Friday, April 19, 2013

Where’s your online arm?

The growth of online business is ushering in a quiet revolution in the retail industry in India as young consumers are adopting it in large numbers, drawn by the convenience and other advantages it offers.

Even as India Inc. keeps its fingers crossed on the eventual outcome of foreign direct investment in retail, a quiet revolution is already brewing in the sector. With FDI in retail still on tenterhooks, foreign mega retailers such as Wal-Mart, Tesco and Carrefour are still waiting in the wings. On the other hand, things aren’t exactly hunky-dory for domestic retail giants like Future Group, Spencer’s and Shoppers Stop. Other than having to constantly juggle around to maintain healthy bottom lines, these players are also beset with rising commodity costs, high rentals and squeezed profit margins. But away from the glare and glitz of Big Retail, the likes of Ebay, GroupOn and Amazon, not to mention a host of homegrown online shopping portals like Flipkart and Snapdeal, have been slowly and steadily upping their business stakes in the flourishing Indian Retail Bazaar.

Desi e-commerce sites like homeshop18.com, snapdeal.com, Mydala & futurebazaar.com are all mopping up significant growth in sync with the growing trend towards online retail in India, which is clocking over 40% growth yoy. Already, flipkart.com has achieved a billion dollar valuation, and is registering 15,000 units in daily sales. In fact, the popularity of online shopping sites in India reflects international trends. In America, during the annual shopping spree prior to the Thanksgiving season in November, a study revealed that 39% of consumers bought goods online compared with 44% who visited local stores and hypermarkets. Clearly, online retail has emerged as a huge disruptive force for retail worldwide.

According to various reports by industry bodies like Assocham and IAMAI, the market size of the Indian e-commerce industry is expected to be around $10.3 billion by December 2011 (of this online retail is still a small part at around $800 million, and predicted to reach roughly $1.5 billion by 2015). The size of e-commerce globally is well over $700 billion. The online retail market is worth over $240 billion in Europe, over $170 billion in the US (expected to touch $250 billion by 2014), and roughly around $76 billion in China.

In India, the share of online retail is currently modest in comparison to the roughly $520 billion Indian retail space - the largest contributing sector to the Indian GDP with over 15% share. But as 3G mobile and broadband penetration grows, and people’s (especially youths) shopping behaviour evolves, consumers will increasingly opt for online shopping to save time and convenience. A further allure in the form of good discounts adds to the attraction. Already India’s internet penetration has crossed 120 million or about 10% of the population, though in-home Internet usage is still low.


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
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