The Changing Dynamics of Offline and Online Shopping

Abstract

Being in a digital world where everything is made available at doorsteps just by using smart phones and computers technology is progressing tremendously. India being famous for conventional markets has also taken a giant leap in this online trend. With modern buying malls emerging, there is significant change in the retailing industry of India. Many international brands are indulging themselves to cope with the requirements that are so dynamic. Purchasing via apps with help of internet is becoming an evolution against conventional mode of buying. The study focuses on how the offline mode of buying picked up by changing itself to provide more specialised experience to buyers and their interests. Although the western world took more than a decade to understand the trend and make changes, it just took mere five years in India to adapt to new trend. The purpose of this study is to find out how the mode from offline to online buying is being shifted and its the probable outcomes. Hawkers, vendors and visitors were surveyed in the commercial area of Hubballi city. Further an online survey was conducted in which the responses of the people were recorded. The success story of online buying depends upon premium of quality & service it offers for buyers.

Introduction

The internet has transcended us from the traditional shopping era into a new and more efficient era called e-commerce (Taweerat Jiradilok, 2014). Most exciting place where people tend to enjoy their time along with spending is the commercial area of any city. Buying and selling activities, bargaining of goods, availability of articles at cheaper prices, long working hours are all seen in market place. Online shopping is defined as the process a customer takes to purchase service or a product over the internet. In other words, consumer may at his or her leisure buy from the comfort of their own home products from an online store (Zuroni Md.Jusoh, 2012). Buying is been an age old practice performed in the world, which basically meant for exchange of goods. Later when currency were introduced, the goods or services were provided on the basis on exchange of currencies. Similarly in India also this activity is being carried out from many years. There was also a specific area allotted for this activity even when our country was ruled by various dynasties. From that point of time to current age there is an immense change in the way of buying. The journey from commercial streets to buying malls to latest online buying, the country has completely underwent a significant change. Development in technology gives a platform to the seller to reach his buyer very quickly, easily and economically. Even though online is emerging rapidly but it has not yet replaced the conventional way of buying goods, where the customer actually visits the retail shop, see the product first hand, feel its quality then decide, later bargain and ultimately buy the goods.

The retailing consist of producers, wholesale distributor, retail merchant and users. The wholesale distributor is connected to producer, while the retail merchant is connected to wholesale distributor. Below is depiction of retail supply chain, Source: (Farfan, 2018)

Classification of Retail store is as below

• Department Store: These sell wide range of items kept in various categories. For an ex: apparels, cosmetic, household items etc.
• Supermarkets: Mainly keep varieties of consumable items, even these contain apparels and electronic items.
• Warehouse Retailers: These are huge warehouses where goods are kept in bulk quantity and goods are sold at lower cost than retailers.
• Speciality Retailers: Here specific category of goods are sold.
• Convenience Retailer: This is a part of retail place where fuel is sold, with less amount of grocery and auto care goods at a considerable cost.
• Discount Retailer: Various types of goods, the cost is less than retail, commonly known as generic brand.
• Internet Retailer: The purchase is done on website and goods are shipped to the users place, here the value addition cost is eliminated so cost is lower than that of retailer.

In this world consumer’s loyalty depends on the continual ability to deliver quality, value and satisfactory product. Few choose offline buying, and some choose for online and rest go for both kind of purchasing. The focus of this study is on consumer’s choice to shop over internet and at the conventional stores at the information gaining period. However buying online seems much easy and comparatively less priced. Making any purchase decision user should know the mode, whether online or the offline buying. Consumer should decide the channel for them which will be best to fulfil their needs. Purchasing is more important than just using internet for entertainment purpose or for knowledge.

The customer buying online should have internet, a valid method of payment in order to buy the goods from the internet. Amazon, Myntra, flipkart are few examples of successful sites that use less price of items with large stocks to attract consumer. In general, population from high level of income and high level of learning are more favourable to buy online. The population who are more knowledgeable and more explored to the technology are more into online purchasing. The increase in technology increases the online buying by the consumer creating favourable attitude towards the consumer for online buying.

The type of purchase in which the customer physically visit designated area for selling goods and providing services, then examine the item and buy is known as offline purchase. Whereas when buyer uses technology like internet through which browses the goods on his phone or computer screen, compare, look for offers then purchase, which is directly delivered to his door is known as online purchase. Online mode of purchase also contains the same sequence as offline or conventional buying.

The online shopping mainly consist of clothes, tickets, books even making reservation for tour, hotels etc. The consumer sets some benchmark in mind, for these type of transaction there is close relation among browsing and buying. Internet browsers are prone to buy such goods online. Consumables goods have lower online browse or buy intention rates than non-consumables goods. The below stats shows behaviour of the consumer on online mode.

