Need an India ShopRunner?

It’s interesting to read Ajay Kelkar's perspective on how rather than going through a land grab, where retailers vied for prime retail sites or for customer footfall & share of wallet, they probably could take to a ShopRunner model to get a chunk of the e-commerce pie in India.

Geoffrey Fowler has an interesting article on ShopRunner in the Wall Street Journal. Click here to read!

Now here are a few problems I anticipate with the implementation of this model in the Indian context (besides the "Indian Crab syndrome”).

In India, we have neighborhood bazars (market place) in every area. These are typically general stores that sell a variety of items from sugar & salt to a Valentine Day’s card, and sometimes even underwears. So technically a consumer is a hop-skip-jump away anytime from making a purchase. In addition, these general store owners operate on a relationship basis, which implies that they may provide an upto 10% discount on the Marked Retail Price (MRP) for most items by compromising his commission purely for the sake of retention and relationship. They may even let the consumer make a purchase without an immediate payment, and not charge an interest for it, based upon his discretion and relationship.

Let’s contrast it with the scenario for an average consumer in the US. You have to plan in advance in order to drive 10 miles to a Walmart or a Target to do your (frozen) grocery or purchase household items. So you especially take out some time and aim to stock-up for atleast two weeks, or even a month unless of-course doing grocery is your favorite hobby. You also need a car (or cab) to get back with your stock, good luck if you don’t have one though for most people car is a given! Now, if you have missed out on one or few items in your list or if you just hadn’t anticipated its (or their) need, then placing an online order is but sensible.

Then the products in the US don’t have a MRP. Implication: The retailer’s quantity is a huge determinant of his procurement price from the distributor. And naturally a good price for the retailer would imply a good deal for the customer. In the US where e-commerce is more mature than India, an online retailer may have general more volumes to cash in on through a better penetration of the market place, which in turn could help him price the products competitively (and yet bear the shipping costs). In India, the same online retailer is competing with the general store (or stores) in neighborhood bazar of the customer that provides upto 10% discount on MRP and is damn well accessible to the customer. So the online retailer would not only be required to provide a lower price than the general store, but also bear the shipping costs. Given both these conditions are true, the customer may still buy from the general store if it offers him more variety, assured quality and an immediate possession of the purchased item.

The ‘Amazon Prime’ model sounds great but as Geoffrey Fowler also highlights, there may be service and delivery issues with regard to individual retailers, and more importantly, unlike Amazon they may not be able to makeup for individual losses. Besides, the willingness of an Indian consumer to pay for a service such as Amazon Prime can’t be established until a proper market survey is done.

Lastly, QUALITY is a big concern, and there is a big gap in what is sold to you in the online store and what you actually land-up receiving. In my opinion, the online retailers in India either don’t care about customer retention and just want to make that one sale, or they probably don’t know the distinction between hard-selling a product and misguiding a customer.

- Namrta R