View of Online E-Commerce in India – Under a Microscope
The phenomenon that the world is rapidly shrinking into a Global Village due to the Internet and other communication media does not fully reflect in the Indian context. While both developed and rapidly developing countries have grasped the power of the Internet, India still has a long way to go to catch up. Internet has brought almost the whole world just a click away from us. The retail industry canvas has been repainted by the Internet and the rules of the game in retail are changing rapidly.
AT Kearney’s annual Global Retail Development Index (GRDI), in 2008, ranked India as the fifth largest retail destination globally. Just a few years ago Indian retail was basically disorganized but, the landscape has changed rapidly with the emergence of big retail groups like FutureBazaar, Trent, Shoppers stop, Reliance Retail, Spencer etc. The brick-and-mortar model of organized retail is booming but, online retailing mode is terrible.
ChannelPush in its series on ‘Indian Online Retail’ will put Indian Retail in perspective. In this two-part series, we’ll try and access what works and what doesn’t for Indian online retail. In the first part we will look at the online retail market as a whole followed by an in-depth analysis of various aspects of the market.
Indian retail in quantity
A quick survey of the average Indian who has access to the Internet shows that most of them can barely remember 1-2 online retail portals and most of their responses are travel sites. In comparison, the average Indian living in America can remember more than 5 online portals tech website . This clearly shows the huge gap between retail settings between India and other developed countries. India’s internet penetration rate of 7.1% is one of the highest in the world and we have one of the highest numbers of Internet users in absolute terms. India is considered to be one of the leading IT hubs in the world however, all this somehow doesn’t translate into anything positive in the retail space.
The retail industry in India stands at $390 billion (Source: Indiaretailblitz, AT Kearny) and organized retail is rapidly catching up. Many major retailers have plunged into online fashion without much success.
Online retail is only 0.47% of the total retail market. This shows the abundance of opportunities for online retail in India. The Indian e-commerce market at the core of the INRI 9200 leans heavily towards travel sites. More than 75-80% of this market is formed by travel portals like Makemytrip.com, Yatra.com etc. The remaining 12% is contributed by online classifieds such as marriage and job portals. Our focus area is the remaining INRI 1100+ core market which is set to see tectonic growth given the right built environment. The market is poised to grow at 30% per annum over the next 5 years, but its long-term sustainability will depend on how the market structure should change. Market participants need to be more proactive and innovative in their approaches and offerings to make serious breakthroughs.
Online Market Setting
The market setting in India is conducive for online retail to proliferate. The internet accessing population in India is very high in absolute numbers (roughly over 32 million) and the penetration rate across the country is also high. There are several online portals in India that have been around for quite some time. Indians have started using online transactions for various purposes like paying bills, transferring money, booking tickets, etc. Despite these conditions, online retail has not improved.
Today most online retail is done in books, clothing and small electronics. This is not far from the online retail services offered by Amazon or eBay. The big question is why India’s online retail is lagging behind. Many online retail portals are still trying to figure out the answer and maybe they don’t have the right answer.
Problems plaguing the growth of this market:
Slow change in buying behavior: Indians are still reluctant to buy online and prefer the brick and mortar model. Indians still love to taste the products and spend time to buy.
Inability of online retail players to influence customers from offline mode to online retail channels: Lack of proper marketing and advertising, inability to create brand image, lack of proper use of all possible online means such as search engines, paid marketing, online advertising, social networking, blogs, etc. to reach customers. The inability of online retailers to drive the value that customers can derive by shopping on online channels.
The online portal is not up to the mark: There are some gaps in the online website such as poor front end, poor website search options, lack of sufficient information