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Expert Opinion: Online retail scenario in India

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The Indian retail industry has come of age and has emerged as one of the most dynamic industries in the world. Accounting for over 10 per cent of the country’s Gross Domestic Product (GDP) and approximately 8 per cent of the employment, it is expected to nearly double to US $1 trillion by 2020 from US $600 billion in 2015, registering a Compound Annual Growth Rate (CAGR ) of 16.7 per cent over 2015-2020. [1]
India’s growing per capita income, a rising middle class, changing demographic profile, urbanization, and attitudinal shifts in the consumer spending pattern, all indicate the retail sector’s potential to be the real growth engine of the country’s economy.
The retail industry, which currently stands at US $625 billion, has evolved over the past decade with major domestic and international players playing a significant role in the ecosystem.[2] They have long term plans to expand their business across verticals, cities and formats owing to a spurt in online retail activity in the last few years.
gaurav-khurana-paybackOnline retail is fast catching on, not just in the larger metros but also in the Tier II and Tier III cities. This growth can be attributed to increasing internet penetration and smartphone revolution. Today, the number of tech-savvy consumers who explore multiple channels before making their crucial purchase decisions has grown manifold.
Keeping in mind the growing online potential, not just the brands but retail chains as well, are upgrading their websites to make it more convenient for customers to shop online. Going forward, total number of online shoppers is estimated to grow 3.5 times to touch 175 million by 2020, from 50 million in 2015. [3]
Consumer goods in different categories including electronics, food, grocery, apparels, home appliances are available online and the range of products is expected to grow further.An interesting trend to observe is that online fashion is emerging as the fastest growing category in India’s booming e-commerce market, backed by strong technology and marketing strategies.
Going forward, by 2020, India is expected to generate $100 billion online retail revenue out of which $35 billion will come from fashion e-commerce. [4] This clearly implies that online apparel sales are set to grow four times in the next five years and will contribute significantly to the burgeoning e-commerce growth.
Although, apparel has always been one of the most popular segments in retail and shoppers were always skeptical about shopping for clothes online, as Indian shopaholics have always loved the touch, feel and fit of their garments. This deterred them from buying online but, this has become a thing of the past. Today, with increased awareness and easy-to-use applications shoppers have migrated to online apparel shopping.
E-tailers are constantly trying to adopt innovative strategies to cater unique need and preferences of customer. They have adopted the digital disruption to provide consumers more influential products and services, in order to strengthen the bond of trust.
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They have bridged the gap between retailer and customer through online to offline space leading to an enhanced customer shopping experience.
An interesting fact that has emerged is that almost all the internet growth in India is happening on mobile and is driving growth across platforms. By 2018, India is set to witness 500 million internet users and 280 million smartphone users who would be the key drivers for e-commerce portals. [5]
And, online retail sector has got a further boost with the Indian Government’s “Digital India” initiative.The government will deliver services via mobile connectivity and in doing so,it is expected to bring the internet and broadband to remote corners of the country, thus providing the underlying connectivity for e-commerce. This will further expand the reach of the e-commerce market into India’s tier-4 towns and rural areas.
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Furthermore, the government is revamping the Indian Postal service and aims to develop it as a distribution channel for e-commerce related services. This will significantly improve delivery services and cash transactions (via cash on delivery payment options) in more remote and rural areas, thus increasing the reach of e-commerce players and expanding the potential market.
Customers, today have an ever increasing choice of products at the lowest rates. E-commerce is creating the biggest disruption in the retail industry and this trend will continue in the years to come. And, the coming years are expected to bring transformation in technology usage among SMBs as they make their online presence.
With more and more businesses embracing e-commerce and many of the roadblocks such as connectivity and logistics being sorted out, the Indian online retail market will drive consolidation in the market.
References :
[1] The Boston Consulting Group and Retailers Association of India report.
[2] PWC Report
[3] Report – Digital Retail 2020’ by Google and AT Kearney.
[4] Forester Consumer Research
[5] Report -Internet and Mobile Association of India

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