arvind Limited will be launching online custom clothing brand Creyate. The brand will give
unique fashion identity to a person through e Commerce. Creyate will offer more than a lakh
unique products and targets to be Rs 100 crore plus brand by 2015. Your 2 hours a day, thrice a
week for 100 days can change many lives. Apply now to volunteer with Teach India at
www.teachindia.net for Delhi/NCR & Mumbai region only.
The industry is expected to spend an additional $500-$1000 million in the same period on
logistics functions, leading to cumulative spend of $950-$1900 million till 2017-2020.
The total spend on warehousing and sortation centers could be as high as 3 to 6% of top-line
revenues, which represents an cumulative spend of over $450-$900 million of spend in
warehousing till 2017-2020.
Indian e-commerce industry is expected to spend an additional $500-$1,000 million on
infrastructure, logistics and warehousing, leading to a cumulative spend of $950-$1900 million
till 2017-2020, according to an ASSOCHAM-PWC joint study.

Online retailers such as Flipkart and Snapdeal, despite multi-billion dollar valuations, will not be
able to challenge traditional retailers that will continue to dominate the domestic market, audit
and consultancy firm Pricewaterhouse-Coopers said in a new report.

pg. 9

Online stores are projected to account for only 3% of India's total retail market by
2020, PwC said in its report 'eCommerce in India Accelerating growth'.

"While the share of online shopping in total retail has increased at a fast pace in the last few
years, it is still minuscule compared to the figure in China, where the share is 8-10%," PwC said.
In 2014, online retail accounted for a mere 0.4% of India's overall retail market.
Issues such as poor last-mile connectivity, high payment cost, low profitability, regulatory
barriers and a dearth of skilled manpower are weighing on online retailers in India, PwC said.
Cash on delivery (CoD) services impose substantial financial cost for online retailers, as unlike
in developed markets, this continues to be a preferred mode of payment in India. PwC said
profitability for online retailers in the country was affected by free shipping offered to customers
and a high rejection rate on CoD orders. Moreover, customer acquisition costs are rising due to
competition by companies with more funds, it said.
Low Internet penetration in the country is also a huge hurdle. Only 16% of India's 1.2 billion
people had access to the Internet in 2013, and of them only 14%, or 28 million, made purchases
online, according to Forrester Research. India, therefore, was still in a nascent stage of evolution
in terms of online retail spending. China was in an ascending stage at 50%, whereas South Korea
(70%), Japan (69%) and Australia (57%) were in a mature stage, according to the Forrester study.

pg. 10

PwC in its latest report said online travel bookings comprised 70% of India's overall ecommerce
market. However, online retailers and marketplaces are the fastestgrowing ecommerce segment,
having grown at a compounded annual growth rate of around 56% from 2009 to 2014.
India's online retail market is estimated to reach $6 billion in 2015, according to PwC. Books,
apparel and accessories and electronics are the largest-selling products online, accounting for
about 80% of product distribution. India's overall ecommerce sector grew at a CAGR of 34%
since 2009 to $16.4 billion in size in 2014, and will grow to $22 billion in 2015, PwC estimated.
According to research firm Ecommerce Europe, the US, the UK and China together accounted
for 57% of the world's total business-to-consumer ecommerce sales in 2013, with China having
total sales of $328.4 billion.
Industry wise I have founded the strategies used by both the E-Commerce and Brick & Mortar
business. The parameters upon which the industries are looked upon are :
Advertising

Price

Product

Place

FLIPKART, SNAPDEAL:
Advertisements Used in Newspapers and Magazines:
Newspaper advertising works on the fundamental of building trust and confidence with the
Readers.
Newspapers have the greatest impact because of the following reasons:
1. Experts say the greater the exposure of the advertisement, the longer is the period of its
impact among the readers. Therefore experts feel if an advertisement stays in the memory of
pg. 11

