Jain, Apeejay-Journal of Management Sciences and Technology, 3 (3), June- 2016

ISSN -2347-5005

Offline Retail in an Online World

Divya Jain
Assistant Professor,
Shree Atam Vallabh Jain College, Ludhiana, Punjab, India
15divyajain@gmail.com

Abstract: Retail sector has undergone changes with increase in use of internet and smart phones. Large number
of online retailers are running their business in India and earning profits too. Expansion of mobile based
electronic payment system, discounts, easy returns, convenience etc. are some of the reasons which urge
customers to purchase goods online. Now everyone wishes to buy goods online as buying items is now just a click
away. Increasing trend of online shopping is affecting offline retail. Offline sale is going down day by day which
create tension for offline retailers about their future. The paper explains how various online retailers are
working i.e. how they are earning profit by offering huge discounts to customers. The paper also describes the
reasons for decline in offline retail sale and concludes with strategies which can be followed by offline retailers to
brighten their future by enticing the customers to increase their sale.

Key words: online shopping, offline retailer, show rooming, magic mirror

I. INTRODUCTION

With an increase in the use of smart phones and fast spreading internet connections, online shopping has
become one of the most popular mode of shopping as buying products is now just a click away. Shopping
at anytime of the day or night, access to compare prices, huge discounts, more options within limited
budget, no waiting in queues for billing, saving of time and fuel, easy access to consumer reviews, easy
returns, free shipping, cash on delivery, availability of online coupons and codes etc. are some of the
reasons that’s why people prefer to shop a wide variety of items online starting from groceries to
automobile. Instead of wandering through stores and making impulse purchases, now shoppers use their
mobile phones and laptops to search prices and cherry-pick promotions. Offline sale is declining and store
traffic is going down, especially in peripheral shopping areas since online shopping takes over the role of
providing a wide product range with various countless benefits. A new emerging way of shopping has
come i.e. show rooming through which customers check out products in the store and then order the same
product online. The growth of online shopping is putting more and more pressure on offline retailers.
With the change in buying behaviour of customers and ongoing decline in store traffic, offline retailers
have to rethink their marketing strategies and change their store formats to entice more and more
customers to increase their sales.

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II. LITERATURE CITED

Traditional retailing is different from e- retailing as traditional retailing involves interaction of human
with human and e-retailing involves human interaction with machines. In traditional retailing, customers
consider store layout as important factor while purchasing whereas browse and search functions, images
are more important factor while purchasing online [1]. Goswami and Mathur [2] studied that both
consumers and merchants of metro cities such as Delhi and Mumbai are internet savvy which leads to
increasing trend of online shopping in these metro cities. As revealed by IAMAI study, some small cities
like Surat, Vadodara, Coimbatore, Nasik, Varanasi, Ludhiana, Patna, Jamshedpur, Agra, Bikaner,
Srinagar, Jalandhar, Faridabad and Bhopal are also showing an increase in online shopping activities [3].
Convenience, easy online navigation and interface facilities, trustworthiness of e-commerce sites and
brands, time, money, cost and energy saving, anywhere - anytime shopping options for customers etc.
overcame the problem for e-tailers to reach geographically dispersed Indian consumers [4]. Another
research conducted on 1,327 consumers revealed that overall convenience, range and availability of
products and lower prices are the reasons because of which people prefer online shopping [5]. Online
pricing search, convenience of door step delivery and competitive prices are unique advantages which
attract customers towards online shopping [6]. Customers browse the products in a physical store to have
a physical look at the product and buy it from an online store at a reduced price [7]. Easy payment options
like cash on delivery which is much more acceptable and reliable to Indian consumers who are
conservative about online data and payment securities, comparative analysis options regarding product
features and prices, influences of consumer feedbacks, discounts and cheap deals, free or low cost
delivery and transparent return policies provided by the Indian online vendors encouraged Indian buyers
for repetitive online shopping [4]. Online business provides wide range of benefits when compared with
offline retailing business like easy shopping, time saving, updated information, cash on delivery and easy
comparison etc. The benefits of online business are affecting the traditional retailing [8]. Big brand
retailers are dominating the small ones due to their wider investment capacities. It is becoming difficult
for the small retailers to prove their existence in the battlefield of online retailing [2]. Online shopping
poses a great threat for offline retailers as they are not able to get products at cheaper prices as purchased
by e-retailers [6]. Due to online shopping, offline retailers have faced considerable decline in their
turnover and profit. In order to stand with the online stores who woes the customers with unbelievable
discounts, the offline retailers have also started increasing their discounts [7].

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III. OBJECTIVES OF THE STUDY

1. This paper is written to study the various reasons of decline in offline retail sale in the light of
increasing trend of online shopping
2. To suggest strategies to the offline retailer to brighten their future by increasing the number of
new offline consumers and retaining their existing offline customers.

