So, how can both channels be growing so fast without getting in each other’s way?
First of all, both channels have been tapping into the unorganised market space. Organised retail - in both its brick & mortar and online forms - has grown as an attractive alternative for an expanding middle class, aspiring for choice, branded goods and improved shopping experience. It seems the most impacted players have been the unorganised players, who have been unable to provide a similar value proposition.
Second, online channels have limited their impact on existing brick & mortar by converting customers in Tier II and III cities, where the brick & mortar footprint is still relatively limited. With their wide reach, online retailers have been tapping pockets of growth that brick & mortar players have not been able to reach profitably.
Third, online channels have created their own demand by generating impulse purchases. By combining constant bargains, targeted advertising, and 24/7 convenience, their model stimulates sales that simply would not have happened in a conventional store format.
In other words, online retailers have been converting new consumers and increasing their propensity to spend, thus increasing the overall size of the retail pie.
Looking at the situation from such a perspective can enable existing brick & mortar retailers to see the opportunity to leverage both physical stores and online to benefit from the rapid growth in both channels. While the dynamics differ from category to category, it is clear that online and brick & mortar still have room to grow together in the Indian retail market.