a consumer for a longer time, chances are quite probable that he might opt for purchasing or
availing your services as and when required. This counts for higher sales and brand
awareness.
2. A newspaper reader is so involved in his reading that sometimes the content in the
advertisements creates an emotional impact on him. It is this power of being able to evoke an
emotional response with the reader that goes in favor of newspaper advertising.
3. In other media, especially online media, people get perturbed by the distractions in the
form of pop-ups and other advertisement forms that keep flashing on and off the screen. In
fact experts points out that instead of having any favorable impact, these ads serve to distract
the readers. However newspapers, point out experts, involves a focused reading where there
are no disturbing and unwanted flashes of advertisements. As there is no distance between the
reader and the story it seems that the reader actually undergoes all the emotions in the story
himself, leading to increase in the trust factor. Taking advantage of this trust quotient,
advertisers cash on newspapers to send their messages loud and clear among the readers.
Hence, Flipkart has used advertisements in newspapers and magazines which are colorful,
bright; most of the images consist of kids, and have clear messages. Here are some of the
advertisements used by Flipkart in Newspapers and Magazines.
PRICE
Another main advantage of online advertising or marketing is the much affordable price
when compared with the traditional advertising costs. With a much lesser cost you can
advertise on the net for a wider range of audience and geographical locations. Payment flexibility
is another added advantage of online advertising and marketing. In offline advertising you need

pg. 12

to pay the full amount to the advertising agency irrespective of the results. But in online
advertising there is the flexibility of paying for only qualified leads, clicks or impressions.

LOGISTICS AND SUPPLY CHAIN:


With a large supply chain and logistics network with almost 1 Million retailers selling online,
shopping sites have been enticing consumers with aggressive discounts, putting market share
ahead of profitability. Fashion brands have already noticed that the Indians are adopting the
practice of showroomingconsumers browsing merchandise at a store and then purchasing
the goods online because of attractive discounts. Some companies have been quick to respond.
Offline retailers and brands are showing concern because their offline business is getting hit and
to extent there is fear among brands that their image can get hurt if the prices are too low.

PRODUCT
Product offerings made by Flipkart and every online stores are innumerable. People just need to
make some clicks in order to avail the product at their doorsteps.

PLACE
One of the most important thing is Access. Its not about the availability or the store locations
anymore, people buy online, they trust the channels, they can dig into almost any information
required about the product and the place right with their smartphones. Its about their accessibility

pg. 13

to reach a brand, to reach customer support, they want to know how attentive a brand is with
respect to any customer feedback, they want your business accessible.
There is an old saying that market in marketing refers to the customer, and if you as a brand is
not accessible to your market they wont trust you for a longer time. Just look around, see how
brands are using digital platforms these days. See how companies like Dell,
Amazon, FLIPKART are efficiently accessible on Twitter, there are several other examples.

Various New Marketing Mix are adopted by the Brick & Mortar shops
PANTALOONS:

Product:

Pantaloons website Futurebazaar.com has revolutionized the e-commerce business in India. It


offers a wide range of products at affordable prices.
Food: In food business, the group offers a host of options.
Food Bazaar a chain of large supermarkets; Brew Bar a beer bar; caf Bollywood a national
chain of eateries; Chamosa a pan-Indian chain of snack counters, and Sports Bar a bistro
focused on the world of sports.
Fashion: The group offers a variety of options in fashion. Its brands include aLL, Blue Sky,
Central, Etam, Fashion Station, Gini & Jony, Navaras, Pantaloons, andTop 10.
Home & Electronics: Options include: Collection i a lifestyle furniture store;Electronics
Bazaar offers branded electronic goods and appliances; e-zone trendiest electronics
items; Furniture Bazaar entire range of Home Furniture ;Home Town one stop destination for
all the home needs.
pg. 14

General Merchandise : Options Include: Big Bazaar , Shoe Factory, Brand Factory, Navaras,
KBs FairPrice , Central, Blue Sky
Leisure & Entertainment: Options are: Bowling Co. state-of-the-art premium family
entertainment centre, offering multiple, novel and unique leisure and entertainment options; F
123 - offers a wide range of gaming options ranging from bowling and pool to redemption and
interactive video games to bumper cars.
Wellness & Beauty: Options are: Health Village a state-of-the art spa and yoga centre; Star &
Sitara: Beauty salon for men and women; Tulsi - provides access to the best allopathic, ayurvedic
and homeopathic medicinal products; Turmeric - offers beauty products like colour cosmetics,
fragrances, herbal and specialty skin items, hair products and bath accessories.
Books & Music: Future Groups brand Depot offers Books, CDs, and stationery items.

Price:
Pantaloons India has brought a whole new revolution when it comes to pricing strategies, which
is evident through the success of its Big Bazaar and Food Bazaar outlets.

