Lenskart’s idea to go offline and set up storefronts worked for it to a certain degree. It earned the company Rs 100 crore in revenue in FY16 but it recorded a loss of Rs 113 crore, according to filings at the Ministry of Corporate Affairs (MCA). Ken could not independently ascertain Lenskart’s source of revenue from online and offline.
“There is nothing that can be really bought from the store. So all sales are online,” says TCM Sundaram, founder and managing director of IDG Ventures. He is also on the board of Lenskart. He refused to comment on what percentage of the sales were driven by the store.
Innovation to the rescue
The concept may be unique to India but it is another matter altogether that Lenskart’s idea was borrowed from Warby Parker. The US-based eyeglass manufacturer, which decided to go offline in 2013.
The company, reportedly, had been toying with the idea from the very beginning. Such was the success that the first few shops generated nearly unmatched sales figures—$3,000 per square foot, something that is next only to Apple stores.
For instance, 80% of the sales for Warby Parker is still through its online channel. “Once we open a store, we see a short-term slowdown in our e-commerce business in that market. But after nine or 12 months, we see e-commerce sales accelerate and grow faster than they had been before the store opened. We’ve seen that pattern in virtually every market,” said Dave Gilboa, co-CEO of Warby Parker, to Inc.
Soon after, Bonobos, another US-based company, known for selling customized trousers for men online followed suit.
It, too, saw an uptick in fortunes. For Bonobos, the average order at a Guideshop location, which helps customers match their trousers with a shirt, in 2014, was about $300 compared to the $180 online.
And then the duo raised money to strengthen their store footprints, just like Macy’s or Target. Bonobos, of the $128 million it raised in all, $55 million of that investment came after it began expanding offline. Similarly for Warby Parker. Of the $215 million it raised, almost half of the funding came in 2015 after it began its offline expansion.
Things got better for Bonobos and its investors. In June this year, Walmart bought Bonobos for $310 million in cash.
“In these markets (the US), online penetration is as high as 20% for some categories. There is limited upside to adding new buyers. So the only way to grow is by getting these customers to shop more and for that, they are forced to go offline, ” says Satish Meena, senior analyst, and e-commerce expert at Forrester, a market research firm.
What is pulling it down?
In China, e-commerce majors went offline for a different reason. The urban populace was very happy shopping online. But the cash cow, which is the rural populace, was still untouched. Alibaba has invested close to $7.2 billion in acquiring offline retailers like Intime Retail and a stake in electronic retailer Sunning. It also opened a store of its own in North China in 2016 to sell imported goods. JD.com, the second-largest online retailer, plans to open a million stores in five years to cater to the rural areas.
That’s good news then, right? Maybe India can do it too. Look closer.
In India, the problem is a bit different. Retailers are forced to go offline because enough people are just not coming online. Let alone not spending enough online (like in the US) or a nearly saturated urban market (like China). They are going offline because their original business in its most primary form is stuttering.
“In India, these companies don’t have the patience to let people get confident and develop an online buying habit. That takes time. Flipkart took 10 years till it became a habit. They (companies going offline) want to hurry the process,” says Meena. But here’s the catch. “These companies are already bleeding online and the new channel is also going to be costly.”
So, where does that leave us?
History has a strange way of repeating itself.