The Myths of eCommerce and the Online-Offline Tug of War
Guest article by Hari TN
Amazon’s Dominance and the E-commerce Landscape
Amazon accounts for nearly half of all e-commerce in the US. The remaining 50% is controlled by a long tail of large offline players like Apple, Walmart, Macy’s, Home Depot, Best Buy, Costco, and others.
This often surprises people: 50% of all e-commerce is controlled by companies that were predominantly offline!
Three Common Myths About E-commerce
Myth 1: E-commerce Means Discounts and Cashbacks!
When Uber and Ola entered India, customers and drivers enjoyed unbeatable fares. India was new to online commerce, and many didn’t understand how these companies could offer such low prices. Few knew their aim wasn’t short-term profit but long-term behavior change.
Eventually, these companies increased prices—introducing waiting time charges, peak time surge pricing, and eliminating transparency. Many customers dropped off, but a significant number stayed hooked due to habit and convenience.
These cashbacks and discounts were never permanent. They were a channel-switching strategy, heavily funded by deep-pocketed investors aiming to accelerate digital adoption.
Comparison: Taxi Aggregation vs. Retail E-commerce
Taxi Aggregation: Operated in a greenfield space with no strong alternatives.
Retail E-commerce: Faced tough competition from modern retail and Kirana stores.
Online had to offer much stronger value propositions. Without discounts, consumers could easily go back to offline shopping. Unlike taxis, offline retail already had a well-established presence.
However, grocery is an exception to the “touch and feel” barrier. Grocery buying doesn’t depend heavily on physical inspection—except fruits and vegetables, where touch matters. BigBasket has addressed this with better sourcing, cold chains, and quicker delivery.
Myth 2: E-commerce Can Get You Super-Profits
One of the biggest challenges in e-commerce is the lack of physical inspection before purchase. Fraudulent returns and customer dissatisfaction add significant costs. In physical retail, the sale was final once the customer left the store. Not so in e-commerce.
Other challenges include:
High customer acquisition costs
Low margins
Returns logistics
Difficulty building trust and brand differentiation
Unless a business can secure repeat purchases, it's very hard to sustain profitability online.
Myth 3: It’s Easy to Scale an Online Business
Investors believed online was a cost-effective way to scale new or small brands. They assumed:
No need for prime retail space
Easy reach via digital
Lower inventory and operational costs
Reality check:
Simply listing on a marketplace doesn’t ensure visibility, trust, or discoverability
Hundreds of similar products make it hard to stand out
SEO, SEM, and online advertising became essential—but often with questionable ROI
Even after heavy investments in discoverability, many businesses failed to build trust or generate real transactions. Platforms like Facebook overstated video engagement, leading to lawsuits and wasted advertiser money.
Where Does E-commerce Go From Here?
E-commerce has evolved into multiple models:
Online Marketplace
(e.g., Alibaba): Connects buyers and sellers, offers logistics, payment, and advertising solutions.Offline Businesses Going Online
(e.g., Apple, Walmart): Businesses with loyal customer bases building exclusive online platforms.Pure-Play Online Companies
(e.g., BigBasket): May eventually move to offline if it enhances customer experience.Online-to-Offline and Vice-Versa
Amazon acquired Whole Foods
Lenskart and Zivame expanded offline
Walmart went online
Conclusion: E-commerce is just another channel. Like “Modern Retail” didn’t kill Kirana stores, online retail won’t dominate entirely. A hybrid model is emerging.
Store Brands: Power Shift from Brands to Distribution
The traditional battle was between brand power vs distribution power.
As modern retailers emerged, they started creating store brands (private labels) to:
Improve margins
Reduce dependence on big brands
Compensate lower brand pull with in-store visibility and pricing advantage
Store brands began with undifferentiated categories like staples and expanded gradually.
"After mastering the art of selling everyone else’s stuff, retailers began persuading shoppers to buy their own stuff."
Now, marketplaces like Amazon are doing the same:
Amazon has 80+ private labels
In apparel, Amazon has surpassed Macy’s
Macy’s response: More exclusive, in-house brands and omnichannel strategy
Not all traditional brands will survive. Only those with a strong value proposition will thrive.
Regulatory Intervention
If channel switching is left to natural consumer pace, disruption is minimal. But when it’s accelerated using deep discounts funded by investors, it disturbs the existing ecosystem.
This has led to regulatory tension:
Pro-free market advocates resist interference.
Anti-monopoly advocates worry about small players being wiped out.
India’s regulators have a tough job: protecting innovation while preventing market disruption.
Light, balanced regulation is ideal—encouraging innovation while maintaining a level playing field.
In Conclusion
Technology, and Amazon in particular, have transformed retail. Today:
Online players are going offline.
Offline players are embracing e-commerce.
Private labels are reshaping the brand landscape.
E-commerce is not the endgame. It is a new channel.
Retailers are now rethinking their channel strategy, looking to integrate online and offline for a unified customer experience.