Computer, mobile and tablet are the devices which are mostly used for buying goods over internet. The below table shows that computers are most used devices for online buying because it is much more convenient to see items on bigger screen, next comes mobile phones because, easy accessibility and network connectivity. People who haven’t used computer also use mobile phones. Then finally the tablet which is used by very few. Source: (N.V., 2014)

The shopping of goods has been a long time affair, evolution of this sector is commendable. Earlier there were weekly markets in village and rural melas where lot of people would come and shop. Later convenience stores started emerging, kirana stores where daily used items were sold. This was traditional way of selling and buying goods. Then when khadi revolution came into India many khadi stores were setup, these stores exclusively sold apparels made out of khadi i.e pure cotton. These stores were supported by the government the price was low. Then there is this era where shopping itself is an experience people are fascinated for. There are exclusive brand outlets which sells only goods under a certain brand only. Then hypermarkets and supermarkets an one stop place for all the household items, daily used items, electronic appliances etc. The shopping malls trend has been so influential that every city in India is coming up with a mall. It’s a complete entertainment shop, food, movie, play etc.

In past decades increasing broad band connectivity along with usage of smart phones has changed our communication style. Internet shopping a new forum, completely dependent on internet along with smart phones to revolutionise trade and connect with buyers. In country like USA this forum has took major step and achieved turnover of over US $150 billion. Industry in India is still in growing phase. This segment has grown by almost thirty five CAGR from US $ 3.8 billion to US $12.6 billion USD. Online travelling dominates the e-commerce industry with an estimated 70% of the market share. Calculations show industry benchmarks estimate that the number of parcel check-outs in e-commerce portals exceeded 100 million in 2013. However, this share represents a minute proportion (less than 1%) of India’s total retailing market, poised for continued growth in the coming years. If this robust growth continues over the next few years, the size of the e-retail industry is poised to be 10 to 20 billion USD by 2017-2020. This growth is expected to be led by increased consumer-led purchases in durables and electronics, apparels and accessories, besides traditional goods such as books and audio-visuals. Source: (Assocham, 2014)

The importance of e-retailing is its characteristic to remove physical boundaries, reach buyer in a manner differently from usual brick-and- mortar stores and directly reach their doorstep. Base of e-retailing model is technology and logistics that helps the customer acquisition the final reach process. E-commerce also brings facilities like free delivery, order rescheduling, cancellation, returns and cash on delivery. Additionally, an expected minimised turn-around-time (TAT) ,will potentially lead to publicity, feedback and customer retention from e-portal or website. An info net which shares updated information with respect to inventory status, demand schedules and forecasts, shipment schedules and promotion plans among all people involved in supplying chain will form backbone of an e-retailer.

To analyse the major differences between the online and offline consumer groups in terms of demographic, technology, availability and attitude of the consumer. To understand the factors which made the buyer to switch from offline to online mode of buying. Also to focus on the factors why the customer prefers only offline or online mode of buying.

Flipkart, an E-Commerce company which was started in October 2007 and has its headquarters in Bengaluru. Flipkart was founded by Sachin Bansal and Binny Bansal and as of March 2017, has 8000 permanent employees and 20000-25000 contract workers who form part of its supply chain. It is market leader in India’s online marketplace with over 80 million goods across more than 80 categories. From 2009, valuation of Flipkart is US $11.6 billion.. As on April 2017 it has raised over US$4 billion in 11 funding rounds. US investment firm Tiger Global participated in nine of them. The firm boasts of having 100 million users and 100 thousand sellers along with 21 warehouses. On average Flipkart has around 8 million shipments per month. It is the first Indian application to cross 50 million users. In April 2017, US$ 1.4 billion was raised from Microsoft, eBay and Tencent and in August 2017, it raised US$ 2.5 billion from SoftBank. In exchange of an equity stake in Flipkart, eBay made a cash investment of US$ 500 million and sold its eBay.in business to Flipkart, in 2017. Flipkart invested US$ 400 million in its logistics arm, eKart, between September-December 2017. Source : (Aranca, 2018)

Over the period growth of Flipkart is commendable, since its incorporation in 2007 by Sachin Bansal and Binny Bansal with an investment of US$6,200.Initially in 2008-09 it went as an online book retailer with venture partners like Ashish Gupta( founder of junglee0 and Helion Venture Partners. It received first funding of US$1 million from Accel Partners & US$20 million from Tiger Global. The company was valued at US$50 million. Next, in 2010-11 it introduced music, movies and mobiles, also launches facilities like cash or card on delivery and prepaid wallet. Along with this 30 day replacement guarantee and a dedicated logistical support for quick delivery. Here also funding was received from Tiger Global of US$20 million and the company valued US$1 billion. In 2012-13 the company added lifestyle along with fashion goods even gateway payzippy. It raised US$200 million from existing investment firms and US$160 million from Morgan Stanley,Sofina,Vulcan Capital and Dragoneer with valuation of US$1.6 billion. The year 2014-15 was a milestone year since the Flipkart acquired Myntra for US$300 million also raised US$210 million from DST Global with valuation of US$15.5 billion. From 2016 onwards the registered users corssed 100 million. It also raised US#1.4 billion from Tencent, Microsoft and eBay in 2017.In August 2017 it merges with eBay India. In November Flipkart launched it’s own smartphone brand called Billion Capture+.

