Online Retailing in India: Hype or Reality?!
Growth of online retailing in India is no surprise. Indian retail market is worth 900 billion USD, out of which online contribution is just 0.47 per cent, while the global Industry average is 4 per cent. There is a significant room for upward growth in online retail. This is quite evident from the fact that e-commerce companies are running TV advertisement campaigns and grabbing news headlines quite often. And this is just tip of the iceberg. !! In 2013, online retailing in india entered into the second phase of growth. We saw a large number of retailers going online to get a piece of the online consumer pie. On the other hand, there is a sizable number of brick & mortar retailers & brands unsure about how to capitalise on this growth momentum.!This report will help you understand the growth potential of online retail in India and provide important insights to capitalise on this opportunity.!
Indian Online Retailing: The Growth Trajectory
According to a recent research conducted by Accel Partners, online shopping of physical goods in India, will grow to $8.5 Billion in 2016. Number of online shoppers in India will more than double to 40 Million (4 crore) consumers.!
A major reason of this growth is the new Generation-Y shoppers
In the next 3 years, potentially 40 million shoppers between ages of 19 – 24 years, will start spending money online. These shoppers also have a propensity to spend more money than Gen-X shoppers.!
Indians are getting more & more comfortable shopping online
Average order value in online shopping is climbing up rapidly. The average order value is a definitive indicator of shopping appetite among consumers. In the last three years, average order value has been climbing up rapidly. It is projected to reach Rs. 3,600/- per order by 2016.!! Last year there was a significant jump in average order value as there was a penetration of new categories like jewelry, home décor etc. Indian shoppers are becoming more and more comfortable buying higher priced items online.
Exponential growth in Mobile Shopping
Mobile shopping is going to grow 27 fold by 2016. ! Close to ~200 Million Indians will come online in next 3 years. A majority of these will come online on smartphones. Mobile shopping infrastructure in India is rapidly improving – smartphones, connectivity, mobile websites and apps. As a result, more and more people are buying online using mobile phone. !
Big news for fashion retailers
Last year (2013) was the rise of the fashion category. Fashion e-commerce revenues have doubled since 2012. ! Given the young demographic which is shopping for latest looks online, Accel Partners estimate that this category will see a whooping 400 per cent growth in the next 3 years.!
Women influenced sales will grow 5 times in next 3 years
It is projected that about 35 per cent of online sales in 2016 will be influenced by women. According to i-Cube & IAMAI, working women segment grew by 43 per cent in 2013 and constitutes nearly 10 per cent of active internet users in India. Categories like baby care, home décor, jewelry etc have traditionally been influenced by women decision makers.
As more choice become available more women are shopping online. Key factor in this growth is increasing supply of women specific categories e.g. jewelry, lingerie & motherhood products. There is a significant untapped growth potential in Women segment and it is expanding rapidly. Fashion retailers in Women segment must capitalise on this trend.
The two facts guaranteed to fuel growth of online retail
There is still a large gap between the number of users shopping online versus numbers of users going to shop online. This gap is so significant that every online retailer in India is going to benefit from it. Here are the two key facts to help understand this gap.!
Fact #1. There is a significant population in India, waiting to go online
Only 17 per cent of Indian population are online, compared to >40 per cent for other countries such as Brazil, Russia and China. With rising internet penetration, this number if rising rapidly.!
Fact #2. Compared to global average, India has the lowest ratio of Internet population shopping online.
Only 9 per cent of online Indians shop online, compared to >30 per cent in other countries. On the contrary, India has the second largest Facebook user base in the world and third largest internet population in the world. Combined with improved internet connectivity, India is catching up fast to reach the global average. This means 21 per cent more internet users will buy online in near future.
The online retailing opportunity which might turn into a threat
Growth numbers in online retailing clearly suggest that next retail
battle will be fought online. The modern internet user in India is not just playing games on Facebook or sending e-mails, she is making serious use of it – to save time & money.!! And it goes much beyond than online shopping. Internet is
changing consumer behaviors and driving their choices in every product category.
