Impact of online shopping on small businesses: Challenges faced by local merchants

Raj went to his friend’s mobile store nearby. He somehow noticed that there used to be a good crowd being a Sunday evening time which is considered as a peak business hour for many stores. He asked him the reason behind that. He smiled and said in a very sad tone, “today, the crowd is less; tomorrow, I will have to close this store.” He was surprised as this was the oldest store around and the most popular one. He said, “Due to ease of access and less cost, people now prefer to purchase mobile online via Amazon or Flipkart where they get a free home delivery and discounts.” Raj felt like he must work in giving tips to small business owners. This is not only the story of one shopkeeper, but many since the online business has been growing rapidly.

Small businesses have a big contribution to the Indian economy. These industries include handicrafts, small grocery stores, medical stores, hardware shops, mobile shops, mobile recharge stores, local vegetable and fruit sellers, etc. Small and medium enterprises are responsible for creating jobs for a huge population in our country and are responsible for their bread and butter.

Last year, because of the pandemic, most businesses suffered a lot, and they have incurred huge losses but as far as online shopping is considered, it got a good response as well as the business also grew a lot. Since people were not able to go out in crowded areas and do shopping on their own, they opted for sitting at their homes and ordering products, may it be clothing, groceries, medicines, or vegetables as well. Several small businesses got hampered since the outset of online shopping.

With time the face of business is changing, and businesses are going digital. This is impacting brick-and-mortar stores and other local businesses due to many reasons while there could be some business tips for them as well-

1. Cheap options available online

in earlier days, people knew only those models of phones or any other gadgets which were available in the local stores, but for the last 2-3 years, people prefer to buy phones online. The reason behind that is cheaper items. Online sellers remove the middlemen in the supply chain. Hence, they can provide items at a very less price of a few pennies more than the cost of its manufacturing to make their business grow, but this, in turn, hampers local shopkeepers’ business. They are selling smartphones in losses also just to gain business and compete with the other companies, so they do a lot of price cutting. Customers sometimes also show the shopkeepers the pricing that they are getting online.

Tip:

Here, a tip for small business owners could be adding a few accessories with the handsets or any other products to give an overall benefit to the customer.

2. Discounts in festivals on other occasions

Sometimes we get a discount due to festivals, or other occasions like the customer’s birthday or anniversary gift which are sometimes even more than 50%. Unless you don’t want to go for discounts and lower prices, you cannot deny or say no to this gift that online sellers give. Due to the festive discounts and flash sales, more and more people are now buying clothing online. The same trend goes for other products, also like online bookstores. These give you discounts on books as well as give you the facility to even sell the same book after reading on their website so that you don’t have to worry about buying a book of higher cost.

Tip:

Here the retailers could provide the local customers with free home delivery or use a list of products packed in one package for that particular occasion which can be sold at discounted rates. This business tip proves useful many times.

3. Membership options provided by online sellers

many E-Commerce companies also provide membership to the customers so that they get extra benefit. If they are regular customers, they can get the facility off automatically, getting the product in regular intervals like in the case of net meds. They offer you to get regular medicines done without even ordering them again and again. So customers who want to save their time ordering medicines, again and again, can get themselves enrolled.

Tip:

Now, this is an option which can be given by local shopkeepers as well. Free membership can be given to customers, and they will always buy products from you. This business tip can be used in grocery and also fruits & veggies stores.

4. Saves time of travelling and shopping

one big advantage of online shopping is that it saves a lot of time. The customers don’t need to go to the store and buy something. They can just order products at a click, make the payment, and get it. So, in very busy schedules or under certain scenarios, customers don’t go shopping on their own and prefer to do online shopping.

Tip:

Small businesses can also use this business tip and provide free home delivery.

5. Giving EMI options

most of the gadgets online are offering EMI options that allow customers to buy a very expensive product by doing part payments in some months. This also increases the chances of buying expensive products online rather than going for direct shopping for an expensive thing and paying at once, so this has also hampered the small retail businesses a lot.

