Online vs Brick and Mortar Retail

By Rebati Adhikari

With increased digitisation and everything at the tip of your finger, the traditional ways of doing things are fast changing even in Nepal. While it creates a unique platform of opportunities and innovation, it also comes with its set of challenges. E-commerce is on the path of acceleration and only likely to increase in the days ahead. According to statista.com, e-commerce share of global retail was 7.4% in 2015, 8.7% in 2016 and 10.1% in 2017. What does it then mean for the brick-and-mortar stores? Does this growth indicate that physical stores and shops are on the verge of extinction? Rajeev Amatya, Managing Director of daraz online store says ecommerce is too small to have a significant impact on retail stores as yet. Aashish Acharya, founder of threadpaints shares the same thought. “The total business that online stores combined yield, at present, does not even match 10% of what happens in the brick-and-mortar business model. The rise we have seen in the online retailing over the past five years is definitely significant. But physical store retailers will not be replaced by online retail any time soon”, says Acharya. Deepak Malik who led one of the first initiatives in ecommerce in India opines the days of physical stores being obsolete are very far away. It is, however, making an impact. The segment of fashion and travel will get massively hit more than the retail industry. The other impact of internet is on the decision making processes. The retail industry will be more dependent on the internet because people research online even though they buy offline. “Most retail stores are already using ecommerce channels to enhance their business, either through third party ecommerce sites such as daraz or starting their own ecommerce shop on Facebook/Instagram,” says Amatya. In fact, it is now unusual to find a store that does not have an online presence. This also means that physical retailing is not in crisis. Customers are indeed expecting business to be present on multiple platforms. Anzu Rai, founder of Fmirrow, considered to be the first online store in Nepal, says both ecommerce and brick-and-mortar stores will co-exist. Acharya thinks physical and online retailing have their own value propositions. Physical stores have been the convenient option for Nepali consumers for decades now. Both forms of retailing will co-exist and each will have its own ecosystem. We could expect a hybrid retailing model to suit the purchasing habits of Nepali consumers. For Mahima Shrestha, founder of mpluxurybridal (which has both online and offline platforms) the key to success is collaboration. A major factor for the growth of online retail is the accelerated development of internet. According to a report of Nepal Telecommunication Authority, 63.17% of the population has access to internet, seven years back this number stood at 8.74%. While the booming e-commerce signals changed shopping behaviour, the proliferation of shopping malls is also a testament that physical stores are here to stay. Another major reason brick and mortar stores will continue to thrive in our part of the world is that people still love to feel a product before buying it. Also shopping is incomplete without bargaining. Mahima Shrestha says, “Majority of Nepali customers want to feel the actual product before making a purchase decision. Therefore, it will take some time before e-commerce completely replaces physical stores in Nepal.” According to consumer view report prepared by National Retail Foundation (world’s largest retail trade association), 73% brick-and-mortar shoppers visit a store to buy something specific while 54% online shoppers visit online with specific purchase in mind. China, one of the largest global economies, is also the largest e-commerce market of the world, far ahead of US. The retail e-commerce sales of China stood at US$ 499 billion in 2017 while it was US$ 409 billion in the United States. In 2017, around 69.1% of internet users in China had shopped online. Amatya suggests focusing on value products and better customer experience and access to bigger markets. Rai opines being visible in the market matters but more important is customer service rather than online or offline platforms; instead, what is sold should make a difference. She believes if good quality products at reasonable prices can be made available,everyone wins.