After the pandemic-driven boost, e-commerce expansion in India has decelerated. According to Unicommerce, in the March 2023 quarter, sales volumes grew by 16% year-on-year, with a subsequent 19% increase in the third quarter. This moderated growth trend coincides with findings from other industry reports.
While market saturation online may be a primary factor, new-generation brands are venturing offline for reasons including the opportunity to foster trust, reach a broader audience, and reduce CAC.
This year, brands like Bonkers.corner’s and the Shark Tank India featured SNITCH have launched their first brick-and-mortar stores. Elevation Capital backed women’s activewear brand Blissclub, as well as Nykaa, aiming to launch 20 and 50 stores respectively by the close of 2023.
The souledstore states that it typically takes 3-4 months for their stores to recoup their Capex. They have raised Rs 135 Cr for store and category expansions.
These brands are forging connections with their customer base not solely through their fully-established stores, but also through temporary pop-up shops and franchise partnerships. Pop-up stores serve as an effective means for brands to gauge the potential foot traffic in a particular city, postal code, or specific location.
While fashion brands explore the path of launching exclusive brand stores, CPG beauty and food brands have greater flexibility and multiple distribution channels, such as #kirana stores, specialty markets, salons and pharmacies.
Establishing an offline or omni-channel presence is a natural extension of their existing offerings and an opportunity to foster stronger connections with customers. This approach offers several other advantages:
1. Establishing closer connections with customers and fostering trust by strategically selecting locations that align with the brand’s business goals. Brands use order data and pin code information, along with knowledge of competitor store locations to pick the right location.
2. Additional advantages are extending presence to all locations where customers’ frequent, and appealing to a broader audience beyond the core target group and look alike audience.
3. Offline sales typically experience a reduction in return and refund scenarios.
4. While DTC brands maintain their own websites, a significant share of their sales originates from online marketplaces. Creating exclusive brand stores enables these brands to eliminate commission costs and boost customer LTV.
5. Contrary to common belief, venturing into the offline realm is associated with a lower CAC due to organic traffic generation. Additionally, the AOV in offline sales tends to surpass that of online sales.
