Tuesday, May 15, 2012: 08:58:34 PM

RETAILInsight

E-tailing: Expanding Horizons

Dhiraj Shetty gives the low-down on the still underdeveloped Indian e-commerce industry, and what it has to offer to the enterprising Indian retailer

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The domestic e-commerce industry is still in its nascent stage, despite having broken onto the scene more than two decades ago. This sector still lacks a basic structure and defined market regulations, which impedes its growth and development. In India, most online players are still conducting Research and Development (R&D) on formats that will facilitate timely and efficient payments and deliveries. Indian consumers, on their part, are slowly gaining confidence in the e-platform, despite the low level of internet penetration and, subsequently, the lack of a nation-wide broadband policy. Thanks to web-based travel portals, online banking and broking websites, a considerable amount of the Indian consumer base is already well aware and reasonably educated about the convenience that such platforms offer. In addition to serving as an effective alternative to channel some of the footfall received by brick-and-mortar stores, e-stores also have the intrinsic advantage of operational simplicity, allowing retailers to set up their businesses in a less complex and convoluted manner.



The e-commerce industry in India is characterised by heavy investments in R&D, which range from 10 to 15 percent of revenue generated by players in this sector. This trend is justified since this industry, which is constantly introducing and evolving new products and services. Most venture capitalists and FDIís operating in the country invest in firms that have a strong balance sheet and, more importantly, those that are investing liberally in R&D.

A Statistical Overview
The e-tailing market should see multifold growth over the next five years, reaching $12 bn by 2016 up from the current $590 mn. These forecasts also verify the belief that Indian consumers are slowly, but surely, adapting to the e-platform.

With the country housing the third-largest internet user base of 100 mn users, constraints on penetration will soon ease out. Further, there are 800 mn Indian mobile phone users today, of which, a significant percentage also uses these mobile devices to access and browse through online content. This growing user base of internet and mobile phone users is the largest growth driver for the ecommerce industry, in terms of revenue and market size.

When compared with the total number of internet users, real-time online shoppers constitute a meagre 30 percent (30 mn). However, this figure is also increasing at the rate of 1.5 mn per month. This can be attributed to the steady increase in the frequency of credit/debit card circulations and use of plastic money, which encourages consumers to indulge in online retail. Transaction volumes have been impressive, charting 13 percent growth for credit cards and 39 percent for debit cards and internet banking.



Analysing the Fundamentals
The nature of the top-selling products and services in online retail indicate that the consumer uptake of this format is riding strong, due to reasons such as parking problems and steadily declining spare time to spend on shopping at traditional retail outlets. Improvements in the supply of content and prolific product categories act as expansion drivers for the industry. Ease of payments and monitored delivery times will further enhance sales volume as well as the value of each transaction.

The sector is already gearing up for the ënext big game changerí in the form of global deals. This emerging trend is largely dependent on the rise of the travel and social media segments, both within the country and on the global fore. Today, one of the biggest spends from an Indian wallet is on travelóIndian consumers are not only travelling within the country, but are also exploring various other countries, as well. Needless to say, online travel portals play an important role here.

Thus, while an Indian consumer is enjoying a vacation abroad, he is also shopping at local mega retail stores, and brand and design outlets, where the product price is 30ñ40 percent lower than the Indian price tag.

New brands shepherded by product consultants, and new consumers are continuously flooding the social media space, with the brands providing regular updates on product launches and technology. This entices the aspirational Indian to find ways to consume these global products, which, in many instances, are not available on Indian shelves.

Indian consumers have been dabbling with international brands and labels even before these brands set foot on Indian shores. Most of these global brands have not set up a brick-and-mortar base in the country, but still cater to the domestic audience by tying up with Indian online retailers, thereby allowing purchases to be made from the country.

The trend of global deals will be powered by worldwide logistics companies, who will shrink the distance between consumers and products through e-stores and online Mega Marts that serve as online malls for customers to pick from a wide variety of products, pay in their own currency and have their purchases shipped to their homes.

Dhiraj Shetty is the CEO of worldsworth.com, a popular e-commerce portal.


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