While e-commerce and online retail is witnessing a boom in various western markets, with the likes of Amazon and eBay expanding their global footprint, the Indian market is still warming up to virtual retail, said industry insiders, on the second day of the India Retail Forum (IRF) 2011 in Mumbai. Despite the enormous success of Flipkart, which is tipped to become India?s first billion-dollar internet company, e-retail is yet to explode in the country.

?This industry has not yet reached a tipping point and it could take another 5-6 years,? said K Vaitheeswaran, founder & CEO, Indiaplaza. ?It is dominated by pure play e-commerce companies but the real explosion will happen once top retailers start selling online as much as they sell through their physical stores.?

According to industry estimates, e-retail in India is pegged at R4,000 crore and occupies less than 4% of the organised retail trade. ?However its penetration could increase to 8-9% in the next two years,? said Anubhav Kushwaha, director ? business strategy & alliances, eReasoning, Global Appliances.

?Increasing internet penetration and rising consumer confidence in online payment and delivery mechanisms are fuelling this growth.?

However, e-retailers pointed out that secure payment gateways are a major concern with e-commerce sites that often deter consumers from shopping online. ?The success rate of payment gateways is at 30%, which is appalling,? said Kashyap Deorah, president, FutureBazaar.com which is the online retail arm of Future Group. ?Unless success rates go up to 60-70%, the rate of conversion from browsing to purchase will not increase.?

At present, only 10% of India?s 75 million Internet users log on to e-commerce sites, of which only 1-1.5% transact. Books, air tickets, mobiles and electronic goods are the most sold items on the web, say retailers.

Pankaj Gupta, practice head ? consumer and retail at Tata Strategic Management Group had earlier told FE that ?Entertainment, books, consumer electronics and travel services are the sectors where e-retail has exploded. The other categories are yet to catch up.?

Meanwhile, prominent e-retail platforms like FutureBazaar.com and HomeShop18 claim to be growing at more than 100% quarter-on-quarter. ?We earn R2.2 crore through 15,000 transactions per day. We?re growing at nearly 200% every three months,? said Sundeep Malhotra, CEO of HomeShop18. ?Though the bottom line is still in red, we hope to double our topline of R408 crore in two years.?

Experts also pointed out that online retail is an efficient way of liquidating excess inventory and expanding one?s reach. ?E-retail provides an alternative channel to get rid of piled up inventory,? said Rahul Narvekar, co-founder and director of Fashion and You, an e-platform selling premium fashion brands. ?It also helps save real estate costs and aids in building up a brand.?

Malhotra agrees with Narvekar and adds: ?India has the most expensive real estate in the world, that makes it difficult for brick-and-mortar retailers to have their full merchandise on display. On e-platforms, the full range of products is available, which offers consumers greater variety.?

FutureBazaar?s Deorah also pointed out that the average transaction size for e-retailers is much higher than the average ticket price for brick-and-mortar retailers. ?Our average transaction size is R10,000 which is largely a function of high sales of large-ticket items like consumer durables and electronics. It is much higher than the ATP in Future Group?s physical stores,? he said.