Place:
The company operates over 12 million square feet of retail space, has over 1000 stores across 71
cities in India and 65 rural cities with taking over Aadhar(). It plans to take up floor space of 30
million square feet by 2011.It has plans to open over 3000 new stores by 2010. It is targeting the
Tier-2 and 3 cities which has a huge unleashed potential.

4. Promotion:
pg. 15

They use magazines, newspapers, television, radios , hoardings, internet etc for promoting the
brand . They have joint ventures and alliances with many companies to promote the brand.
Seasonal Discounts , Sales Discounts during Festivals are offered to attract consumers.

BIG BAZAAR:

Product:

Big Bazaar offers a wide range of products which range from apparels, food, farm products,
furniture,child care, toys, etc of various brands like Levis, Allen Solly, Pepsi, Coca- Cola, HUL,
ITC, P&G, LG, Samsung, Nokia, HP etc.
Big Bazaar also promotes a number of in house brands like:
DJ & C

Tasty Treat

Clean Mate

Sensei

Care Mate

Koryo and 44 other brands.

Pricing:

The pricing objective at Big Bazaar is to get Maximum Market Share. Pricing at Big Bazaar is
based on the following techniques:
Value Pricing (EDLP Every Day Low pricing): Big Bazaar promises consumers the
lowest available price without coupon clipping, waiting for discount promotions, or comparison
shopping.

Promotional Pricing: Big Bazaar offers FINANCING at low interest rate. The concept
of psychological discounting (Rs. 99, Rs. 49, etc.) is also used to attract customers. Big Bazaar
also caters on Special Event Pricing (Close to Diwali, Gudi Padva, and Durga Pooja).
pg. 16

Differentiated Pricing: Differentiated pricing i.e. difference in rate based on peak and
non-peak hours or days of shopping is also a pricing technique used in Indian retail, which is
aggressively used by Big Bazaar.

e.g. Wednesday Bazaar


Bundling: It refers to selling combo-packs and offering discount to customers. The
combo-packs add value to customer and lead to increased sales. Big Bazaar lays a lot of
importance on bundling.
e.g. 3 Good Day family packs at Rs 60(Price of 1 pack = Rs 22)
5kg oil + 5kg rice + 5kg sugar for Rs 599

Place:
The Big Bazaar stores are operational across three formats hypermarkets spread over 40,00045,000 sq ft, the Express format over 15,000-20,000 sq ft and the Super Centers set up over 1
lakh sq ft. Currently Big Bazaar operates in over 34 cities and towns across India with 116 stores.
Apart from the Metros these stores are also doing well in the tier II cities. These stores are
normally located in high traffic areas. Big Bazaar aims at starting stores in developing areas to
take an early advantage before the real estate value booms. Mr. Biyani is planning to INVEST
around Rs 350 crore over the next one year expansion of Big Bazaar. In order to gain a
competitive advantage Big Bazaar has also launched a website www.futurebazaar.com, which
helps customers to orders products online which will be delivered to their doorstep. This helps in
saving a lot of time of its customers.

Promotion:

The various promotion schemes used at Big Bazaar include:


Saal ke sabse saste 3 din

Hafte ka sabse sasta din Wednesday bazaar

Exchange Offers Junk swap offer

Future card(3% discount)

Shakti card

Advertisement (print ad, TV ad, radio)

Brand endorsement by M.S Dhoni and Asin

pg. 17

Big Bazaar has come up with 3 catchy lines written on hoardings taking on biggies like Westside,
Shoppers stop and Lifestyle. They are:
Keep West- aSide. Make a smart choice!

Shoppers! Stop. Make a smart choice!

Change your Lifestyle. Make a smart choice!

Samsung Mobile phone issue:


The dealers had stopped keeping SAMSUNG mobile phones because they were incurring huge
losses because the same phones were available at a cheaper rate in the E-Commerce websites.
However there are certain companies who are moving into online business as well.
Reliance Retail is a prime example in this case where the retail arm of Mukesh Ambanis
Reliance Industries Ltd. Is hiring people from the E-Commerce giants like Myntra and Flipkart
by offering them salary which is double the present one.

pg. 18

So we can see that there are certain categories which are planning both the shopping models in
order

to

grow

their

business.

