We recently embarked on one of our major research initiatives for India this year on the topic of developing an effective India digital strategy. The country’s rapidly developing digital landscape is drawing increased interest from multinationals lately, and I’ve had several conversations with executives curious about how they should capitalize on this trend. To better inform this research, I spent some time on the ground in Delhi and Bangalore speaking with executives from local and multinational companies to develop a deeper understanding of this topic.

While on the ground I visited several offline stores started by e-commerce companies, but one that stood out in particular was the Roadsters store in Bangalore. Roadsters is basically an offline version of Myntra.com (now owned by Flipkart, one of India’s largest e-commerce companies). This hi-tech store is unlike most other brick and mortar stores in India in that it is lined with technology on every corner: television screens hang above clothing mannequins explaining where and how each piece is made and what cloth is used; touch screens are stationed on every wall allowing customers to browse the internet if they are looking for something specific; and games are available to play to win store and online discount coupons.

I chatted with the manager and the sales staff. Many shoppers buy something in store, but the sales staff are also encouraged to drive traffic online. Consumers come to the store to ‘touch and feel’ the products: “Indians still value getting a sense of what the product looks like, and more importantly, how it looks on them,” the manager told me. “Many young people have already decided what they want; they only come to the store to see if it looks like what they’ve seen online before buying it.” (This is known as showrooming.) Others are impatient, and want to pick up their purchase immediately rather than wait five to seven days for a delivery.

Roadsters is not the only online shop pursuing an omnichannel strategy. Other e-commerce companies like Lenskart and CaratLane also have physical stores, mostly so consumers can test products and authenticate their purchases. These physical stores sell a limited selection of merchandise; their main purpose is to encourage shoppers to buy online via numerous laptops and touchscreens in the store. Based on my observations, these stores have been quite successful in attracting new customers. Many traditional offline shoppers—the older, less tech-savvy consumers who aren’t very comfortable shopping online—come into the store so the assistants there can help them order online.

These on-the-ground observations are also validated by the data. A recent Google-A.T. Kearney survey highlighted that “no instant gratification”, “no touch and feel”, and “lack of awareness” were among the main reasons Indian shoppers preferred to make purchases offline. The data, therefore, strongly supports the claim that developing an effective omnichannel strategy is critical in India, and there are a few reasons for this:

  1. Digital infrastructure has a long way to go. India’s technological infrastructure is still lacking. The country ranks 91 out of 139 countries in terms of digital readiness, and only a fraction of the population is truly comfortable with the internet. While this is changing due to increased availability of cheap data provided by the Reliance Jio network, mobile penetration is only the first step. Moving beyond telecom infrastructure to increasing digital literacy and awareness is still critical for India to reach the size and provide the scale needed for e-commerce companies to operate successfully.
  2. Indian consumers use the internet to search for product information. Most Indian consumers go online to understand specifications, check prices, read reviews, and compare products. They remain more comfortable, however, purchasing the product in store rather than online, which is why the online to offline model resonates.
  3. The cash-on-delivery (COD) mechanism reduces e-commerce companies’ cost differential between online and offline sales. COD is the most preferred method of payment in India’s e-commerce industry, accounting for approximately 80% of all transactions. Due to the popularity of this model, along with the high number of cancellations and returns in India, the scale that e-commerce companies can achieve is restricted. Thus, the cost saving that companies would achieve having a purely online presence is limited in India. So, investing in offline stores and having shoppers come to the store and test their purchases is a lot more feasible for India’s e-commerce players. Although the popularity of COD purchases is gradually declining, following the demonetization measure in November 2016, and mobile wallets like PayTM are becoming more common, they remain limited to tier-1 cities.

Given that the barriers to online adoption and market characteristics are unlikely to change soon, developing an omnichannel approach is critical for the Indian market. These findings were supported by what I heard on the ground, with most successful companies viewing their online presence as a complement to their offline stores. I look forward to sharing more such insights, strategic frameworks, and best practices from both multinational and local companies when the India digital strategy report is published.

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