As the epidemic surge stops, startups switch from digital to physical

Every day, India registers approximately 80 startups, and over the past few years, that number has increased. Every other firm, including Pandemic, invested in building a strong web presence and promoting it, believing that it would endure forever.

Following the end of the internet boom, edtech firms like Byju’s, Unacademy, and Vedantu as well as furniture shops like Pepperfry and Wakefit are aiming to increase their offline presence by opening brick and mortar stores or, in some cases, opening their storefronts. According to experts, consumer businesses should develop offline storefronts to build their brands, grow, and take advantage of the enormous offline market.

Startup leader at PwC India, Amit Nawka said that in India, online commerce still accounts for 10–12% of all retail sales, whereas 85–90% of all retail sales are still conducted offline. For a variety of reasons, including brand building, business expansion, and the fact that the offline market is far larger than the online market, online enterprises are moving offline.

Hybrid Mode in Startups

Customers are visiting stores and looking for a human touch after the epidemic, which is making it difficult for such consumer startups. The majority of online startups with plenty of cash are buying businesses to swiftly establish an offline presence. Students’ screen weariness over the two years of the pandemic is already apparent in the edtech sector.

Amit Nawka said that the majority of the Akash acquisition was done offline by Byju. There is nothing offline at Unacademy, and they could have to do anything offline as well. Online and offline models are designed to operate seamlessly with one another store so that consumers can walk in and experience the brand and then also make an online purchase. However, even offline stores are still a priority for many in the rising digital world.

When it comes to offline play or Omni channel as it is sometimes referred to, Nawka remarked that this topic was primarily explored in the context of consumer technology. FirstCry, as well as the Ratan Tata-backed retail jewelry companies BlueStone and CaratLane, who were mostly online competitors, have lately begun operating offline.

About Nykaa

Nykaa, a firm that sells more beauty, health, and fashion products online, has started opening locations so that customers can see their brand in person. To be more accessible to clients, Nykaa has become omnichannel and created actual retail locations since 2014. It now has 95 retail locations spread across 47 cities in the nation and has stated aspirations to increase that number to 300 locations throughout 100 cities.

According to a report by J M Financial, on the surface, it could appear to be a diversion from the corporation’s ongoing positioning as a tech-enabled, digital-first company. It’s crucial to comprehend the company’s strategic motivations for pursuing retail development, though. While going offline might be a long-term plan, brokerages believe that it could put stress on the balance sheets of businesses, particularly those that are on the road to profitability.

IIFL report on Nykaa stated that we don’t see any justification for getting into this sector other than to provide some brands, and within those brands, just some SKUs, the route to market in the physical world in addition to the online arena. There will be a lot of overlap with other providers, like Jio and Udaan, in addition to, in some circumstances, its distribution.

Nykaa’s sales of cosmetics and personal care items may suffer if physical stores open up. According to IIFL, it receives a lot of business from tiny towns without a significant retail presence, and this business may eventually eat into its physical operations.

Digital to Physical

J M Financial however believes otherwise. In urban and rural areas, a majority of the population still feels comfortable transacting on digital platforms when they can connect it to a physical presence as well. The startups provide peace of mind to the customers and, hence, become a strong brand-building factor as well.

Tech innovations such as virtual try-on work to some extent for certain products but having the opportunity to access a store can be a game-changer. Nawka said that even Purple made the Faces Canada acquisition, which was predominantly offline while they had their online play.

Expanding Their Warehouses

Startups or retail businesses need brick and mortar presence, the most. Quick delivery platforms which include Zomato, Dunzo, and Bigbasket are also expanding their warehouses as they promise to deliver groceries in 10-15 minutes.

A dark store is generally a large warehouse that can either be used to facilitate a ‘click-and-collect’ service, where a customer collects an item they have ordered online or as an order fulfillment platform for online sales. These quick commerce platforms rely on these dark stores for quick deliveries in startups.

During the pandemic, startups have expanded and thrived but as they tried to ‘take over’ from physical businesses, they saw something they never probably saw earlier, how close they can get to their customers and how many more they can reach physically. This is the starting point of the trend reversal in startups and new-age digital businesses.

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