IV. WORKING OF ONLINE RETAIL

Any retailer who wishes to sell his products online can get himself registered as online retailers on any of
online shopping websites such as Amazon, Flipkart, E-bay, Snapdeal and many more by completing some
formalities. After being registered, he can list the products that he wishes to sell. Once the online shoppers
see the product on shopping websites, they order the same after seeing its specifications and comparing its
price with other online shopping sites. After successful delivery of products to customers, online retailer
gets the payment within 5-7 working days. Online shopping in India is growing at a very fast clip. Now
everyone is willing to buy items online because of availability of wide choice and huge discounts. But
question comes how they actually earn profits when they sell by giving huge amount of discount to
customers in comparison with offline mode of sale.

In reality, online retailers buy bulk quantities directly from company and eliminate the involvement of
whole seller and distributor who hikes up the price for retailer. Thus thereby they give benefit of low
price to customer. Online retailers are saving operational costs such as store rent and other expenses like
electricity charges because they don’t need to have their retail stores and warehouse; no need to hire
persons so it involves saving of salaries paid to them. Even they are not supposed to make advertisement
expenses because online shopping sites advertise items on their own. In short, online retailers are selling
products at lower prices online by saving operational costs as they are required to pay only a certain
percentage of the price paid by the customer as commission to shopping websites along with nominal
fixed fees only for selling their products online.

Actually it’s the online retailers who sell the products and decides the price of product instead of online
shopping websites. But it has been seen many times that online retailers are selling the products even at
lower than cost price on Big billion sale, The Great Online Shopping Festival, End of season sale etc. In
order to entice more and more customers and to stay ahead from their competitors, some e-commerce
companies pay the amount of discounts given to customers by cheque to sellers and some of them forgoes
commissions or listing fees that they usually charge from their sellers. Therefore, in the rat race to win
customers by offering heavy discounts, these e-commerce companies are facing losses too. Offering

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lower prices will be viable in the short term but in the long run when they will stop offering excessive
discounts, it would be difficult for them to survive in the market.

V. REASONS OF DECLINE IN OFFLINE RETAIL SALE

People prefer to buy products online because of its convenience, low prices, and availability of various
offers. Due to this the store traffic is going down and retailers are closing their offline stores. Various
reasons are found regarding why people shop online on the basis of study conducted in 2014 by Priyanka
Joshi and Hemant Upadhyay on 1,327 consumers [5]. Following are some of reasons due to which people
have started now purchasing goods online in comparison with traditional modes of purchasing:

A. Huge discounts: The biggest reason of increasing trend of online shopping is availability of huge
discounts offered by online retailers to customers [5]. Even sometimes online retailers sell the products at
below their purchased price on some special days like Amazon-treasure hunt, big billion day sale, deal of
the day offer, end of season sale. Online retailers buy in bulk quantity directly from manufacturer by
eliminating middleman margin that’s why they sell the products at lower prices. Offline retailers are not
able to offer such huge discounts as offered by online retailers and they are left with no option except
moving towards online business.
B. 24/7 Availability: Online shopping stores are open round the clock of 24/7. It is very rare to find any
offline retail store that is open for 24 hours in a day. The availability of online stores gives the freedom to
shoppers shop at their own pace and convenience. Shoppers can shop at any time of day or night in online
shopping stores just by at one click [9].
C. No waiting in queues for billing: Shoppers are not required to wait in long queues for billing in case
of online shopping. They just simply order the goods online by following a simple procedure and get
them delivered at their doorstep. This facility is not available in offline retail because sometimes customer
has to wait in queues for billing [10].
D. Easy Return: Normally it is not possible for shoppers to get the money back if they don’t like the
product after purchase in case of offline sale. They can exchange the product only and that too in
exceptional cases. But in case of online shopping, if customers don’t like the purchased product, they can
simply return the product and get their money refunded [11].
E. Extensive availability of online coupons compared to offline ones: In case of offline retail store,
customer can get discount only when there is sale or if he has membership card. But online coupons are
easy to search and apply in comparison to offline coupons. Online shoppers can save the discount coupon
codes and get discounts upon purchase by using the coupon code [10].

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F. Wide choice: In online shopping, Customers have lots of option while buying products online such as
color, size, brand etc. but in case of offline shopping choice is restricted as some times the customer may
not get the desired color, size or offers [5].
G. Saving of time and transportation cost: People don’t get the time to go in stores to buy products due
to their busy schedules. They can easily purchase the products online by sitting at their home or whenever
they are free. Online shopping saves their time as well as transportation cost because now many online
shopping websites deliver the products without charging delivery expenses [12].
H. Easy access to customer reviews: Customer can have easy access to consumer reviews and feedbacks
before purchasing anything in online shopping. But offline sale don’t provide such customer response
before actual purchase take place. That’s why people prefer to buy goods online now [4].
I. Access to compare prices: Due to online shopping, customer first of all compares the price of product
on different shopping websites by sitting at their homes and after comparing he buys it from that site
where the price is lowest [12]. These facilities are available in offline retail too but customers have to
move to far away places to compare the price which is difficult nowadays due to busy schedules of
customers.

