When Online Goes Offline: Why brick-and-mortar is back in fashion
The e-commerce boom in India, fuelled by rising in internet penetration and digital payments, appeared unstoppable. But the tide seems to be turning, with brick-and-mortar stores regaining their footing. Even successful D2C (direct-to-consumer) brands, born online, are embracing an omnichannel strategy by opening physical stores.
Return of off-line stores
Several factors have contributed to this trend.
The ‘touch & feel’ factor: Customers, especially when considering higher-priced items, still value the ability to physically interact with products before buying. This is particularly true for categories like cosmetics, apparel, and eyewear. Beauty brands like Nykaa and Just Herbs understand this, with Nykaa tripling its offline store count in just two years.
Experience over transaction: Shopping is no longer just about acquiring goods; it's about the entire experience. Larger physical stores allow brands to showcase a wider product range, create a more inviting atmosphere, and offer personalized service, all of which can elevate the shopping experience. Anarock Retail reports a significant rise in stores exceeding 2,000 sq. ft. As Tushar Ved, President of Apparel Group India, emphasizes the importance of creating an inviting space that elevates the shopping experience.
Data speaks volumes: Growth in online user acquisition for major e-commerce players has significantly slowed down compared to pre-pandemic years. A report by Boston Consulting Group and Retailers Association of India suggests a partial shift back to offline shopping.
Importance of omnichannel strategy: D2C brands recognize the value of an omnichannel approach, offering a seamless online-offline experience. For example, Mamaearth, a leading D2C brand, boasts over 170,000 physical retail touchpoints, complementing its online presence.
D2C brands go physical blurring the lines
The move to physical stores by D2C brands might raise concerns about losing their unique online positioning or becoming generic. However, the evidence suggests it's more about brand expansion and wider reach. In fact, for D2C brands, venturing offline doesn't necessarily dilute their unique positioning.
Physical stores can complement online presence. For example, beauty retailer Nykaa grew its offline store presence from 72 to 150 in just two years. Similarly, for boAt, an audio wearables brand, nearly a third of its revenue now comes from physical stores. Ghazal Alagh, Co-founder of Mamaearth, highlights their 1.7 lakh retail touchpoints, demonstrating the potential for wider brand reach.
Financial performance and the future
While bigger stores translate to higher rental costs, retailers are focusing on conversion rates rather than just foot traffic. The future seems bright for this trend. CBRE reports a 25 per cent increase in retail leasing by international brands in 2023. This was record-breaking with a significant portion driven by fashion & apparel brands.
A JLL study indicates a strong supply pipeline of nearly 41 million sq ft of retail space expected to be operational in major Indian cities by 2028, catering to this growing demand.
The once-meteoric rise of e-commerce seems to be plateauing. A report by BCG and RAI suggests a 50 per cent drop in active users for top online retailers in 2023, compared to the previous year. This slowdown could be due to post-pandemic shift as mobility restrictions ease, consumers are returning to physical stores to some extent.
Indeed, the rise of brick-and-mortar retail signifies a consumer desire for a more engaging shopping experience. D2C brands are embracing this trend by adopting an omnichannel approach, leveraging the strengths of both online and offline channels. While the financial impact of this shift needs further observation, the future of retail seems to be a well-integrated blend of physical and digital experiences.
