The unfolding of the great Indian Retail story

The online shopping industry in India is still at a nascent stage as compared to other western markets. However, it is fast catching up among Indian customers, and with the e-commerce market beginning to show rapid progress, this trend is expected to continue. The e-commerce market in India is estimated to be worth $16 billion in 2013 and expected to touch $56 billion by 2023, according to the latest ASSOCHAM report.

Kenny Shin CEO Star CJ

“Overall, Indian retail business is more than US$500 billion, out of which 6–7% is organized retail which includes online and home shopping also. We are expecting this market to grow 100% year on year,”  Kenny Shin, CEO, Star CJ informs.

Advancement in technology in India and penetration of Internet into everyday life has brought in a sea change in the consumer psyche and their purchasing habits that have further influenced for e-commerce to take shape in a big way. “The Indian consumer has evolved and is willing to explore different options. With the hectic lifestyles that one leads today, people are looking for options that are time saving and e-commerce is definitely a winner on that front. E-commerce will definitely be a part of the future of shopping and is here to stay,” explains Kenny.

It is a fact that online shopping has perceivable advantages for the customer, given the convenience of shopping from the comfort of his home, the wide selections (that are only possible in an online format) and the deep discounts that are offered. As e-commerce evolves and the seams are ironed out, customers are steadily gaining confidence in shopping online.

Param Parameshwaran Chairman Sulekha.com

“Customers are increasingly discovering how convenient it is to shop from their homes or during breaks at work. They are able to discover new stores in suitable locations that can fill their needs. They are able to compare prices and other terms of use.  Many brick-and-mortar retailers, through whom customers conduct most of their transactions today, are beginning to appreciate and take advantage of benefits of reaching users online by skillfully combining offline, mobile and PC-based approaches,” points out Param Parameswaran, Chairman, Sulekha.com.

The e-commerce opportunity for India is huge and given the size of the market, there is room for several players. Being an online marketplace, it has the distinct advantages like the size of the catalogue (selection), number of merchants, category depth and breadth, and marketplace dynamics such as merchant rating, product reviews, etc. These attributes combined together create a network effect that helps to attract customers. 

“Consumer’s behaviour and shopping trends have helped the Indian e-commerce industry to record a staggering 85% growth in 2013. The e-commerce market in India will control 6.5% of the total retail market by 2023. Young generation on the internet has emerged as the driving force behind the growth of the e-commerce industry in India. Nearly 90% of online shoppers in India belong to the 18–35-year age group, while 8% fall in the 36–45-year age group,” informs Vishal Mehta, Founder CEO, Infibeam.com.

Ajit Joshi MD & CEO Infiniti Retail Limited

“E-tailing is going to grow big in India. It will be growing at a pace of 6X in six years. The consumer habits are changing which are primarily driven by convenience and easy access. The entire dynamics of shopping is changing and evolving very fast. Also internet penetration is growing inorganically at a faster pace. All these indicate that e-commerce is here to stay and one can witness Y-o-Y revenue growth. We see there are still a handful of players and there is a room for many e-tailers to come on-board,” says Ajit Joshi, MD & CEO, Infiniti Retail Limited.

Broadly, there are two factors fuelling the growth of e-commerce – habit and technology. Busy lifestyle in the metros and lack of a variety and range in smaller towns are factors that are driving the growth of online shopping. “Then, there is technological advancement with increasing internet penetration, growth of 3G and 4G and increase in smartphone usage. People also find online shopping more value for their money which induces new trials,” observes Sundeep Malhotra, Founder & CEO, HomeShop18.

Tony Navin VP-Business Dept. snapdeal.com

However, Tony Navin, Vice-President – Business Development, Snapdeal.com, cautions that there will be many niche players who will keep launching but unless they have the scale in this particular market, a long-term sustainable business cannot be worked out. “This is very important and only people who work horizontal like Snapdeal.com will slowly evolve as winners,” he says.

The “Best” Retail Model…

Whether a customer is looking for information on a website or calling a contact centre or experiencing a touch-n-feel at an offline store, customers are accessing various touch points today. As far as the customer is concerned, in spite of deriving information from various other quarters, he still is very comfortable with the earlier pattern of walking into the neighborhood mobile shop and getting his queries answered which is the traditional format of retailing.

Himanshu Chakrawarti CEO The Mobile Store Ltd.

