This mornings mint has a full page advertisement on the front page announcing the launch of the moto x phone in India. The ad mentions that the phone is available in India exclusively on flipkart the online retailer. The question is if this is a good idea.
While it is true that online retail offers the best costs and prices – thanks largely in part to the massive savings on real estate and inventory costs, I’m not sure if we are still thee at a stage where retail can be online only. In fact people like to touch and feel the stuff that they’re buying. Especially when it comes to big ticket purchases such as a phone. Without giving people the opportunity to do so – shops won’t carry the dummy model unless they’re also selling it, at a good margin – I’m not sure how many will want to make the jump and buy.
On a related note I saw a report last week, again in mint, talking about pushback from offline retailers and malls to the online retail phenomenon. This brings into focus how retail will evolve going forward since people now have a low cost (low inventory, zero real estate) option for making their purchases. We’re already seeing some “progress” in that direction where people go to malls and high streets to browse and get a touch and feel and then buy online where the prices are lower.
This points to one direction in which retail might evolve – soon stores in malls and high streets might be set up with the primary purpose of building the brand and letting customers get a touch and feel. Any sales from these stores for the brands will only be a bonus – the primary purpose being to let people know what is out there and to let them touch and feel and experience it.
If this were tO happen we can expect malls and high streets to move to more brand stores and less multi brand stores – unless the latter can somehow either match the cost and price structure of online or get paid for purely providing the experience to the customers.
Either ways we can expect the overall demand for retail real estate space to come down in the next few years. If there are any malls or retail real estate firms which are listed its time to short them. Or by hedging against them by going long on online retail.