Monday, 24 February 2014

The War Waged by Bricks & Clicks

Yesterday, my friend, Vignesh called me up and asked me to accompany him to buy a new mobile phone for his Dad. I asked him what was the Budget and what are the expected features in the new phone.
He said, " I want Samsung Smart Pro. It costs around 7k. Now lets go!" 

I said, "Great! Since you have already decided what to buy, why dont you flipkart it?"

Vignesh: "flipkart rate is around 6.5k, Store may charge 500 more, but we will buy it at a store."

Now this is new, we had done "SHOWROOMING" from the day e-commerce became the next big thing in India after TCS, Infy & CTS.

Showrooming is the noble practice of examining merchandise in a traditional brick and mortar retail store without purchasing it, but then shopping online to find a lower price for the same item.

The convenience of Home Delivery, Cash on Delivery, and to top it all, "The Lowest price in Town", yet Vignesh had chosen Brick over Click? Its like going to library with a Member Card, to refer a book, when you can Google it in seconds. Is the world really going to end?

Earlier this month the senior officials of 3 major global handset makers had met somewhere in India to discuss on the menace of online shopping. The 3 global handset makers who are fighting in the market place for Market shares called it a truce to discuss how traditional Brick and Mortar channel was hit by "SHOWROOMING". source: economic times.

The traditional retail stores and online stores are waging a "Cold War" between themselves. Its the war to acquire Customers. The online is always on the winning side because they are ready to lower the cost much below the imagination of the retail store. And now the retailers are pressurizing the handset makers to increase the margins from the conventional 8 - 10% causing inconvenience to the handset makers. Else, Retail stores wont stock the handset models which wont get them the desired profits. A classic case of "Channel Conflict"
source: economictimes 

What Vignesh said next was surprising, "I dont prefer 
buying from e-commerce portals as they are not authorized trade partners. Such products could even be fake and hence lead to problems with warranty support." 

He said, "e commerce marketplaces such as Flipkart and Snapdeal is just a platform where numerous registered sellers and merchants sell their products. Even though the registered merchants are on a contract to sell only genuine products using the platforms, still portals have no control over the sellers on prices and discounts." 

I was amused at his statement, "Surely, the e business midterm exam tomorrow had taken a toll on Vignesh."

What Vignesh said was true. Companies such as Sony, Apple, Canon, Nokia and Samsung are planning to issue customer advisories not to buy from e commerce portals as they are not authorised trade partners. Canon India, the Japanese imaging major, had begun appointing authorised online sellers linked to its website. The authorised online partners will have to comply with our pricing norms and if there is any predatory price which can be damaging, strict action would be taken.

Now that was too much gyaan for an evening. I said nothing and accompanied him to an "Authorised showroom" in Thillai Nagar and bought a Samsung Smart Pro.

The best part was that I got a Free Dinner from Vignesh for accompanying him to the store. Now that's a reason to shop from a physical store.