I have believed for a while now, online technology is like the gold rush of the 1840’s. Technology has opened up an entire new industry within every industry and beyond, globally.
Where artificial intelligence will take us is something most of us cannot fathom however technology and internet has already given the world, the ability to communicate, account, organise, scale a whole new meaning. It has given accessibility a whole new meaning.
When we think of E-commerce, what comes to mind? (other than the names of Flipkart and Amazon) Order anytime, anywhere, get great prices and pay as you prefer. What started as books getting delivered now extends to even a coffee being delivered to your doorstep. It has given access to shopping, reservations, services and various other needs and conveniences for our day to day life a whole new meaning.
Still e-commerce accounts for just about 3% of market share.
Of course being a newer industry, it has a long way to go, growing in double digits, and that shows in the valuations of current e-commerce start-ups.
But offline retail is also here to stay.
Electrical Stores, as discussed, in the blog on verticalised retail distribution, are the 4th doppelgänger of the famous four pillars of hyper local retail distribution in India.
Electrical shops in fact, present especially strong reasons for their continuation.
Specific reasons, for the need of electricals retail shops:
- A home or business owner(end-user) will be paying for & using the product, but the person purchasing from the shop is an electrician. Hence a purchase without either of the two being involved is unlikely, which in turn reduces the benefits of online ordering.
Since 2 separate individuals are part of the buying decision, it is difficult for either one to buy it online simply in their own time.
- Technical requirements are, difficult to understand for an end user, due to a lack of electrical knowledge and multiple variables.
- Safety precautions are critical here as a wrong product or quality can be extremely dangerous in this segment
- Authenticity and product reliability are critical and which are difficult to control in large online markets unless they have a deep vertical focus.
- Currently the usual way the Indian economy works, the installers (electricians) usuallymake the purchase on the day of the requirement for installation and not in advance which an online purchase might require.
- Electricians purchases are usually on credit, from their local store and they require flexibility on payments and other nuances, which only a smaller personally managed retail store owner can provide.
Some pertinent learnings & insights, in the electricals space.
(Basis decades of on-ground experience)
- Generally, a large percentage of sales in India are via the local retail shop networks, and these will continue as discussed above and in the previous blog hence there is a large opportunity in the distribution of electricals to retailers, an under-served, un-organised segment.
- Due to the Indian economy formalisation in recent years, margins have become very tight, with consolidation of various stakeholders needed for survival.
- Not removal, not replacement, but consolidation. Consolidation of offerings, brands, technology, supply chain.
- Electrical manufacturers are realising at the huge potentialof retail distribution, and trying to solve issues of distribution, man-power dependancy/inefficiencies and communication to reach and better serve the smaller localities.
- Manufacturers often face losses due to failed product / scheme launches, which are a result of, unorganised and inefficient distribution and communication.
Companies that are looking at organised distribution and are working on harnessing the scale and opportunity of retail distribution are seeing their valuations multiply.
- Individual brand / manufacturer offerings make it difficult for retailers to co-ordinate with multiple suppliers, maximise scheme benefits and manage 100s of SKUs separately for all the brands they stock.
- Electrical manufacturers need organised distributors, the electricals space due to being one of the oldest industries with smaller local players, lacks the same.
This is where the opportunity lies to offer a unified sales and distribution channel to lakhs of retailers and distributors , optimising the channel and improving man-power efficiencies.
We believe organised electrical retail distribution, presents a massive opportunity, based on in-depth domain knowledge, and one that will survive and thrivein future.
Hence our foray into electricals, the backbone of progress since, while daily consumables, medicines, books, electronics, groceries and appliances could increasingly shift to online purchases,the electrical retail store is here to stay.
Acknowledging Brijnandan Mundhra as contributor to this chain of Blogs.