Channel Push

Online Services Pvt. Ltd.

Channel Push
State of Online Retailing in India

Website: www.channelpush.com, www.egully.com Phone: 011-41002323

Email: contact@channelpush.com

Copyright@2009 Channelpush Online Services Pvt Ltd

Channel Push
Online Services Pvt. Ltd.

State of Online Retailing in India

The phenomena that world is fast shrinking into a Global Village because of internet and other communication mediums is not completely reflective in the Indian context. While developed and fast developing countries have understood the power of internet, India still has a long way to catch up. Internet has brought nearly the entire world just a click away from us. The retail industry canvass has been repainted by internet and the rules of the game in retailing are fast changing.
AT Kearneys annual Global Retail Development Index (GRDI), in 2008, puts India as the fifth largest retail destination globally . Just a few years ago Indian retail was primarily
1

unorganized but, the scene has been changing fast with emergence of big retail groups like FutureBazaar, Trent, Shoppers stop, Reliance Retail, Spencer etc. The brick and mortar model of organized retail is growing fast but, the online mode of retailing is pretty abysmal. ChannelPush in its series on Indian Online Retail will put the Indian Retail in perspective. In the two part series we will try and access what is going right and whats not for the Indian online retail. In the first part we will look at overall online retail market followed by in-depth analysis on different aspects of the market.

Indian Retail in numbers

A quick survey of average Indians who have access to internet showed that most of them hardly could recall 1-2 online retail portals and most of their responses were travel site. In comparison an average Indian settled in America could recollect more than 5 online portals. This clearly indicates the huge gap between the retail setup between India and other developed countries. Internet penetration rate of 7.1%2 in India is one of the highest in world and we have one of the highest numbers of internet users in absolute terms.
http://www.heidrick.com/NR/rdonlyres/EBDB4C1F-80CE-419B-973B 5B082765D51C/0/IndiaRetailsector.pdf 2 http://www.internetworldstats.com/asia.htm
1

Website: www.channelpush.com, www.egully.com Phone: 011-41002323

Email: contact@channelpush.com

Copyright@2009 Channelpush Online Services Pvt Ltd

Channel Push
Online Services Pvt. Ltd.

India is considered as one of the prominent IT hubs in the world but, all these have somehow not translated into positives in the retail space. Retail industry in India stands at $390 billion3 (refer fig1) and organized retail is fast catching up. Many of the big retailers have forayed into the online mode without much success.
Future of Indian Retail Industry 1000 900 800 700 in $bn 600 500 400 300 200 100 0 2007 2008 2009 2010 2011 2012 2013 2014 2015

Indian Retail Industry (Organized Sector)

Source: Indiaretailblitz, A T Kearny, ChannelPush estimates

Indian Retail Industry

Online retail forms a meager 0.47% of the total retail market. This shows the plethora of opportunity for online retailing in India. The Indian ecommerce market at INR 92004 crore is heavily tilted towards travel sites. More than 75-80% of this market is constituted by travel portals like makemytrip, yatra etc. About 12% of the rest is contributed by online classifieds like matrimonial and job portals. Our area of focus is the remaining INR 1100+ crores market which is set to see tectonic growth given the right environment is built. This market is poised to grow at 30% per annum for next 5 years but, long term sustainability will depend on how must the market fabric changes. Market players have to be more proactive and innovative in their approach and offering to make serious inroads.
3
4

http://www.indiaretailbiz.com

http://www.pluggd.in/indian-travel-industry/india-business-report-e-commerce-industry-to-touch-9210crore-online-classifieds-820-online-travel-7000-crores-741/

Website: www.channelpush.com, www.egully.com Phone: 011-41002323

Email: contact@channelpush.com

Copyright@2009 Channelpush Online Services Pvt Ltd

Channel Push
Online Services Pvt. Ltd.
Indian Retail Industry (Online Retailing) 3000 2500 2000 in $mn 1500 1000 500 0 2008 2009 2010 2011 2012 2013 2014 2015

Indian Retail Industry (Online Retailing)

Source: Indiaretailblitz, A T Kearny, ChannelPush estimates Note: Travel portals contribution excluded

Online Market Setup

The market setup in India is conducive for the online retail to proliferate. Internet accessing population in India is very high in absolute numbers (roughly more than 32 million)5 and its penetration rate across the country is also high. There are a handful of online portals in India which have been around for quite sometime. Indians have started using online transactions for various purposes like paying bills, money transfers, ticket booking etc. Despite these conditions the online retailing has not picked up. Currently bulk of the online retailing is done in books, apparels and small electronic items. This is no where close to the online retailing services offered by Amazon or e-bay. The big question is why the Indian online retail is lagging behind. Many of the online retail portals are still trying to figure out the answer and probably they havent right answers.

http://www.techcrunch.com/2009/01/23/comscore-internet-population-passes-one-billion-top-15countries/

Website: www.channelpush.com, www.egully.com Phone: 011-41002323

Email: contact@channelpush.com

Copyright@2009 Channelpush Online Services Pvt Ltd

Channel Push
Online Services Pvt. Ltd.

Issues plaguing the growth of this market:

Slow change in the buying behavior: Indians are still reluctant to buy online and prefer brick and mortar models. Indians still like to have a feel of product and spend time in buying. Inability of online retail players to sway customers from offline mode to online retail channel : Lack of proper marketing and advertisement, inability to create a brand image, lack of proper usage of all possible online means like search engines, paid marketing, online ads, social networking, blogs etc to reach the customers. Inability of online retailers to drive the values a customer can derive by shopping on online channels. Online portals are not up to the mark : There have been few lacunas in the exiting online websites like poor front ends, website search options are not good, lack of sufficient information about products and terms and conditions, slow websites etc Lack of seriousness: A lot of online portals have come up in India backed by major retail distributors but, for many it seems to have been just a one time setup. Post this there hasnt been enough drive to propagate the brand and services of the portals among potential clients. Our discussion with few portal owners gave us a feel that many big retailers have opened a website because their peers are doing so. Issues concerning security and transaction frauds. In addition many of the web portals dont support all online modes of payments. There are high occurrence of failed payments and this if often a deterrent for clients to revisit the portal.

As stated above, most of the key issues are already known by the market participants. Currently the inability of the retail portals to address these problems is hindering the unraveling of the true potential. In the next part of this series we will try to address key areas of improvement for online retail portals. In the final part we will try to have a comparative analysis of leading online retail portals in India.

Website: www.channelpush.com, www.egully.com Phone: 011-41002323

Email: contact@channelpush.com

Copyright@2009 Channelpush Online Services Pvt Ltd