Exclusive Online Retailing In India: Will It Work Beyond Technology Products?
Mobile brands have recently achieved huge success with online only retailing in India. There are a host of other products that seem interested in trying this exclusive online only distribution road. The question is can this model get similar success in product categories other than mobile?
Worked for mobiles, inspiring other
Motorola’s second innings in India has been a huge success and a significant credit for this goes to its exclusive online only retailing strategy. The company has launched three models in the last six months Moto G, Moto X and Moto E, all exclusively on Flipkart and no offline retailing. The brand is quite a hit among Indian consumers, so much so that it has dethroned Nokia from its number fourth position in the smartphone category in the country in the second quarter of this year (which April to June, 2014). Motorola shipped 955,650 smartphones as compared to Nokia that shipped 633,720 units of smartphones.
China-based Xiaomi is another success as a result of exclusive online retailing. Inspired by this, products from other categories too are exploring exclusive online retailing. From apparels, video games, home appliances, even jewelleries, a whole new set of product categories are exploring this option.
Categories jumping the online only brandwagon
Global giant Amazon, which entered the Indian market last year has bagged exclusive rights to sell Microsoft’s Xbox gaming consoles. This includes the entire range of its Interactive Entertainment Business (IEB) portfolio including Xbox One, Xbox 360, Kinect, Xbox Live, Xbox Accessories and all Microsoft-published Xbox game titles. Commenting on this, Chakrapani Gollapali, Country General Manager - Consumer Channels Group, Microsoft Corporation India Pvt Ltd said in a press statement, “We believe this collaboration with Amazon gives us the platform to build scale at an unprecedented level for the gaming and entertainment category in India. This is the first time that we will be focusing on retailing our products through an ‘online only’ channel and we look forward to bringing the world’s most-loved gaming portfolio to Indian consumers through India’s largest and fastest growing online store Amazon.in."
This is quite a significant step as Microsoft currently sells its Xbox 360 portfolio through offline retail channels. The company has said it will support the existing retail channels till 30th of August, 2014 and after that all Xbox sales will be exclusively through Amazon.in.
Home appliances is another category which is exploring online only model. Whirlpool has made an exclusive deal with Amazon for its KitchenAid brand. Philips too is partnering with the online retailer for selling a lighting range.
Even, jewellery brands are exploring exclusive online tie-ups. Online retailer Snapdeal has inked a deal with Satyug Gold for a designer jewellery collection range designed by popular actress Shilpa Shetty. Though, Satyug Gold will later launch this collection in its offline stores too.
International apparel brands like Dorothy Perkins and Stanley Kane started this online only retail model by tying up with Myntra.com and Jabong.com. Lingerie online retailer Zivame, too, has some international brands which are selling in India exclusively through it.
Saving on the infrastructure cost
One of the biggest advantages that is driving various products and brands to opt for online only distribution strategy is the big saving in terms of money, time, and resources that otherwise goes in building and nurturing a physical infrastructure.
Moreover, with no middlemen involved, the online supply chain becomes much more efficient in terms of costs as well as time. This gives the brands to pass on part of the cost benefits to the consumer, creating a win-win situation.
Not relevant for mass products
The recent success of Motorola and Xiomi has indicated that this online-only distribution can work for some product categories. Products which have a strong appeal among a specific set of customers have a better chance to succeed with an online-only model like smartphones or gaming consoles.
In contrast, mass products like appliances may not have good chance with online-only retail for the sheer reason of the limited reach of Internet in the country, with 12% penetration.
Mix of online-offline
For mass products, a mix of online and offline distribution model will be the best, considering the reach factor. The online will help manage costs, while offline will ensure the product reaches to every nook and cranny of the country.
Challenge of touch, feel and trust
While the Indian consumers have slowly started to bring down their apprehensions against online purchases, the challenge is not gone completely, especially for certain categories. The problem of touch and feel remains a big deterrent for online buyers especially for products like clothes, jewellery, appliances, etc. Establishing the trust factor with consumers is another challenge, especially in tier 2 towns. That is where the challenge will lie for the online only retail model in the times to come, apart from the challenge of low Internet penetration.