VI. STRATEGIES TO BRIGHTEN THE FUTURE OF OFFLINE RETAILERS

Offline sale is declining due to above discussed reasons. About 80% shoppers who do online shopping are
youngsters i.e. below 30 years of age [5]. And it is found that women and rural users are still either not
interested or afraid of buying online due to absence of feel and touch shopping experiences, technological
complexities, concerns over durability and functionality of the available online products, bad experiences
over past online shopping, lack of knowledge about English language as all online shopping sites are
usually using English language to display their domain etc. Most of customers in India are reluctant to
expose their personal details including credit and debit card details in virtual world because of privacy
concerns. The obstacles of online shopping can act as opportunity for offline retailers. The offline
retailers have to think their marketing strategies and change their store formats to entice new customers as
well as retain their existing customers to increase their sales.

In order to decrease the ongoing fight between offline and online, offline retailers must form associations
to fight collectively with manufacturers so that they don’t discriminate between them [6]. In order to stop
online retailers from offering huge discounts to customer, manufacturers should put restrictions on
numbers of units sold to online retailers. Even in order to promote offline sale, many companies have
started promoting their products offline by giving a declaration in public notice mentioning that they

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would provide after sale service or warranty only for only those products which would be sold by their
authorized online or offline channels. Nikon was the first company who put on their website they will not
honor any warranty given by non-authorized online sellers. After that many other companies also
followed the same like Asus, Dell, Lenovo, Toshiba, Canon etc. [13] [14]. The result of this is that the
customers have to pay for after-sales services and repairs even during the warranty period for products
purchased online. This trend is decreasing the confidence of customers for buying products online
especially electronic items. Such types of initiatives are required more to protect the offline retailer in this
online world.

Online retailers have tendency to save local taxes. As the rate of taxes are different in different states for
the same product. In order to offer discounts to customers, sometimes the online retailers route their
products through different states to save tax and they directly bill it to the customer at lower price. This
practice would be automatically stopped with the implementation of GST in our country. The
Government should implement GST as early as possible so that this type of wrong practices can be
curtailed.

In order to protect the future of offline retailers, companies should produce exclusive products for its
retail chain and for online retail so that people who have the habit of following the concept of show
rooming can be stopped from this.

As followed in U.S., offline retailers could use different barcodes for the products which are available
online too especially in case of garments so that people who have practice of scanning barcodes of items
in offline store and comparing its price online can be stopped to some extent [15].

In spite of all this good quality customer relations, improved after sale service, proper redressal of
customer complaints and customization can help retailer in competing with online retailers.

Even offline retailers should change their store formats to entice more customers. The following type of
store formats can be established by offline retailers to attract the customers and increase their sale:

A. Flagship store: Flagship store is usually the largest store in a retailer's chain store of brand, a store in
prominent location that holds or sells the highest volume of merchandise where shoppers can find best
deals and find everything the company makes [16]. They are different from the rest of the chain because
window display is stunning, lighting is perfect, design and layout of store is luxuriously spacious. In order
to attract the attention of shoppers, they should be provided with something unique that enables them to

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have fun, to be entertained, to be awe-struck. Many companies such as Apple, Sony India, Hennes &
Mauritz (H&M) have established flagship stores. More and more flagship stores should be established to
entice shoppers [14] [17] [18].

B. Magic Mirror: People generally try a lot of items before buying any product. It creates inconvenience
for them to take clothes to a dressing room they want to try on, take off and put on whenever they find
attracting garments to purchase. In order to avoid long queue problem at the dressing room and the
hassles of trying clothes physically, customers have started purchasing goods online. Retailers have to
change their store formats and integrate various digital technologies to entice more and more customers in
showrooms.

Magic Mirror is an intelligent Photo Booth which allows customers to ‘try on’ more than 50 items such as
dress, jacket, sunglasses, necklace, footwear’s etc. in less than a minute. Retailers usually install it in the
shop floor of the store to entice shoppers with the latest fashion items. Selected dress image will be
projected on shoppers’ mirror image. Customers can virtually ‘try on’ the clothes they wish to purchase
and choose from a range of dresses by swiping their hands horizontally [19] [20].

Therefore the retailers should adopt all above strategies to entice customers to increase their sale and
brighten their future.

VII. CONCLUSION

The main objective of this paper was to study why offline retail sale is declining in this online world. The
paper discussed huge discounts, 24/7 availability, no waiting in queues for billing, easy return, extensive
availability of online coupons compared to offline ones, wide choice, saving of time and transportation
cost, easy access to customer reviews and access to compare prices are some of the reasons because of
which people prefer online shopping in comparison with offline shopping. Online retail business is
affecting the traditional retailing business and increasing trend of online sale is thereby declining offline
retail sale. This paper also suggests various strategies which the offline retailers should follow to brighten
their future. Offline retailers should change their marketing strategies and store formats to entice more
and more customers to increase their sale.

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