How Tesco virtually created a new market on a country's lifestyle
South Koreans have amongst the longest working hours in the world. UK's giant retailer sought to turn this to its benefit.
- Feb 6, 2015,
- Updated May 4, 2015 3:27 PM IST
Virtual retail, such as Tesco Homeplus in South Korea, is an innovative concept that has witnessed success in various forms across developed markets. Today, we can be optimistic about the acceptance of new concepts by Indian consumers with the recent success of e-commerce and increasing penetration of smartphones - online shoppers have grown to 35 million from 8 million in 2012, and smartphone users have climbed four-fold to over 110 mn in the same period. A virtual store would offer consumers the 'convenience' of online retail and the 'experience' of brick-and-mortar stores. However, we can expect significant challenges in implementation in India.
The target segment would be very niche - young, urban, middle class, time-strapped, convenience seekers, whose needs are fulfilled by either neighbourhood mom-and-pop stores, or e-commerce sites like BigBasket.com and LocalBanya.com. To reach this niche target consumer with virtual stores would be different in every Indian city. Mass public transport transit areas, such as local train stations in Mumbai, are unlikely to be successful given the high traffic and quick movement, while tier-I city airports may be ideal given the audience and transit time.
Also, common areas in residential, commercial and shopping complexes could potentially thrive.
The success of virtual retail would also hinge on a strong back-end for order fulfilment and a supply chain enabling timely delivery. An extension by online retailers or organised neighbourhood retail chains such as Godrej's Natures Basket or Reliance Fresh, who have an existing set up could prove successful. However, such a concept may not be viable on a standalone basis. A hybrid model could be a marketplace aggregator who could use the existing kirana stores for delivery.
As the concept is fascinating to consumers, virtual stores could see acceptance largely for top-up or impulse purchases.
(This case study is from the Aditya Birla India Centre of London Business School)
Virtual retail, such as Tesco Homeplus in South Korea, is an innovative concept that has witnessed success in various forms across developed markets. Today, we can be optimistic about the acceptance of new concepts by Indian consumers with the recent success of e-commerce and increasing penetration of smartphones - online shoppers have grown to 35 million from 8 million in 2012, and smartphone users have climbed four-fold to over 110 mn in the same period. A virtual store would offer consumers the 'convenience' of online retail and the 'experience' of brick-and-mortar stores. However, we can expect significant challenges in implementation in India.
The target segment would be very niche - young, urban, middle class, time-strapped, convenience seekers, whose needs are fulfilled by either neighbourhood mom-and-pop stores, or e-commerce sites like BigBasket.com and LocalBanya.com. To reach this niche target consumer with virtual stores would be different in every Indian city. Mass public transport transit areas, such as local train stations in Mumbai, are unlikely to be successful given the high traffic and quick movement, while tier-I city airports may be ideal given the audience and transit time.
Also, common areas in residential, commercial and shopping complexes could potentially thrive.
The success of virtual retail would also hinge on a strong back-end for order fulfilment and a supply chain enabling timely delivery. An extension by online retailers or organised neighbourhood retail chains such as Godrej's Natures Basket or Reliance Fresh, who have an existing set up could prove successful. However, such a concept may not be viable on a standalone basis. A hybrid model could be a marketplace aggregator who could use the existing kirana stores for delivery.
As the concept is fascinating to consumers, virtual stores could see acceptance largely for top-up or impulse purchases.
(This case study is from the Aditya Birla India Centre of London Business School)