Citing Cris-Infac's study of the European market, a McKinsey and Confederation of Indian Industry (CII) report on `Retailing in India' says that while apparel is expected to become a key online categories in Europe by 2004, it may not be able to enjoy the same position in India due to lack of established brands and catalogue business.

For grocery, however, a significant share of the existing phone-based ordering and home delivery system - which accounts for 10-15 per cent of total grocery purchases in major metros- is likely to shift to an e-tail like proposition, it says.

In India, the e-tail market is still in its infancy. The McKinsey-CII joint study estimates total online sales at anywhere between Rs 10 crore and Rs 65 crore. Compared to the $180 billion Indian retail market, the share of online retailing is insignificant. However, it is considered as a potent medium of future.

Projections for the size of the market are very volatile and will depend on whether e-tailers can offer a winning proposition based on affordability, availability and relevance to their consumers and not on any external trends, says the study.

Reflecting on the global trend, the study points out that `brick-and-click'-based business models are proving superior to stand-alone options in categories like apparel and grocery. Therefore, even though the online market is emergent in India, savvy retailers will ensure that they develop integrated offerings from the start.

The global e-tail market has faced significant reversal of fortune over the past year as many business models advocated by the start-up e-tailers could not make money. This reversal in the market was, however, not an abandonment of the value of the Internet as a future medium to carry business-to-consumer commerce.

The study points out that growing consumer base and the development of e-commerce infrastructure is indicating a trend in favour of e-tailing. The number of Internet users in India is estimated at four million. These users are young, well educated males with monthly income over Rs 15,000 and are concentrated in the top 10-20 class A cities. Women, who constitute over 50 per cent of the US market, are still a small but growing percentage of users in India.

The infrastructure required for e-commerce is also being put into place, with significant ISP capacity being built and further investments for increasing bandwidth being planned. Big companies including Satyam, Tata, Dishnet, HPCL and BPCL are investing to develop cyber cafe facilities in India. New payment technologies are being brought in, for example, Fabmoney and BPCl's PetroCard offer cash-based payment for people who do not have credit cards.

Predicting the future of e-tailing, the study says that organised Indian retail chains neither have a strong brick presence nor an established online proposition. In such a situation, new players will have the option to start with an integrated offline and online proposition. Retailers like Crossword, Shopper's Stop, Globus, Foodworlds, Subhiksha and Musicworld have understood the trend as they are in the process of launching e-tail sites which complement their physical business.