The transformation from web based buying to app based buying was taken after too much of brainstorming. Myntra, which was taken over by Flipkart, had changed its operating model to being app based alone. It helped Myntra save on marketing costs, as it required no cost in sending notifications over applications. It is also been proved that app-customers have been more loyal and profitable towards the firm. An app based model also provided personalization, better user interface, superior customer experience, the ability to easily connect anytime and anywhere, rich customer data and so on. After the acquiring, Flipkart decided on proceeding with web and app based model. In March 2016, Flipkart had launched a mobile web application which is very light and provides complete app-like experience to all its customers, named the app Flipkart Lite. This app was built to lighter than most phone applications, and did not require a dedicated storage for the application for customers who did not want to install it on their phones. A survey was conducted on consumer preference over e-commerce sites, it was found that 80% of customers want a website for an e-commerce site, though only 20% of them might use it. This was when Flipkart realized that only for an app based model was a very consumer-friendly decision. Further, only app-based would take away the options that is available to its customers to have a complete visual experience of buying things online. Has also set up “Pick up Stores” in various cities which provide convenience to the consumers to pick up their orders as per their convenience. It has planned to increase stores all over the country and to also make them fully outfitted experience zones, where customers can gather the experience of the product by trying the product, seek alterations, and enjoy the product demonstrations.

Hubli is the heart of North Karnataka region and fast growing city after Bangalore.Being the second largest city in the state of Karnataka hosting a population of nine lakhs forty three thousand eight hundred and fifty seven. Hubli is well connected to Dharwad, the district place. Hubli is the commercial hub of North Karnataka region. People around the place come for trade. Not only agriculture, Hubli also hosts many leading industries in different sectors like valves, pharmaceuticals, food processing etc. It consist of more than 1000 allied micro, small and medium enterprise, which include electrical, food goods, rubber and lather steel, furniture and tanning industries. In small scale industries, goods like Agro goods, chemicals, machine tools, chemicals, engineering goods along with pharmaceutical goods are manufactured. The commercial area is mainly located in the centre of the city, the world famous Rani Chennamma Circle, where seven major roads join from cities of Karnataka, is all surrounded by the commercial space. The Old bus stand is located near the circle where majority of the people form surrounding villages come for trade. The first and foremost market is known as Janata Bazaar, where fuits, vegetables, flowers are sold. Little more deep inside the market there are various other shops consisting of retail trade of various household, industrial, agricultural goods. Next the Koppikar street where majority of the shops are selling clothes, there are exclusive stores of various brands. Also jewellery shops like Tanishq, Gold Museum, Malabar are also present in this street. Then comes the Broadway where electronic items like calculators, watches, home electronic appliances etc are sold. Later, the oldest market of Hubli the Mahatma Gandhi Market spread across the place called Durgadbail. Here fruits, flowers, plastic items, pooja items, fancy wears, are sold. Then the internal space where the spices and other consumable items are sold.There were thousands of retail traders without any registration. By the end of March 1952, as per the provisions of Bombay Shops and Establishments Act 1948, within the municipal limits of Hubli. Among the retail shops of Hubli a majority of 663 were pan beeda and cigar shops, 617 provision (kirani) shops, 218 cloth shops, in addition to sweet meat shops (125), jewellary shops (223), stationery (134) and there were 617 shops where other goods were sold.

Results and Discussion

Most of the respondents fell in the age group 26-35 years. The profession that these respondents were holding was the job. The monthly expenditure was 5000 and above. The mode of buying chosen by the respondents is online method. The respondents in Hubli carried out their offline buying mostly on the Koppikar road which caters to the requirements of the customers in terms of apparels, Fancy items, designer clothes, footwear, sanitary fittings and kids wear. People mostly placed their orders on Flipkart. Reason for opting online buying mode was convenience and discount offers. Offline mode of buying was also practiced because it permitted bargaining and tangibility. The issue identified to the decline in the offline mode was the parking. The issue with the online buying was security and privacy. For many Indians, low prices are a key purchase driver. Factors drive the growth of online buying Increasing incomes is enabling Indian consumers to spend more and experiment across goods, brands and categories. Availability of return and exchange options in the online buying websites. Cash on delivery and exclusive packing which causes no damage to the product.The offline retail industry has increasingly come under stress with the rising popularity of online buying platforms. Led by big discounts, online retail players like Amazon, Flipkart, Snapdeal, Shopclues, etc. have managed to woo customers with their innovative and aggressive marketing mix. Moreover, the convenience of buying from a remote location with competitive price points has added to their popularity.

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