Indias Growing Consumer Base


The staggering 88 percent overall growth rate of Indias online retail sector is indicative of its
relatively nascent stage of development. E-commerce in India accounts for less than 1 percent of

pg. 19

the countrys mostly unorganized retail market, and continues to lag far behind that of China and
the United States.
In comparison to Indias US$13-16 billion e-commerce industry, e-commerce in the U.S. and
China is now valued at US$224 billion and US$220 billion, respectively. After years of relatively
slow growth in China, the countrys e-commerce sector experienced an explosion of activity last
year as internet giants ALIBABA and Tencent battled for dominance of the domestic market.
Indias population size and demographics will likely be the driving force behind e-commerces
expansion in the near future. According to the IAMAI, India had 213 million internet users at the
end of 2013 a number expected to rise to 243 million by June of this year. With this projected
increase, India will cement its status as the second-largest internet base in the world after Chinas
more than 600 million reported internet users, and ahead of the United States estimated 207
million internet users.
While statistics indicate many of Indias internet users do not log on very frequently, there is
good cause to believe this will change as the usage of smartphones and tablets increases, and 3G
and 4G broadband coverage expands. Last year, smartphone sales in India grew by between 170
and 180 percent year-on-year, with over 40 million units shipped to the country according to
tracking agencies International Data Corporation (IDC) India and Cyber-Media Research.
India's Internet base, already the third largest in the world after China and the US, is growing by
40 per cent a year. Despite this, e-commerce continues to underperform with all the major
companies bleeding.

pg. 20

It's very simple. A large section of Indian consumers are not yet ready to trust and buy online.
The e-commerce industry is yet to build that trust or need. Till this gap is bridged, there will be a
huge disparity between the number of Internet users versus the number of online buyers. In the
US, 85 per cent of online users transact online versus 8-10 per cent in India.

Issues after the entry of E-Commerce business:


Just 10 years back, E retailing in India seemed like a myth and was treated as an outlier, a
channel meant for very niche businesses. With the advent of affordable and high speed internet,
catalyzed by Smartphone burst, which transformed the customers buying behavior, online
retailing has emerged as one of the fastest growing retail channels in India. The boom is being
driven not just by tier-I cities, but by tier II & tier III towns as well, where the number of internet
users have grown to a whopping 69 times and 33 times respectively since 2000.
It was about this time of the year in 2011 that the news of multimillion-dollar valuations of
companies such as FLIPKART, Snapdeal and others came out in business circles. VCs and
Angels flush with funds went on a spending spree, extending financial support to any one they
thought was the next big thing on the internet. Today, the funding has been doubled or
quadrupled and angel investors are flushing money on every niche e-commerce idea leading to
massive e-Commerce boom. Today, you name any product or service and there are very high
chances that you will find a dedicated E-commerce player serving the need.
On the other hand, Brick-and-mortar stores i.e. stores that have a physical presence and offer
face-to-face customer experiences account for the bulk of India's $600-billion retail market, a
majority of which is unorganized; where e-commerce's share is still a minuscule 3-4%.
pg. 21

Online retail portals like FLIPKART, Snapdeal and Amazon have grown rapidly in the past
couple of years. Market leader Flipkart is targeting $3 billion (over Rs 18,300 crore) in total
value of goods sold by the end of this fiscal. The value of goods sold by AMAZON INDIA in a
year had topped $1 billion (over Rs 6,000 crore). Snapdeal too has crossed the $1 billion
milestone this year. In comparison, the Tata group's retail divisions, including Titan, Croma,
Trent and Landmark, had revenue of about Rs 17,000 crore. Kishore Biyani's Future Retail had
revenue of Rs 11,336 crore in fiscal 2014.
Since organized retail (brick and mortar) is concentrated in the top 30-35 cities (where retail
consumption is concentrated), these brands are unable to meet the rising demand from smaller
cities across India. This skew in retail presence is fuelling the growth in online channels, which
can help retailers expand their reach to smaller cities and towns, where physical stores are either
not viable or will take years to reach.
STRATEGIES ADOPTED BY E-COMMERCE BUSINESS:
1. Micro-Target an Online Audience. E-commerce is basically about establishing a territory:
defining and designing a site to reach an audience with a common interest or characteristic.
Whatever your product or service, define your companys niche markets that you can penetrate
online with specialized offerings.

