VC Funded E-com biz are unviable; Will Release Omni-Channel Strategy Soon – Kishore Biyani

As per his recent comment in ET, Kishore Biyani, founder CEO, Future Group , said “Online selling, the way venture funded start-ups are doing it, is a gross margin negative business and not sustainable. I don’t see ourselves competing with online sellers as both models — online and offline — will converge. Not everything will be sold only online or only offline.” he emhasised that online and offline will converge and omni channel strategy shall lead and indicated that Future Group’s omni channel plans will be out in September.

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Image Source: Business Week

A somewhat similar opinion was shared by Ajit Joshi,CEO & MD at Infiniti Retail Limited, who agreed that there are some products that may not be sold online, and favoured omni channel strategy for Retail.

Shift in Online Retail Leadership

From Pure-play, retailers are now moving towards omni-channel retail. As mentioned by Kishore Biyani, nothing would be sold only online or only offline. Today’s consumer use simultaneous engagement mediums- the most common of which is watching TV while using an Internet-connected device. Now if one looks at it from the eyes of a retailer – these collaborative interactions that integrate multiple touch points complement a retail business – but only if the experience is seamless.
Customers now don’t only want to be able to switch channels. They want to be able to switch channels and continue the same conversation with the brand – and that’s where omni channel retailing comes into play.

Brands which initially focussed on building their own websites, are moving towards marketplaces so that they are present everywhere the customer is. Offline retailers going online is a common phenomenon, and the reverse is happening too.

Key Drivers of Change

Death of Pure Play
  •   Lower Margins
  •  High Operation Cost
  •  High Supply Chain Costs
  •  Continued Investment need to bridge cash flow gap
Rise of Omni-Channel
  •  Higher control on margins
  •  High Control on Supply Chain
  •  Surplus Cash flow to meet ongoing cash requirements
  •  Increasing Consumer Demand for Omni Channel Experience
  •  Established legacy trust of consumers
Will people stop buying from Flipkart?

Probably not, but only a few of the major aggregators shall survive. A large share of market shall shift toward omni channel retail, where the pricing is competitive and its a fair game for both the sellers and the buyers.

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  • https://plus.google.com/116610256615484479461 GroupOfFreaks

    I somehow agree with Mr Biyani. Most of end-to-end e-com companies are still in losses and moving towards marketplace model. This marketplace model is win-win situation for both companies and sellers. I see many smaller retailers like StonKraft killing their e-com websites and moving towards marketplace model and seeing tremendous growth as well as remaining profitable. what’s working for smaller retailers like StonKraft is to sell non-branded but quality products at attractive price point, having their infrastructure in three tier city. Infrastructure, operational as well as employee cost is much lower in three tier city, which makes them remain profitable in the cut throat compitition scenarios in e-commerce segment.