When shoe company Bata decided to develop a new e-commerce platform for the Indian market last year, it was confident of the online model clicking with the consumers who are traditionally more inclined to buy products from stores. Today Bata?s online business has grown to become one of its largest stores in terms of transactions and value growing by 25% month on month.
With increasing internet penetration and flexible payment modes such as cash-on-delivery being used widely nowadays, Bata is not alone making the move online. In the next couple of months bigwigs like Reliance Retail, Aditya Birla Retail and Tata?s Croma are looking at entering the R2,050 crore e-retailing market, growing at over 30% annually.
Industry experts point out that besides popular categories like electronics, mobile phones and books, fashion items like apparel, footwear, jewellery and accessories has a large share worldwide in e-commerce sales and the trend is catching fast in India too. The reason being the brand preference, ease of selection and shipping make this category a preferred good choice for online transactions.
?We are definitely planning to enter the online space this year with Reliance Timeout. Our current mix of merchandise suits the online business. We will start with books and music, followed by electronics and mobile items,? says Deepinder Kapany, vice-president & head, books, entertainment and e-commerce business, Reliance Leisures.
Seeing huge potential in the e-tailing market, early entrants like Shoppers? Stop, Globus, Gitanjali and Futurebazaar are looking at expanding their online presence. Shoppers? Stop is also looking at increasing its reach to more delivery locations, convenient payment methods, and better integration with its stores. Vivek Mathur, vice-president, corporate planning and e-commerce, Shoppers? Stop, says, ?We are working on plans to grow this channel more actively over the next few months, including large additions to the product range in terms of the brands and options available to the customer. We are also continually working to streamline and improve the user experience and service levels. We are actively engaging with our customers on various social media platforms and essentially working towards making a truly integrated multichannel experience.? Over the next 3-5 years, Shoppers? Stop expect online business to be equivalent to one of its larger stores.
Manoj Chandra, vice-president, marketing and customer services, Bata India, feels depending on the growth plans, e-commerce revenues can always become an important part of the company?s total business as the market is very large. ?Our costs are very low, as the system derives huge synergies from existing retail systems. Due to lower operating costs, the online business gives a higher net margin than normal retail,? he adds.
FutureBazaar.com, the e-commerce arm of the Future Group, that links to its stores including eZone, Pantaloons and Big Bazaar online delivers across 1,500 cities and towns in India covering 16,000 PIN codes. Experts say as the retail market evolves in India, more e-commerce sites will be launched by pure-play retailers and e-tailers. ?In the next 6-8 months, we will see leading retail brands entering the online space. For the big brands we see a 30-40% month on month growth opportunity,? says Cory York, founder CEO, Socialinked.com, a technology and service provider to companies like Globus, Croma and American Express India.
Online retailing has not only been a boon to the retailers but also to several start-up businesses and aggregators, which has come up in the last few years offering a multi-brand products like flipkart.com, Snapdeal.com, fashionandyou.com and Naaptol.com. Gift voucher aggregator Giftcardsindia.in started three months ago has managed sell 7,000 gift vouchers online. Flipkart, which sells books, music, electronics and mobile phones online is another success story. The online aggregator has registered sales of about 2 million items across all categories.
However, with the entry of more retailers into the online space, industry watchers feel the market will shift more towards retailers. ?Over the period the share of retailers will grow in entire ecosystem. Also, the entry of retailers will grow consumer expectations from service levels and product selection, which will make aggregators to eventually adopt retail practices like having more control on supply chain, enhanced customer services, etc,? says Ankur Dinesh Garg, CEO, Wirefoot, a research and analysis firm. ?There will be trend of pure play online retailers entering offline market, and core retail entrepreneurs choosing online as their starting format thereby leading to offline retail,? he adds.
According to Wirefoot, there are about 40,000 transactions per day at an average ticket size between R1,000 and R1,500. Popular categories include mobile phones, cameras, DVD players, video games and MP3 players, accessories like hard drives and pen drives and kitchenware.
Overall, the Indian e-commerce industry is estimated to grow by 47% to R46,520 crore by the end of this year, according to a report by Internet and Mobile Association of India, (IAMAI). E-tailing or online retailing, which includes consumer items like electronics, mobile phones, computer peripherals, home appliances, apparels, jewellery, shoes and toys will contribute about 6% or R2,700 crore by the end of this year, to the overall e-commerce market, the report noted.
Experts say, it is not just the metros that is fueling the online scene in India. The demand supply gap in tier 2-3 cities where there is brand awareness but no availability of products and services is also adding to growth. Online retailing portals such as eBay.in, Snapdeal.com, and Naaptol.com are registering anywhere between 40 and 60% of their sales from rural areas apart from the tier II and III cities like Vadodara, Faridabad. Jaipur, Visakhapatnam, Kanpur and Lucknow. According to eBay India Census 2010, about 3,296 Indian cities shopped on eBay last year, of which 2,234 were tier II and tier III cities, and 1,045 were rural towns.
While growing internet penetration does indicate increasing acceptance of internet, new users may not readily start shopping online.
India?s internet penetration, with 100 million users, touched 8% last year. ?The penetration rate is quite low in comparison to other countries worldwide; however the number of users is significantly high. Globally India ranks third, in terms of total number of users in a country,? says Garg of Wirefoot.