2. Personalize. Site visitors are demanding one-of-a-kind experiences that cater to their needs
and interests. Technology is available, even to smaller players, to capture individual shoppers
interests and preferences and generate a product selection and shopping experience led by
individualized promotions tailored to them.
pg. 22

3. Create Content to Build Stickiness. Winning e-commerce deploys crowd-sourced content to


make a site sticky for potential buyers. Amazon attracted millions of consumers by
encouraging them to share their opinions of items like books and CDs. What is your strategy to
help potential customers for your products or services find you via Google? Use keywords and
meta tags to raise your ranking in search results.

4. Tailor the Browsing Experience to Target Segments. Brand-appropriate site design and
well-structured navigation remain key ingredients for attracting an audience and getting them to
come back. Provide an enticing browsing experience across online platforms. If you want to sell
backpacks to college students, for example, use vibrant colors with a flashy design to evoke a
sense of youth and adventure.

5. Integrate Across Channels. Create multi-channel offerings, enabling your consumers to


experience your brand consistently, whatever their shopping method of choice. But be sure that
products you are selling via different channels are sufficiently differentiated to account for price
differences.

6. INVEST in Mobile. Mobile commerce is growing at a rate of over 130 percent annually. If
you lack a robust mobile commerce platform, you will see a dramatic drop off in revenue over
the next several years. To stay competitive, you need to offer mobile-accessible services such as
delivery status, real-time notifications, click-to-call, maps, and product information.

pg. 23

7. Tap into Logistics. To accommodate growth, you may need to tap the capabilities of thirdparty logistics providers (3PLs) to manage a high volume of complex orders. Reverse logistics,
the ability to handle returns and exchanges quickly and economically, is becoming a key
differentiator. Same-day delivery and innovative fulfillment networks can be competitive
advantages.

8. Consider Subscription Commerce. Subscription commerce takes several forms. In the


replenishment model, a commodity item is sent to the customer every month. The discovery
model is more promising. It offers a subscription to a curated experience that delivers new, hardto-find, or customized items periodically to the customers doorstep.

9. Bypass the Middlemen. The Internet is enabling small companies to reach lots of consumers
quickly. Manufacturers, including factories in China, are increasingly willing to work with small
brands. They have discovered that small brands are more likely to introduce new products to
market because they are less constrained by shelf space limitations and complex supply chains.

10. Offer a Seamless Experience Across Channels. Your sales will grow if you ensure that
product availability, promotional strategies, and brand experience are consistent across all
channels whether online, in-store, or on a mobile device. Implement cloud-based supply chain
technology to gain visibility into your performance across all channels.

pg. 24

STRATEGIES ADOPTED BY BRICK & MORTAR SHOPS:


As we can see that the advantages provided by the E-Commerce people helps to gain an edge
over the Traditional business.
In order to curb the E-Commerce business now the Brick & Mortar Shops are applying
certain strategies.
The main and most critical marketing objective for a brick-and-mortar business is generating
awareness. Advertising, direct mail, and promotions are some the common methods utilized to
bring awareness to the targeted audience and to create foot traffic in the store. Revealing the new
location is important, as is brand imaging and differentiating from competitors to draw a crowd.

We just discovered that brick-and-mortar stores are retailers with active storefronts, such
as The Home Depot or Wal-Mart. These brick-and-mortar stores do have some
advantages over other retailing methods, such as online shopping. For example, they offer
enhanced customer interaction with store employees and allow consumers to physically
hold and/or try on the product they wish to purchase.

However, drawbacks persist for owners of brick-and-mortar stores as well. For the store
owner, there is an operating cost impact to provide merchandise through physical
locations. However, the potential for stores to make a sale become greater

pg. 25

Brick-and-mortar marketing is the direct reference to the business strategy identified


as servicing customers with an interactive means within the confines of the store's
products, or a traditional storefront if you will. During the explosion of the dot.com era in
the 1990's, the term was coined to give identify to the marketing strategy separate from
the boom of online retailers.
Theres a new retail game and the customer determines the rules of engagement.
Matching online prices or bulking up product SKUs is not enough to keep pace with a
todays savvy shopper. To stay in touch with this new smartphone shopper, merchants
must give customers the ability to shop the way they want to shop, and do it well.
Wise retailers are striving to provide a shopping experience where every customer feels
that their individual preferences, wants and needs are a priority from the minute they
engage with the store, whether online, through mobile, or inside the store.
If retailers choose to sit on their hands right now and do nothing they risk losing
relevance with customers. Retailers need to focus in on their inherent advantage the
ability to be locally and individually relevant through the products they sell, how they sell
them and the shoppers experience buying them. Staying relevant with customers means
giving them the opportunity to shop the way they love to shop. Realizing that vision
requires employing online and offline strategies based upon the modern customers
expectations.

