View of Online E-Commerce in India – Under a Microscope

Apr 8




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The phenomena that world is fast shrinking into a Global Village because of Internet and other communication mediums is not completely reflective in t...


The phenomena that world is fast shrinking into a Global Village because of Internet and other communication mediums is not completely reflective in the Indian context. While developed and fast developing countries have understood the power of Internet,View of Online E-Commerce in India – Under a Microscope Articles India still has a long way to catch up. Internet has brought nearly the entire world just a click away from us. The retail industry canvass has been repainted by Internet and the rules of the game in retailing are fast changing.

AT Kearney’s annual Global Retail Development Index (GRDI), in 2008, puts India as the fifth largest retail destination globally. Just a few years ago Indian retail was primarily unorganized but, the scene has been changing fast with emergence of big retail groups like FutureBazaar, Trent, Shoppers stop, Reliance Retail, Spencer etc. The brick and mortar model of organized retail is growing fast but, the on-line mode of retailing is pretty abysmal.

ChannelPush in its series on ‘Indian On-line Retail’ will put the Indian Retail in perspective. In the two part series we will try and access what is going right and what’s not for the Indian on-line retail. In the first part we will look at overall on-line retail market followed by in-depth analysis on different aspects of the market.

Indian Retail in numbers

A quick survey of average Indians who have access to Internet showed that most of them hardly could recall 1-2 on-line retail portals and most of their responses were travel site. In comparison an average Indian settled in America could recollect more than 5 on-line portals. This clearly indicates the huge gap between the retail setup between India and other developed countries. Internet penetration rate of 7.1% in India is one of the highest in world and we have one of the highest numbers of Internet users in absolute terms. India is considered as one of the prominent IT hubs in the world but, all these have somehow not translated into positives in the retail space.

Retail industry in India stands at $390 billion (Source: Indiaretailblitz, A T Kearny) and organized retail is fast catching up. Many of the big retailers have forayed into the on-line mode without much success.

On-line retail forms a meager 0.47% of the total retail market. This shows the plethora of opportunity for on-line retailing in India. The Indian e-commerce market at INRI 9200 core is heavily tilted towards travel sites. More than 75-80% of this market is constituted by travel portals like, etc. About 12% of the rest is contributed by on-line classifieds like matrimonial and job portals. Our area of focus is the remaining INRI 1100+ cores market which is set to see tectonic growth given the right environment is built. This market is poised to grow at 30% per year for next 5 years but, long term sustainability will depend on how must the market fabric changes. Market players have to be more proactive and innovative in their approach and offering to make serious inroads.

On-line Market Setup

The market setup in India is conducive for the on-line retail to proliferate. Internet accessing population in India is very high in absolute numbers (roughly more than 32 million) and its penetration rate across the country is also high. There are a handful of on-line portals in India which have been around for quite sometime. Indians have started using on-line transactions for various purposes like paying bills, money transfers, ticket booking etc. Despite these conditions the on-line retailing has not picked up.

Currently bulk of the on-line retailing is done in books, apparels and small electronic items. This is no where close to the on-line retailing services offered by Amazon or eBay. The big question is why the Indian on-line retail is lagging behind. Many of the on-line retail portals are still trying to figure out the answer and probably they haven’t right answers.

Issues plaguing the growth of this market:

* Slow change in the buying behavior: Indians are still reluctant to buy on-line and prefer brick and mortar models. Indians still like to have a feel of product and spend time in buying. * Inability of on-line retail players to sway customers from offline mode to on-line retail channel: Lack of proper marketing and advertisement, inability to create a brand image, lack of proper usage of all possible on-line means like search engines, paid marketing, on-line ads, social networking, blogs etc to reach the customers. Inability of on-line retailers to drive the values a customer can derive by shopping on on-line channels. * On-line portals are not up to the mark: There have been few lacuna’s in the exiting on-line websites like poor front ends, website search options are not good, lack of sufficient information about products and terms and conditions, slow websites etc * Lack of seriousness: A lot of on-line portals have come up in India backed by major retail distributors but, for many it seems to have been just a one time setup. Post this there hasn’t been enough drive to propagate the brand and services of the portals among potential clients. Our discussion with few portal owners gave us a feel that many big retailers have opened a website because their peers are doing so. * Issues concerning security and transaction frauds. In addition many of the web portals don’t support all on-line modes of payments. There are high occurrence of failed payments and this if often a deterrent for clients to revisit the portal.

As stated above, most of the key issues are already known by the market participants. Currently the inability of the retail portals to address these problems is hindering the unraveling of the true potential. In the next part of this series we will try to address key areas of improvement for on-line retail portals. In the final part we will try to have a comparative analysis of leading on-line retail portals in India.

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