Its rivals on the web have a similar idea. Fabfurnish, which already has four physical stores, plans to increase it to nine, across four cities, in the next 12 months. And Urbanladder, for the past two months, has been sending three single-seater sofa samples to homes of interested buyers so that they can feel first-hand aspects like make, foam, inners and spring. "We cannot address furniture completely online — it's a pain point," says Rajiv Srivastava, COO and co-founder of Urbanladder. "That's how the 'trial room' idea came about."
Their online peers in other specialised shopping categories have similar designs. On August 24, jewellery retailer CaratLane opened its fourth store, in Bangalore. Child products retailer Firstcry will hit 100 franchisees in December. Eyewear retailer Lenskart has 25 stores and 100 optometrists — diploma holders, not doctors — who come home to do eye-checkups. "Going offline is important for us as an element of eye checkup is involved in our business," says Peyush Bansal, co-founder-CEO of Lenskart. "It's also a good way to build trust for the brand."
The narrative is of online players trying to change mindsets about internet shopping in a country that has just begun its online initiation. So, they see these stores not as out-and-out shopping hubs, but as spokes that feed the online hub by giving users a 'live' experience, building brand awareness and watering the online habit.
But, at some level, it's also about diffusing the boundaries between online and offline, at times even the bold ambition of building a national brand that is equally dominant and omnipresent in both spaces. "Smart digital retailers are starting to recognise they too need a broader, multi-channel approach for many of the same reasons as offline retailers need to go online," says Pragya Singh, associate vice president, retail & consumer, Technopak, a retail consultancy. "Customers don't come only online or only offline — they come anywhere."
Nature of niche
Players in niche product categories — like furniture, jewellery and child products — are at the forefront of this offline drive. These are categories where look and feel matter to a consumer, more so as the product value increases. An online only presence was not facilitating the conversion of customer clicks to sales at the scale or frequency they would have liked.
The solitaires at CaratLane, for example, start at Rs 50,000 and go up to Rs 4 crore. "Buyers want to see and try before they pay," says Calvin John, vice president, marketing, CaratLane. "Virtual try-rooms do not complete the experience." Supam Maheshwari, co-founder of Firstcry, too cites the shopping experience. "For any couple, parenting is a new experience and they like to go out to shop," he says. "Only online does not complete the experience that new parents look forward to."
Anil Jaggia, CIO of HDFC Bank, offers an analogy from the banking sector as another compelling reason why a physical presence helps. "Today, I can take banking to the masses via smartphones and internet banking," he says. "But a customer in a remote town is unlikely to open an account with a bank he can't physically see. So, I need to open a branch in a city. It adds to trust and comfort."
One estimate of how much that comfort adds up to comes from John of CaratLane. "We have seen the bill value triple when the customer has an option to try and buy," he says. CaratLane stocks about 125,000 solitaires on its webstore, but just 40-60 pieces in its physical stores.
Cost and benefits
A similar variance in product range is seen across all e-commerce players that are establishing an offline presence too. Lenskart, which expects about 20% of its business to come from offline sales, has 4,000 spectacle frames on its webstore, but 400 in its shops. At Firstcry, the split is 70,000 online and 2,000 offline. "For example, we have 60 (baby) car seats online and only the fast-selling four or five in stores," says Maheshwari.
Product range is a function of store size. Lenskart's strategy is to open 200-300 sq ft. And increasingly, it is looking to go beyond metros, to towns like Agartala, Bhubaneshwar, Nagpur and Tinsukia."Lenskart is in a niche," says Sanjeev Aggarwal, senior managing director of Helion Venture Partners, a VC fund. "Repeat buyers is a problem. Hence, it's tapping the offline market as well.' Costs are a limiting factor for these offline plays. Each CaratLane store requires an investment of Rs 60 lakh, plus running cost of Rs 1 lakh to Rs 3 lakh a month, though John expects breakeven from year one. Similarly, Pepperfry is paying a rent of Rs 3.75 lakh for its store in Powai, Mumbai. "If we go to a mall, the rental will be thrice that," says Ambareesh Murty, founder & CEO of Pepperfry.
The other option is to take the franchisee route, as Firstcry and Fabfurnish are doing. Each Fabfurnish store is about Rs 5,000 sq ft in size and requires the franchisee to spend about Rs 15 lakh to set it up. According to Vikram Chopra, CEO of Fabfurnish, its physical stores average 100 customers a day, against 150,000 online. "I can't open a 30,000 sq ft store (typical size of furniture stores) on a high street," he says. "Also, my USP is a 60,000 products catalogue online. Instead we are focusing on 5,000 sq ft stores to build the brand and build customer connect."
National ambitions
While brand building for online traffic is their primary objective to set up physical stores, some businesses harbour the hope this can evolve into a one-two punch. Fabfurnish, Firstcry and Lenskart all see an opportunity to build a national brand of some scale, which is currently absent in their respective segments. "Retailing in India is still unorganised," says Maheshwari of Firstcry. "There's no national retail chain catering to babies. We also see an opportunity to capture that space."
Companies are framing that opportunity not just in the online context, but are also seeing it through the prism of organised retail. Retail in India is a $500 billion industry, according to Technopak; of this, organised retail accounts for 8% and web stores 0.5%. "We have leapfrogged from unorganised retail to e-commerce," says Mukul Arora, vice-president of SAIF Partners. "Penetration of organised retail in the US is 70% and less than 10% in India. It is a unique opportunity for Indian startups to grab the offline space as well."
Furniture, for example, is a $20 billion market in India, across unorganised and organised. According to Srivastava of Urbanladder, the online segment has increased from 0 to `250 crore in two years, and he expects it to double this year. And it's also powering offline sales. "70% of our (Urbanladder's) sofa business is online, while 30% is offline," adds Srivastava.
Today, in a new market like India, customer addition in the online space is brisk, but it will normalise at some point."If India follows a similar pattern as developed markets, online retail will be no more than 10% of the total business," says Rachna Nath, leader, retail & consumer, PricewaterhouseCoopers (PwC) India."There's plenty of headroom for e-tailers to grow. But most shoppers come offline and that's where setting up shops fits in."
There are global precedents. Mielele, the largest online furniture seller in China, also has 250 stores. In the US, garment retailers Indochino and Bonobos, and eyewear maker Warby Parker, run what they call 'guide shops' and 'pop-up' physical stores to get buyers check out collection offline. "Vertical players have strong margins — 40-50% — to forge a strong offline play," says Niren Shah, managing director of Norwest Venture Partners.
For now, though, these online businesses are unsure of a full-scale offline play. "There are advantages that online offers — like I can display all products without paying high retail rentals," says Murty of Pepperfry. "Besides, we are a marketplace and don't want to take the focus off our core strength."
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