Mobile
pg. 26

With the widespread use of mobile devices, its no longer optional to have some type of
mobile presence. According to RSR Research, 87% of retailers see the value in
smartphones ability to drive consumers into their stores. Mobile is a huge conversion
opportunity for local retailers to gain a competitive advantage over competitors. Having a
mobile presence will increase the possibility potential customers will find your store on
their device and get the information they need to shop with you.
Millions of shoppers discover stores through popular location-based mobile apps, such as
Google Maps, Yelp, Foursquare to name a few. Not only is it critical for local retailers to
claim and manage their local listings through these services, but its crucial to give these
shoppers a quick and easy way to buy through these channels. After all, mobile shoppers
using these local apps are close to a purchase decision. ShoppinPal specializes in turning
these popular location-based apps into powerful retail sales channels.

Merchandising

Merchandising and display is still crucial to influencing customer purchasing decisions


in-store. By using attractive displays and store arrangements that optimally display
products, retailers can persuade consumers to make a purchase decision.
Also, retailers can ask for exclusive product deals from manufacturers agreeing not to
offer certain products/models online. This strategy seems to be working for Target, which
has made some exclusive product agreements with technology and clothing suppliers.

Customer Service

pg. 27

76% of customers purchase more products based on merchant recommendations. Provide


better customer service through well-informed sales associates. Retailers can leverage
their built-in advantages of customer service and immediacy. An assisted sale vs. online
self-service sales gives brick-and-mortar stores a huge advantage for certain types of
sales. But dont forget do include quick ways for shoppers to get recommendations as
they shop on their phones, too, through views of the stores most popular items, sale
items, and specific product recommendations based on products they like.
One of the most popular ways for large brick & mortar chains are highlighting the
benefits of a physical location is the ability to buy online and pick up in store. This allows
customers to shop the way they want to shop (in this case, away from the store), and still
get their items the same day instead of waiting for the order to be shipped.
When stores stress the benefits of immediate fulfillment vs. online shipping fees and the
hassles of returns/exchanges for online sales combined with superior product knowledge,
this can go a long way toward driving sales in-store and ensuring return visits.

An Online and Offline Strategy

Sometimes, theres no substitution for the personal touch. Brick and mortar retailers can
be more profitable by adapting to modern changes in consumer behavior to drive in-store
sales. Todays retailers must not only know how to sell, they must integrate smart onlineoffline marketing tactics available to gain an advantage over local and online competitors.

Here are five interesting insights found.


pg. 28

1. India is almost 10 years behind China in the e-commerce space. Chinas inflection point was
reached in 2005 when its size was similar to Indias current market size. Thankfully for India the
dynamics currently are similar to what existed in China then growing broadband penetration,
acceptance of online marketplaces, and lack of physical retail infrastructure in many places.

2. Forget the Flipkarts, Snapdeals and Amazons. Travel is where the real money in Indias ecommerce is. Online travel accounts for nearly 71% of e-commerce business in India. This
business has grown at a compounded annual growth rate (CAGR) of 32% over 2009-13. Etailing, on the other hand, accounts for only 8.7% of organised retail and a minuscule 0.3% of
total retail sales. Even within sales of physical goods, books are a mere 7% of total book sales,
mobile phones are 2% of all handsets sold, and fashion goods sold online are just 1%. Online
jewellery sales account for only 0.2 per cent of all jewellery sold. Motilal Oswal, however,
expects e-tailing to pick up with a focus on fashion.

3. Alibaba is an outlier when it comes to margins and making money in the e-commerce
ecosystem. The Chinese company makes an operating profit of 40% compared to industry
standard (US and China) of 8-10%. Travel sites typically make 2.3%. Amazon, the industry
pioneer, is yet to achieve healthy profitability even after two decades of dominance. Indian
players, the report points out, are not even thinking of profitability yet. Its a game of market
share and market penetration, causing all serious players to have a war chest ready for when the
industry scales multiple times.

pg. 29

4. For every Rs 100 spent on e-tailing, Rs 35 is spent on supporting services like warehousing,
payment gateways, and logistics, among others. Delivery costs a platform owner 8-10%
implying significant burn. Though 50-60% of delivery logistics today are handled by large etailers themselves, this proportion may reduce going forward as the participation of lower tier
cities picks up. Presently, aggressive pricing in India is leading to e-tailers making losses on
every segment. For a Rs 100 sale of a book, the e-tailer incurs a loss of Rs 24, a loss of Rs 13 in
mobiles, and Rs 8 in apparel.

