E-retail — the future of a cash-crunched industry?

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“Online shopping is not only more convenient for consumers with hectic lifestyles, but also gives a better deal for their money,” says Veer Kaul CEO of Art d’nox, the premium stainless steel home décor chain from Jindal steel. There are eight exclusive Artd’nox stores in key metros like New Delhi and Mumbai, besides at 41 multi brand outlets including Shoppers Stop, Westside, Home Stop and The Home Store. Kaul finds the online format exciting, though the concept is still in a nascent phase in India.

Small eyes big
According to a study by Indian Council for Research on International Economic Relations (ICRIER), India’s unorganised retail sector is expected to grow at about 10 per cent per annum with sales rising from US$ 309 billion in 2006-07 to USD 496 billion in 2011-12. The study further suggests that organised retail is likely to grow at a much faster pace of 45-50 per cent per annum and quadruple its share in total retail trade to 16 per cent by 2011-12. The study also revealed that the majority of unorganised retailers indicated their preference to continue in the business and compete rather than exit, representing a future scenario in which both unorganised and organised retail not only coexist but also grow substantially in size.

In such a scenario, there is certainly a need for the former and larger segment to innovate. Online retail is one such tool to boost the sales of small retailers. For those operating single or even a couple of stores, the clientele may be limited; however, their adoption of an online model will not just boost visibility and reach – and thereby sales revenues — but also help build proximity with clients, thanks to many inbuilt tools.

Shalini Gera, GM, Ferns N Petals – ecommerce, says, “Online retail offers global reach for both buyers and receivers, which is absent in the case of a fixed physical store. It also provides round-the-clock reach and hence there are no market timing restrictions.”

Despite all the advantages, when it comes to credibility, it is no secret that Indian consumers still prefer a touch-and-feel experience when it comes to shopping. Some analysts, however, believe that it is only a matter of time before Indians begin trusting the online shopping space.

“E-commerce is growing by 30-40 per cent each year and with branded players stepping in for most products, credibility is not a major issue. Besides, online retailers are extremely cautious of this fact and go the extra mile to ensure that customer experience is above expectation,” says Gera.

Khurshid Iqbal, business head— operation, Sweet World, a popular European concept of a pick-n-mix candy shop, elaborates the role of online retail in food. “We currently operate 53 outlets—both company owned and franchised. Besides planning 50 more outlets by December 2009, we will soon launch an online retail site for the customers. Online retail will help us reach clients in the areas where we currently have no stores.”

Jagdeep Chhabra, managing director, Chhabra Triple Five Fashions says, “Chhabra555, a traditional Indian women’s ethnic wear retailer with 35 physical stores, also has an online presence. However, company’s revenue generation through online shopping is minimal at this point of time.” The reason for this, he elaborates, is because customers want to touch and feel the products before making the final purchase. However, he believes over the next 2-3 years, the customer mindset will change in favour of the online shopping experience.

Cost effective
Besides offering significant benefits to consumers in terms of accessibility and product & price comparisons, online retailing has commercial advantages as well. It allows much larger inventory breadth, offers cost savings through a lack of physical infrastructure and overheads, and potentially offers a global consumer base to almost any size of business.

The biggest advantage of online sales is its cost effectiveness. The online version is not only available at zero real estate cost but also zero inventory cost. Gera further says, “It gives measurable options for marketing available on digital medium. Further, the retailer can reach a large targeted audience in lieu of targeting audiences through traditional media, which may not always be significant.”

India story
According to a recent Visa e-commerce tracking survey, eighty per cent of internet users in the Asia Pacific region made an online transaction and spent an average of over USD 3,000 each in the past 12 months. Further, the survey revealed that in India, purchasing digital downloads was the most popular form of consumer e-commerce. Seventy-six per cent of respondents from India, the highest among Asia Pacific countries including Hong Kong (China), Singapore, Japan, Korea, Australia and India, have bought some form of digital entertainment over the internet in the last 12 months; music downloads (63 per cent) emerged as the most popular digital entertainment purchase.

Online consumers in India recognise the convenience of online shopping as reflected in the high percentage of internet users who buy a wide range of products, from those for everyday use to the occasional high-value item online. According to the report, the top draws for shopping online spotted airline tickets at first place, followed by online travel agents, travel accommodation. Clothes and shoes grabbed the fourth spot while car/motorcycle stood fifth. However, food and groceries segment was positioned seventh in the Visa e-commerce tracking survey.

The online shopping market in India is on the rise. Recently, to address the requirements of the consumer base, Reliance Money also forayed into the segment. As per India Retail Report 2009, books, electronic items, clothes/accessories, gifts and CDs/DVDs make up the largest chunk of e-retail sales at 28 per cent, 26 per cent, 25 per cent, and 23 per cent respectively, followed closely by watches, mobile phones, software, movie tickets etc. Major players in the segment are, HomeShop18, ebay, Indiatimes and individual retailers. Observers indeed expect the online shopping concept to boom in the near future, provided awareness about the safety of financial transactions over the internet spreads across consumers.

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