According to a recent research
In the last 6 months, 50 per cent Indian car buyers researched about car on internet and 60 per cent changed their mind. Internet is increasingly used by consumers as research and deal discovery tool. Online shopping allows consumers to compare products, prices and read reviews before making a purchase. Online shopping by Indian consumers is perceived as a smarter way to shop, saving their time and helping them find great deal!!
Brick & Mortar retailers must prepare themselves for this rising opportunity, which if not capitalized might turn into a threat. There are many reasons why not going online could be a “lost opportunity” in short term and “threat” in the long run.! The rise of FlipKart provides a rich insight to established retailers about the lost opportunity during the first wave of online shopping.
FlipKart: capitalising the first wave of online retailing
FlipKart was founded in 2007 by Bansal brothers with a tiny investment of Rs. 4 lacs. On March 7, 2014, Flipkart hit $1 billion in sales, a feat it has managed to achieve before its own target of 2015. In just 6 years, FlipKart became the largest retailer in India.!
Flipkart’s jump in sales is one of the fastest ever recorded for any Internet company in the world, surpassing even eBay and Amazon — said Ashish Jhalani, founder of eTailing India. As onApril 5th, 2014, FlipKart received an estimated 70,663,000 visits over the last 30 days.
Act Before it’s too Late For many established retailers, Flipkart success came as a surprise. The truth is, FlipKart saw the direction of wind and took the necessary steps to capitalized on it. !
All is not lost for brick & mortar retailers who are not retailing
online. Online retail in India is in the second phase of growth. You can capitalized the second wave before it matures.! For brick & mortar retailers, online retailing is a natural extension of their physical store. That’s the reason, we call this phenomenon “Click & Mortar” retailing. !
Click & Mortar Retailing is the Future
A recent study of a brick & mortar retailer having an established online as well as physical store presence revealed some interesting facts:!
1. Brick & Mortar Store on a given day had 1500 customers walk-ins, out of which 800 customers purchased with an average order value of Rs.1500/-.!
2. Online Store for the same retailer, received 1.6 lakh visitors, and got 6000 transactions per day with an average order value Rs.1200/-. Gross monthly revenue from online store was Rs.21 Crore.
Brick & Mortar retailers can no longer afford to ignore Online
According to Google MD, Rajan Anand:“If you are retailer, as a minimum, you should think of your online store as one store. Instead of investing in another brick & mortar store, retailers must invest their time & energy in building their next retail outlet – Online.”
Click & Mortar Has a Winning Advantage
Contrary to the popular belief, Click & Mortar retailers have a winning advantage over pure internet retailers. There is a strong reason to believe it. In USA, 9 out of top 10 online retailers are brick & mortar retailers who went online. Brick and mortar retailers can quickly and effectively leverage online retailing due to several factors working in their favor. Here are the five key factors that contribute to success of brick & mortar retailers in eRetailing:!
1. Well-known brand.
2. Established customer base.
3. Proven merchandising expertise.
4. Readily available inventory.
5. Customer service experience.
With the right strategy and framework in place, brick & mortar retailers are set to excel in online retailing.
Your Online Retail Success Roadmap: At 50,000 Feet
Online Retailing is a long-term strategic decision. Here is a high level view of your online retail success roadmap:!
I. Take a long-term view of online retailing. See online retailing as a hedge for constantly shifting socio-economic patterns of consumers.
II. Consider your online store as an extended customer service
channel to reach more customers and serve existing customers.
III. Online retail presence should be optimized for mobile from start. A mobile friendly store is prerequisite for success in online retailing.
IV. Establishing an online retail presence now versus 3 years later will be much more difficult because existing players would have gained a substantial reach, leaving little room for new entrants.
V. Focus on the low hanging fruits first. Encourage your loyal customers to shop online from your online retail presence.
VI. Build a social media presence, because it is not only cost effective, but it is also proven to provide a high ROI to retailers.
VII.Focus on building a strong foundation for your online retailbusiness by systematically investing time and energy in learning the ropes.
VIII.Get known for customer service. Trust and credibility are a valuable commodity on internet. Invest in building online trust and credibility through exceptional customer service.
About The Author
Hrishikesh Jobanputra is an Entrepreneur, Author and of 39shops.com. He helps business owners excel in customer delight by offering them deep business insights and consulting!