Holy grail of blended commerce

Combining the power of physical and online retail represents the next frontier

Ever since the pandemic ended, shoppers have been thronging physical stores. Step into a mall any weekend and you’ll find it hard to attract the attention of a shopping attendant. Or indeed, find the item that you’re looking for — in the size or colour that you need. You’re possibly wondering whether the trip was worth the hassle —and if you would easily find the item online — plus maybe, a better deal as well. Except that you’d prefer to touch, feel and try the product before you buy.

Here’s the upshot: Smart retailers are seeing this gap as an opportunity to improve the customer experience, efficiency and conversion rates by leveraging the power of blended commerce. That is, get the best of both worlds — physical and online.

It isn’t new per se, but retailers are starting to think about blended commerce as the next frontier, and work to offer a seamless and unified shopping experience.

Imagine a customer who walks into a store needing a dress for an important official engagement two days later. In case the item isn’t available, does the store attendant have the wherewithal to check in his system if any of the stores in the city have the item in stock? If it is in stock, would he be able to reserve it and offer the customer the option to either pick it from that store or have it express-delivered home well in time? Plus, in the event there is more choice available beyond the limited range the store stocks, can the attendant offer the shopper the choice to select an item from the “endless aisle” that the online shopping experience offers and have it delivered from the nearest warehouse within a specific time frame?

Therefore, the physical store has a new role: Not just showcase what is available, perhaps help the customer to try it out — but also offer the added benefit of closing the sale, in case the customer is open to having it delivered from their nearest store or warehouse.

It isn’t without reason that blended commerce is emerging as the holy grail of retail. Especially since covering a country as large and diverse as India has its challenges. The opportunity in Tier-II towns and beyond is starting to open up. Major retailers are scrambling to open physical stores, but that invariably takes time. Instead, a thoughtfully crafted combination of e-commerce and physical stores could help bridge the gap.

It is easier said than done, though. A major consumer electronics retailer decided that store expansion was too slow and cumbersome, and that expanding e-commerce in a big way by taking control of its logistics, warehousing and supply chain operations was the solution. It assumed that having control over its supply chain was a prerequisite for improving service levels, ensuring quicker delivery, and thereby, scaling up e-commerce. As a result, it in-sourced warehousing, invested in a large setup of its own, and asked an integrated logistics partner to run it on its behalf, with half of the capacity earmarked for e-commerce. The result: After a few months, it realised that its e-commerce business had simply failed to take off, customers continued to throng its physical stores, and it paid rent and a substantial fee for the excess warehousing space. Now, with a lock-in in place, exiting such rigid arrangements wasn’t easy. The more sensible approach would have been to rely on third-party warehousing options till such time the volumes built up, and it made economic sense to invest in its own warehousing.

There is one other option: Store-enabled fulfilment. In India, early this year, IKEA announced it was expanding its footprint to offer doorstep delivery across 62 districts in Telangana, Maharashtra, Andhra Pradesh and Karnataka. Instead of setting up separate warehouses, it would use its large format stores in Hyderabad, Bengaluru and Mumbai (plus one city store in Mumbai) to service demand and ensure delivery within 7-10 days. Next year, IKEA hopes to open its first store in Delhi NCR, which will also allow the Swedish retailer to expand its e-commerce footprint in adjacent markets in the north.

Having such large format stores also double up as warehouses that not only reduces capex, but also streamlines operations. That’s not all. In the US, Walmart has leveraged its large network of superstores as fulfilment centres. Almost 90 per cent of its customers live within an hour of a Walmart superstore. And all of them own a large vehicle. Particularly for groceries, they prefer to place an order and themselves pick up delivery from the nearest store on their way home from work. In India, the situation is somewhat different. Car ownership is low. And city traffic is unpredictable. And hence, doorstep delivery is usually the preferred norm.

For blended commerce to work, building a unified vision, approach and teamwork among the in-store and e-commerce teams is key. Merchandising teams at the store typically have a better handle on what customers in the catchment prefer. E-commerce teams can benefit from that head start. Plus, building a stronger understanding of the customer journey — irrespective of the format — will provide the stimulus for designing a seamless experience that customers need.

The writer is co-founder at Founding Fuel