5. Demand in India exists across 4,000-5,000 towns and cities, but there is no significant
presence of physical retail in almost 95% of these. High real estate cost is one of the main
reasons why organised retail is unable to expand at speeds expected earlier. Real estate as a
percentage of sales is 14 times higher than in the US. For large retailers in India, it is 7% of sales
as compared to 0.5% for Walmart.

pg. 30

DIFFERENCE BETWEEN E-COMMERCE AND BRICK & MORTAR

Marketing Mix
Product

Price

Place

Flipkart
Any product which a

Pantaloons
Pantaloons has diversified

consumer wants is available

very beautifully its products

in Flipkart
As Flipkart is investing

Pantaloons also are going for

heavily in its business with

sales promotion schemes but

many investors the discounts

is lagging behind online

are offered at a good rate


Flipkart offers as easy access

markets at present
Pantaloons are increasing

to the internet users by

their stores all over India in

providing a virtual platform

order to increase their

for the users. They can order

market share.

online and get the product at


Promotion

their doorsteps
Online ads are being the
major source for Promotion.
Television ads and
sponsorships also are taken

They use magazines,


newspapers, television,
hoardings, internet etc. for
promoting the brand.
Seasonal Discounts are
offered

CONCLUSION
pg. 31

E-commerce retailers have a lot of advantages over bricks-and-mortar stores - diverse inventory,
low prices, and minimal overhead. But bricks-and-mortars' key asset is they're still where people
can go to see and feel products.
Of course, this has led many to assume physical stores will simply become showrooms for online
shoppers - places where consumers go to check out what they want to buy, before heading online
to complete their purchase.
But it turns out this isn't really the case. Or at least, it's far from the most common behavior. In
fact, people are far more likely to treat online stores as their showroom - researching online and
then buying in-store.
Despite improving health in the retail sector, nearly a tenth of shopping centers are already
obsolete; e-commerce stands to double this redundant retail space within a decade. Online sales
are growing some five times faster than total retail sales, a trend we see only accelerating with
greater consumer adoption of mobile technology and more widespread usage of shopping apps,
and encouraged by retailers themselves who see opportunities to reduce their operating expenses.
Though the online share of sales is still small, at expected growth rates it will quickly reach more
meaningful market shares: at least 10% of all non-auto retail sales by the end of 2017, and 25%
within the categories most inclined toward ecommerce. Perhaps the only uncertainly is how
quickly the online model will spread to other retail categories such as groceries and personal-care
items. As in any commercial revolution, there will be winners and losers among industry
participants. Looking beyond the inevitable failures among retailers that cannot adapt quickly
and extensively enough, some types of retail space will benefit more than others: dominant
regional malls and high-street retail stand to gain, as do community centers with top grocers,
food, and service-oriented tenants. On the other hand, power centers, big-box retail generally,
pg. 32

and weaker centers will fade, particularly those in secondary locations. The threat to retail chains
posed by showrooming and mobile commerce generally is overstated to the extent that in many
cases the retailer will capture sales online that they previously might have transacted in a store
assuming they are price-competitive. Indeed, some chains even encourage online sales, which
cost them less. But the threat to retail landlords is undeniable. With more focus on improving
sales productivity, retailers are reducing their physical presence, leasing fewer and smaller stores
and leaving more merchandise in less-costly warehouses for direct shipping to their customers.
The collective loss in leased retail space will be considerable. Owners of inferior shopping
centers should be very, very concerned.

BIBLIOGRAPHY

www.Flipkart.com
www.snapdeal.com
Wikipedia
economictimes.indiatimes.com
http://www.businessinsider.in/Bricks-And-Mortar-Retailers-Have-One-Big-Advantage-Over-ECommerce-Companies/articleshow/37586992.cms
http://smallbusiness.chron.com/must-brick-mortar-company-transfer-its-strategy-ecommercestrategy-15603.html

pg. 33