Reliance Retail To Titan: Crowds Back At Stores But Retail Chains Stay Firm On Online Plans

India's consumer goods firms and brick-and-mortar retail chains scurried to strengthen their e-commerce channels as Covid-19 confined people to their homes. But even as more Indians return to physical stores as the pandemic wanes, focus on online expansion stays.

E-commerce helped navigate the lockdowns as consumers shopped online and took deliveries on curbside. That also helped accelerate the digital shift for the nation's consumers. Hindustan Unilever Ltd. and Reliance Retail Ventures Ltd. and Titan Co. continue to expand their e-commerce verticals.

Reliance Retail, India’s largest retailer with a footprint of 15,196 stores across the country, has seen its digital business scale to a “new high” in the March quarter even as footfalls recovered surpassing pre-Covid-19 levels.

“Online orders increased 2.5 times," Gaurav Jain, head of strategy at Reliance Retail, said in a post-earnings call. "It's really the promotional events which are building more traction, and our average value per merchant has doubled year-on-year in the March-ended quarter,”

Digital channels including AJio, Reliance Digital.in, Trends and JioMart comprise 19% of its core retailing revenues versus 10% in the last financial year. And consumers are buying 35% more than when they were shopping at a single channel, Jain said.

The surge in online sales is across categories—apparel, daily groceries, footwear, over-the-counter medicines, watches, personal care, beauty and cosmetics, as well as electronics like air conditioners, televisions and refrigerators.

At Shoppers Stop Ltd., digital sales continued to be “robust” with a growth of 5.1%, on a significantly higher base in the March-ended quarter, Venugopal Nair, the company's chief executive and managing director, told BQ Prime.

For the full year, digital sales grew 60% with private brands—or labels owned by the company—contributing 20%, and outperforming other brands.

The company is in talks to onboard several direct-to-consumer companies online as omnichannel remains a key strategic growth pillar, Nair said. “We also plan to launch a few more exclusive brands on our digital platform given the space constraint in store.”

In the beauty space, the contribution of online players has been less than 10% from premium brands, Nair said. “This is an area where we see a big opportunity.” SS Beauty, an app of its standalone beauty retail stores, will be unveiled in August, he said.

Similarly, the Tata-owned Trent Ltd. which operates Westside, has seen online sales contribute 7% to revenues in FY22 compared with 5% a year earlier.

Manyavar-owner Vedant Fashions Ltd.'s online sales grew at a CAGR of 70% between FY19 and FY22, the company said in its investors presentation.

Sports and athleisure footwear brand Campus Activewear Ltd. has seen its direct-to-consumer online sales contribution jump 21.1% year-on-year in FY21 against 2.84% in FY19, according to its red herring prospectus. Online volume growth for the recently listed company rose from 1.54% to 16.6% over the period.

Watchmaker Titan Co.'s online sales contributed 19% of total sales in FY22.

"For some people, online is the natural default thing. We've seen Fastrack do very well in both, our own brand e-commerce as well as the marketplace e-commerce," Suparna Mitra, chief executive officer-watches and wearables division at Titan, said in a post-earnings investor's call.

Makers of staples to soaps, too, have seen a surge in the share of online transactions despite traditional trade gradually normalising.

For Hindustan Unilever Ltd., digital sales contribute to more than 20% of sales. “Our digital initiatives, which include e-commerce, eB2C, eB2B, D2C website and Shikhar app, are scaling up fast,” Sanjiv Mehta, chairman and managing director at India's largest consumer goods company, said in a post-earnings call.

“E-commerce continues to grow ahead of the rest of the channels. Our D2C website has 25 million annual visits. Together, with the e-commerce platform, our online sales today contribute 30% of our Lakme business.”

Tea-to-salt-maker Tata Consumer Products Ltd. saw the percentage of sales from the e-commerce channel increase to 7.3% in FY22 from 2.5% in FY20.

According to Dabur's CEO Mohit Malhotra, e-commerce was an “outperformer”, contributing 6.5% to revenue in FY22.

The namesake chyawanprash maker spends about 23% of total ad spending on digital channels. “As digital continues to gain prominence, we now spend almost a quarter of our spends in digital, helping us connect with the millennials and Gen Z.”

The target is to treble online contribution to 19-20% in four years, he said.

According to Anand Ramanathan, a partner at Deloitte India, there will be no "back to normal" for retail. A meaningful amount of online penetration that kicked off during the pandemic will persist due to multiple factors, he said.

The change in consumer behaviour is now firmly entrenched, he said. "Those who are used to 'click and buy' and get things to their doors free and fast may not want to go back to their old ways of shopping."

More and more consumers are moving towards instant purchases. "Traditionally, people had a pre-planned monthly grocery shopping list to save money and time. In terms of electronics and apparel, people waited for occasions to avail discounts. E-commerce, however, made it both convenient and affordable," said Ramanathan.

For retailers, e-commerce has become an easier channel to penetrate deeper in a market given that there aren't any traditional entry barriers, Ramanathan said.

"The companies can also have a proliferation of brands online. During the last two years, both consumers and companies have got an opportunity to experiment online. Now, it's no more a novelty but a mainstream for businesses and even shoppers."

Simpler return policies, hyperlocal delivery, cash on delivery, a wider option of brands including private labels—which are priced relatively lower—are also aiding growth.

A few retailers, however, are unsure whether e-commerce growth will be persistent.

Avenue Supermarts Ltd., the operator of the retail chain DMart, said that its e-commerce business —DMart Ready—has seen a slower growth trajectory after the Omicron wave.

"At a fundamental level, we believe that for grocery, e-commerce is a 'channel of convenience', while brick and mortar is still the 'channel of joy', except for the effort to reach the store and the time to wait at the checkout," said Neville Noronha, chief executive officer and managing director at Avenue Supermarts.

Still, the company launched its online-offline hybrid model in new cities. In FY22, DMart Ready commenced operation in seven cities—Bhopal, Indore, Kolhapur, Nagpur, Surat, Vadodara and Vizag, said Noronha.

Nissan Joseph, chief executive officer of Metro Brands Ltd., too, isn't "enthusiastic" about the growth in e-commerce. The company retails own-brands like Metro and Mochi, as well as third-party brands such as Crocs, Skechers and FitFlop.

"Although online sales contribute to 10% of our total sales from just 1% before the pandemic, people are much more willing to come to stores, touch and feel the brand," he said. "Also, the growth comes on a much lower base."

However, Joseph is "optimistic" of the channel potential and said the company will use e-commerce for brand-building in tier-II cities and beyond. "For our premium brands, such as FitFlop, we want to expand our business in smaller towns, first through e-commerce and then set up stores depending on demand."