According to Himanshu Chakrawarti, CEO, The MobileStore Ltd., the growth of modern trade and e-commerce is resulting in the sinking of stakes of the traditional retail format. “The large part of the market is with general trade, which essentially is the Mom-n-Pop or small stores you find selling mobile handsets. The role of modern trade (whether online or multi-brand retail stores) has increased significantly only in the last two years with the growth of smartphones, but before this it was solely the general trade that has been the primary driver of mobile phones in the market. The requirement for experiencing the smartphone features and interaction level has gone up and with it has risen modern trade, affecting the business of traditional retail. The shift of pattern is happening on the general trade,” Himanshu retorts.

Talking from a customers’ perspective, Himanshu points out that there are two types of customers – one who take information from online but buy from brick-n-mortar stores and the other who experience touch-n-feel in a store but purchase online. “Customer is deciding the touch points and they are the ones making the decision where to purchase. We cannot influence them to accept any one retail format but yes, we can surely ensure the significant role we can play in each of these segments,” says Himanshu 

Vaibhav Singhal MD & CEO Savemax

Vaibhav Singhal, MD & CEO, Savemax, feels that the online model will have a tough time surviving especially in industries with lower margins. “Online and offline are two very different models. It will be really challenging for the online retail to survive with low-margin products. Moreover, we are not sure if any company has managed to create a sustainable business model to suit the Indian context. The growth seems phenomenal only because the base is extremely low. Thus, the figures can be grossly misleading.”

He further continues, “Since online store and brick-and-mortar stores like ours have some common customers, online stores may have some marginal impact on our sales.  I say marginal because in the Indian context, customers still want to feel and check the product before they go ahead with their purchase and not go merely by the pictures on the online store.”

Kenny Shin, CEO, Star CJ, explains why he feels the online format to be a better accepted phenomenon than the offline stores. “STAR CJ handles products which are also available in brick-and-mortar retailers and stores, but the advantage of STAR CJ is that we are providing unique deals which are not available across any other platforms of shopping. Having said this, brick-and-mortar format has many limitations such as geographical reach, cost of operations, customer acquisition cost, inventory cost, etc, which can’t be matched or competed with the advantage that the online format offers.”

Echoing the same sentiments, Parameswaran comments, “We don’t compete with brick-and- mortar IT retailers as we view ourselves as highly complementary to the achievement of their business objectives. We are able to bring to them millions of qualified potential customers who are looking for the types of products they carry and of which they have inventory to sell. The future of e-commerce, where people are using online resources to research, discover and buy products and services at the right price, is bright.”

Sanjay Sethi CEO & Co-Founder ShopClues.com

“When it comes to competing with brick-and-mortar stores, especially in the organized categories like electronics, mobiles and appliances, our market opportunities are different. Also, nearly 72% of our sellers are small and medium businesses that use the ShopClues platform to reach out to millions of customers from anywhere in the country. So, even brick-and-mortar merchants are recognizing the unfathomable potential of ecommerce,” marks Sanjay Sethi, CEO & Co-Founder, ShopClues.com.

Deepa Thomas eCommerce Evangelist eBay India

However, Deepa Thomas, eCommerce Evangelist, eBay India feels that eCommerce has become a very important aspect of the multi-channel strategy of retailers and brands in India. “We do not compete with our sellers, but help them expand their reach beyond their physical catchments. Many large retailers and brands such as Croma and more recently, Ezone, have brand stores on eBay India. Brands optimise the large user base of eBay India to reach a wider set of consumers beyond their geographical reach.”

The online marketplace concept that has been conceptualized as a platform that facilitates trade between sellers and buyers.Here the e-commerce player does not own inventory but enable sellers to directly engage with a ready base of consumers. “Hence online marketplaces work well by providing consumers with vast selection by leveraging the inventory of thousands of entrepreneurs, retailers, SMEs & brands allowing marketplaces to play in many categories and cater to demand from consumers across the country,” she further continues.

Offline and Online formats - a mix of both…

Sundeep Malhotra Founder and CEO HomeShop18

Given the dynamics of the Indian market and its size, a combination of physical retail with online retail model will work best to serve customers with diverse tastes and preferences. And this has been mandated by many. “Both these models are not one against the other but actually two complementing aspects of shopping. The Indian market is big enough for brick-and-mortar stores and e-commerce players to flourish side by side,” recommends Sundeep Malhotra, Founder & CEO, HomeShop18. 

