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Uncovering Retailing and E-tailing at CBS, Chennai by Mr. P.K. Mohapatra

Online shopping THRILLS but
KILLS. Yes it kills the patience inside you to wait for the product until you
receive your order to your doorstep. We as customers know the story of the
purchases that we make. And we think the retailers and e-tailers make a huge
profit. But what’s the real story? Let us have a glance on the performance of
retailing and e-tailing. Mr. P.K. Mohapatra spoke to us on the position or retail and e-tail sectors
in his last lecture. He told us how the consumers are inclined towards E-Tailing
for their purchase. He taught us the concept of e-tailing through the history
of retailing.

Though modern retailing started 18 years back, the growth of the
organized sectors happened only 5 years back, largest being Reliance followed
by the Future group and Aditya-more market. Modern retailing grew in India
rapidly last 5 years because of customer’s convenience in buying.

Mr. Mohapatra also gave us an insight on how manufacturers
support small shops over major retailing shops. Manufacturers have more advantage
over the Kiranas compared to Retailers as the supply of products is
comparatively lesser than the retailers. Retailers over power manufacturers
because the demand of products is higher. Manufacturers also cleverly use the
bundling tactics with the retailers to release less profitable products.

Retailers sell their products at 30% above the cost price. But
the profit margin is only around 1-2%. How is that possible? Their expenses
include:

Rent and inventory- Around 10%

Man power-5%

Electricity- 2%

Hardware/software-3%

Marketing-3%

Distribution-5%

This totals to 28% and profit margin for groceries is based on
sales in volumes and not through high or low pricing. We might think 1-2% margin
is very less but with higher volume and sales the amount piles up. The fastest
with least margins comparatively are super markets and Kiranas.

After giving us a fair brief of Retailing sector, Mr. Mohapatra
moved to explaining the current trend- E-Tailing. E-Tailing concept came up
with the idea of hiding space costs to achieve higher profit margin. Less did
the E-tailers know that it would cost them so much.

·
They will not only run the
whole operation thru cloud computing but they have to pay the cost of
maintenance, ware house and logistics cost.

·
More benefit to the
consumers because of competition.

·
The transport and delivery
costs

The first wave of E-tailing was a complete disaster which lasted
between 1995-2000. “Webvan.com” the first e-tailing site could not manage its
expense leading to a huge loss. HamaraCD.com was another Indian website for
music which had its slow death.

While books were an expensive affair in the brick and mortars,
Amazon launched in 1995 promised to stock an almost unlimited virtual
warehouse. Amazon got its first profit 7 years since its launch. E-selling
books left retailing book industry die slowly. While books contribute to
profit, electronic items, furniture etc incur more cost than the selling price
contributing to loss. Analysis shows that ecommerce sites hardly make any
profit but investment is huge, taking minimum of 5 years to achieve a minimum
profit.

There is a huge competition between retailers and e-tailers.
With e-tailers promising quick delivery for groceries, Retailers have also come
up faster deliveries with groceries using web as a medium. Things are changing.
E-tailers and retailers are either merging or retailers are opening up their
own e-commerce sites. To increase profit margin, one of the ways is to faster
the sales and high volume or Collaboration with retail or other e-tail sites.
However, with the competition between e-tailors and retailors, the consumers are
getting benefitted with
-Better price
– Choices
– Doorstep Facilities

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