Should you follow Amazon’s example and tie up with local stores?

No doubt, Amazon has lead the way for introducing innovative and distinguishing services that have contributed significantly to the growth of the Indian e-commerce industry. One of the latest features from Amazon is its tie-up with kirana stores in Bangalore (currently a pilot project only) to enable better and more convenient delivery for customers.

Should you follow suit? Or should other online marketplaces and online sellers follow suit?

Advantages of tie-up with a local store

• Increase in revenue margins– Studies have proven that when online stores can sell both store and online inventory, they achieve higher revenue thus adding to their growth.

• Same day delivery– Sellers can deliver products to customers on the same day, thus getting an edge over others who don’t have this service, if they have tie-ups with shops and stores spread out across a city or region.

• Free delivery- It becomes easier to offer free delivery to customers if inventory is spread out over local stores which are closer to customer locations.

• Reduce logistics cost- Retailers can reduce their logistics and delivery costs significantly as distance from store to delivery address would be much lesser.

• Avoid last mile glitches- Sometimes delivery is delayed due to inefficiencies in the last sorting facility before products are delivered to customer. Such glitches can be avoided.

• Reduce returns- Customers make impromptu purchases when they see recommendations and offers on shopping portals. But by the time they get delivery, they may change their minds. Whereas, a tie-up with local stores would ensure customers get their purchases the same day.

• Easier to avoid damages- Avoiding damages is a major task for online sellers as they are liable to return products in case of damages due to delivery also, irrespective of how many cities the package has travelled across.

Do customers care?

Generally customers don’t care where their product is coming from or how far it may have travelled to get to their doorsteps. However, they care about timely and damage free delivery. Sellers can ensure faster delivery, possibly free delivery, to customers and ensure no damages happen to packages.

International examples of coordination between physical stores and online stores

True to Amazon’s mission statement, it will now operate out of 39 fulfilment centres across US by 2014 end. The online giant takes constant efforts to ensure packages are delivered to customers as quickly as possible to ensure maximum customer satisfaction. Also, Amazon has a loyalty scheme called Prime (possible due to tie-ups with local stores), members of which are entitled to free 2-day shipping on almost all orders even on peak holiday seasons like Christmas and New year.

The Amazon effect has made more online retailers like American Apparel, Ann Inc, Best Buy, Finish Line, Gap, Guess, Lowe’s, Macy’s, Toys R Us, Outfitters and Walmart to adopt the practice of shipping online orders from brick and mortar stores.

Should an Indian Online Seller tie up with local stores?

Although it is not a yes or no decision making question, the answer would probably lean more towards it as a can-think-about option. If you have a wide customer base (or want to widen customer base) this is a good option to ensure timely delivery and gain customer trust.