Skipping developmental steps and leapfrogging have been uniquely Indian. We leapfrogged into services from agriculture, skipped the landline stage and moved to smart phones and the same holds true for retail as well. We’ve leapfrogged to online retail while malls remain largely restricted to the metros.

But what does this mean for the retail markets in India? Drawing insights from a pan-India survey of 2,062 online vendors and 2,031 brick-and-mortar vendors conducted by Pahle India Foundation, we take stock of how we adapted to this nimble transition. And in doing so, we shift the needle from a misguided ‘online vs. offline’ debate to a discussion on business performance and productivity of retailers in India.

The study reveals that 60 per cent of vendors reported an uptick in their sales since the time they started selling online and 52 per cent attribute their increase in profits to this digital shift. Vendors have additionally seen an improvement in other aspects of business performance as well. About 60 per cent of vendors stated that they have improved market access after joining e-tail platform, alongside a boost in purchase value per customer, and 58 per cent of them report that they have more customers. Interestingly, a greater percentage of vendors from tier 3 cities have seen an improvement in market access as compared to the rest.

The maturing Indian retail economy vests on the ability of retailers to adapt new systems and technologies. Fifty-seven per cent of vendors have adopted more technology and close to 97 per cent of them have digitalized at least one retail function (for example, marketing, management, warehousing) since their shift online.

Additionally, by benefiting from the specialised services of suppliers, shippers, packers etc., 56 per cent of online vendors have been able to usher-in efficiency in their sourcing and distribution methods.

With greater customer intelligence, vendors today are better equipped to meet consumer expectations of quick, hassle-free delivery of quality products. Sixty per cent of online vendors believe they have better insights into customer preferences than before, 59 per cent of them have improved their product design and 61 per cent have enhanced product variety.

Much like market access, innovation (in product design, variety and payment methods), efficiency (in sourcing and distribution, customer intel) and technological adoption have been the highest amongst tier 3 city vendors.

Tier III factor

The data show that close to half the tier 3 city online vendors have seen an improvement in these three parameters. Barring costs – that have ‘not decreased’ according to 40 per cent of vendors – and stiffening competition, vendors by and large view their move online positively.

Comparable developments are seen in traditional retail as well.

When offline vendors were asked if their product variety and payment options decreased since the growth of e-commerce, a negative score was obtained. This was also true for consumer insights.

Notably, about 70 per cent of offline vendors have adopted some form of technology, the most prevalent being point-of-sale device for digital payments followed by software for retail operations management and business intelligence.

Some challenges remain, particularly around vendor costs — such as the expense of acquiring new customers, platform charges, and the burden of unsellable inventory or returns. Around 60 per cent of vendors registered a dissatisfaction with platform charges and about 56 per cent vendors expressed concerns around fulfilment costs such as logistics, packaging & handling, and customer acquisition costs such as marketing & sales, respectively.

ONDC solution

In light of this, ONDC offers a timely solution. By allowing vendors to access customers across multiple platforms without the hassle of onboarding each one individually, ONDC is creating a more cost-effective and streamlined ecosystem for sellers of all sizes.

Although just 3 per cent of the surveyed vendors are currently selling on ONDC, this number is expected to grow significantly as the platform continues its wider rollout. There is also need for incentivising offline vendors to also adopt online trading by suitable capacity development.

To conclude, vendors across the spectrum are spurring to level it up — jumping on the technology bandwagon, improving product quality, enhancing design, and using consumer data to make smarter decisions. It is thus time we move beyond the traditional - digital dichotomy and see e-commerce as a catalyst for innovation and growth in the retail industry.

However, the lingering issues that continue to nag at the industry’s edges, even as innovation propels it forward, may need attention in the near future.

Kumar, Former DG, MOSPI, is Distinguished Fellow and Abrol is Visiting Fellow with Pahle India Foundation