E-commerce is viewed by many as just another channel which has opened up and not a substitute that is going to replace the traditional retailing model. “Both the models are here to stay and customers will decide where they want to buy. It is not an alternate medium but will complement each other. Customers can now shop at their convenience and will be able to reach out to retailers that are not present in their city,” Ajit suggests. “We believe that competition should always be healthy. It helps brands to innovate and stay up to the mark. As we progress, we will see better infrastructure in the country, better education and more internet-savvy population.”

Similar views were expressed by Tony, “Brick-and-mortar stores actually view us as partners now. We don’t see them as competition, but we are starting to partner with them. Our partnership with Vijay Sales is in that direction. They are a brick-and-mortar company, but they have chosen Snapdeal and they sell their products using our platform. They do not have to set up stores in the tier-II and -III towns but just have to upload their products on Snapdeal and can reach out to the entire nation. And that is how other offline retailers are also viewing Snapdeal,” he remarks.

Vishal Mehta Founder & CEO Infibeam.com

“There is no denying the fact today that consumer is well adapted to technology and smart devices which have further boosted e-commerce trade practices. Even for the small and large offline retail format, e-commerce technology can be a boon if they embrace it now, but it might become a bane if it is too late. The way technology is spreading its tentacles from desktop to laptop to smart devices, the future or even the present seems to be stronger than any offline format of retail. With the connected commerce in practice, the future of e-commerce looks strong and significant,” says Vishal Mehta, Founder CEO, Infibeam.com.

Challenges ahead for Retailers…

The challenges faced by both an online retailer and a brick-and-mortar retailer differ in the sense that their business models demand different approaches and each has its own limitations. On the one hand, where maintaining a website from hackers while still upscaling his operations becomes important for an online retailer, an offline retailer, on the other hand, is beset with challenges of operating a store, bearing inventory, manpower and operations overhead.  

However, the biggest challenge faced by retailers is to set up a supply chain which should be smooth, sustainable and economically viable. Along with the right talent, retail also faces the challenge of getting the right location. “We are trying to work out a 100% direct store delivery SCM model which will help us achieve all of the above. We are still evolving and thus, customers’ feedback is even more valuable for us today. We are trying to put in place a mechanism where in the customers freely express themselves. We understand the importance of having that bond of warmth with the customer in the Indian scenario,” says Vaibhav.

The secret to becoming a successful retailer is constant innovation and customer satisfaction that will differentiate one from the other. A key initiative to keep above competition is strict TATs (turnaround time) to ensure timely deliveries and satisfied customers. Agrees Ajit, “We totally rely on the customers’ belief and go out of our way to ensure the customers’ requirements are serviced to the hilt. Our continuuous efforts for timely delivery help us enjoy low return rates and earn customer loyalty. Croma will continue with these efforts to make every purchase at Croma a memorable experience.”

For Snapdeal however, the bigger challenge is how to go deeper into the smaller towns in terms of delivering the goods since a lot of the national carriers do not deliver to these towns. The purchasing power of customers of these small towns has increased and e-commerce players are increasingly eyeing these key markets to enhance their reach. “But I would rather say logistics is more of an opportunity than a challenge because of the sheer fact that there are so many regions untapped and we are already a leader in the number of pin codes we reach out to and will continue to adding more pin codes,” Tony explains.

Bricks & Clicks Model – The way forward…

Though India has caught on it a bit late, the e-commerce revolution is slowly dawning upon the Indian modern retailers and consumers. This transformation can be attributed to growing consumerism and internet penetration that is taking the Indian market by storm. It is a little early to gauge as how successful can this model be but with more than hundreds of websites currently operating in the sphere and many more to join the space, it is obvious that e-commerce is definitely going to be a game changer in India. “In 2014 brand and retailers will increasingly look at multiple avenues to be visible to the customer at every channel of trade including eCommerce, Mobile Commerce and even Social Commerce. With Mobile Commerce gaining significance with increase in app penetration, in-app marketing will also start to take off,” Deepa puts it.

Notwithstanding the rise of e-commerce portals and the evolving mCommerce, brands are also eyeing the flourishing multi-brand retail segment as an important retail strategy. At this juncture, when each of these models faces stiff competition from each other, it is most likely for a convergence of both that will see their strategies merging. Since both the models have their own challenges and opportunities, it is up to retailers as to how best or how fast they can integrate these concepts and realize the potential. 

samrita@varindia.com