Tip:

This could be converted into a helpful small business tip by giving the product in return for some advance and the remaining payment could be collected afterwards.

6. The available variety on ease of access

the variety of products available online is the biggest advantage that has impacted the small vendors. Inventory can only be kept under a certain level depending on the funds available as working capital, so choices reduce in shops, whereas online platforms can take you through the whole world of choices you can think of. So it becomes difficult here for retailers to compete with them.

Tip:

One small business tip can be used as they keep a product catalogue and take orders. Products can be delivered within a few days.

7. Other Challenges

Apart from all these challenges, there are a few more to consider. Some giants of industries have also started directly supplying items from manufacturers like JioMart. In its first week of launch only, it has got 1 million downloads of the application. This is going to impact the local vegetable and fruit sellers and grocery stores. Losses to retailers are not the only issue. Here, the distributors & wholesalers are also getting impacted due to manufacturers-retailers consolidation. Both are losing buying powers since the end-user is getting more benefits from the manufacturers. Instead of buying products from regional or area centres, they are purchased from company headquarters giving them cost benefits.

This has a huge impact on the country's economy also. The distributors of like recharge stores had a 4% margin, but now people prefer to do recharge on PAYTM or GooglePay, so this amount is now going directly to them. So, the money which was collected from retailers was earlier staying in those regions only growing local businesses, but now it is all flowing to big companies, which in turn is our economy’s loss. This supply chain is an important part of our society. This is giving jobs to several people in rural areas and acting as our rural growth base. If this is affected adversely, as far as employment is considered, the young generation is going to rush towards cities for jobs leaving the villages in a worse condition.

Tip for Small Business Owners

a need for a Communist system in the economy, at least where there is no competition and the economic decisions are taken as a whole.
It is planned by central government authority and organised along with a top-down administration where the planners decide decisions regarding production output requirements and investments.
Also, there should be government rules and regulations on these portals which restrict them to sell products to certain minimum costs. Even if it is under the name of a festival dhamaka or big sale on any new year or end of season sale, they can not just sell the products at any cost, which attracts a crowd of consumers waiting to buy low-priced products under that offer.
The customers who are choosing to buy products online also play a key role here. They must realise now that their money which is going to big companies should be helping the small businesses. This could be their contribution towards the society that they stick to the brick-and-mortar shops and make online purchases only in the situation of high need. This will also demand some education to the young generation about the pros and cons of online shopping, not as a consumer but from the point of view of a businessman.
Moreover, in this scenario, the small and medium industries should now also include digital marketing or selling; if not, there are chances that they lose the market. They must have an online presence.
There are so many platforms for a quick start. They can opt for making their application and sell the products directly. Or else, they can get the membership of existing portals, which helps them to reach a large audience. This will be a great tip for small business owners like retailers, wholesalers, etc.

Also read:

1) 10 Best Ways to Promote Your Small Business
2) How Many Social Media Sites Can I Promote My Online Business On?
3) Online Business Ideas You Can Start Quickly
4) 8 Online Business Ideas That Could Make You Hit Gold in 2020Z"
5) OkCredit: Simple, Paperless & Secure solution for businesses

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FAQs

Q. If a shopkeeper is uneducated, how can he deal with an online portal?

Ans. He could get a basic understanding from local cybercafe owners who have a basic understanding of computer operations. The language settings could be changed as per their need.

Q. Can home delivery solve the problem a bit?

Ans. Yes, to some extent, if the product reaches the customers at their doorsteps, they could opt out of online shopping.

Q. What type of facilities can I provide as a shopkeeper to my customers?

Ans. Free home delivery, discounts on festivals, product basketing for selected festivals, relationship building by keeping customer data, etc.

Q. If brick-and-mortar shops close, resources are saved, so what's the need to support them?

Ans. in rural areas, a huge population is depending on this type of business. They are also pillars in support of our economy. So, instead of neglecting them, we should support them and embrace them.