Most brick and mortar companies have been affected to varying degrees depending on the category due to the Internet Retailers.
In apparel, third-party departmental stores have been impacted the most due to the ecommerce onslaught, whereas men's wear apparel brands have had to cede wallet share to electronics bought online. In footwear, ecommerce already accounts for 11% of the market in India as brands leveraged on the reach offered by ecommerce. The reduction in discounting will aid apparel brands and third-party departmental stores the most. Footwear remains a space where disintermediation (cost of selling an US$25 footwear is 23% of sales online, vs a 45-50% distribution margin for a physical store) coupled with higher inventory turns in a conventionally low-turns category enable better pricing for the customer and higher margins for the brand.
With growing use of web/mobile as the first point of product exploration, we are likely to see: (a) smaller store sizes and end of the big box; and (b) technology capex and opex will be given more weightage versus conventional store capex. We see little threat to Titan and Trent; while they are behind (but not too far behind) on the omni channel they are present in large categories with strong products and brands.
