Online Shopping, The increasing trend of shopping in India. Are we ready for it?

In 2011-12 online shopping (e-tailing) constitute about 8% of 46000 crore rupees worth e-commerce according to IAMAI.1 That is, the puny 0.017% of USD 450 billion Indian retail market. Then why is so much hoopla building around e-tailing? Why VCs are literally stampeding to invest in e-tail start-ups? According to press articles, VC circles, USD 203 million were spent in first 11 months of 2011. Heres why?

Increasing Internet Users Accelerating double digit growth, 38.8 million in Mar-2010 to 42.8 million in Mar-2011 (13.3% y-o-y)2 Increase in users making online transactions- Estimated to grow from 11 million in 2011 to 38 million in 2015, according to Avendus Capital Report- India goes digital.3 Availability of alternative payment modes like COD Advent of free shipping and replacement guarantee offers Price sensitivity of Indian consumer- Since e-tailing is the game of quantity discounts and unbelievable deals (mainly export surplus and clearance stocks), its attractive to price sensitive Indian consumer. Rise of tier-2 and tier-3 city customer- Not only non-metro (<1 million populated cities) customer is becoming internet-savvy (Constitutes 48% of total internet population of India in 2011 as compared to 39% in 2006- Avendus Estimate4); its brand-awareness is increasing too. To fill the gap created by lack of distribution channels of brands like Hidesign in such cities, e-tailing is an ideal candidate. Preferred channel for start-up brands- Brands like Zovi, Inkfruit etc. which are increasingly occupying young consumers mind share prefer e-tail as distribution channel as its much cheaper than investing in retail store chain of their own. Plus

http://articles.economictimes.indiatimes.com/2011-03-21/news/29171192_1_online-travel-market-ecommerce-travel-insurance 2 http://www.comscore.com/Press_Events/Presentations_Whitepapers/2011/State_of_the_Internet_in_India
3 4

http://www.avendus.com/Files/India_goes_Digital.pdf http://www.avendus.com/Files/India_goes_Digital.pdf

Synergy between Telecom and E-tailing- Declining voice ARPUs and huge investments in 3G spectrum (Rs 67719 crore) have left Indian mobile operators with little option, but to push on data and 3G services aggressively. Its penetration is set to grow from 4% in 2012 to 22% in 2015 also supported by MGI report predicts 40% mobile only internet users by 201556. Price discovery on the go via e-tailing sites and subsequently order-placement on mobile (if better offer is found) make both industries partner in growth.

Holy Grail of e-tail experience stems from in-store mobile commerce

User

Brick-andMortar Store for look and feel

Finds the price comparison, colors/variants available, reviews on e-tail site

Places the online order from mobile instantaneously

Receives product at doorstep

Roadblocks COD Problems Possible policy of PAN card requirement of COD user and cap on Cash that can be paid, might affect e-tail market. Also when the volumes of online purchases increase. Setting up mechanisms for fraud control, safety from theft and fake currency notes would be hard to implement. Accessibility Issues- Technology spreads faster than road network in India. How possible would it to be to handle logistics without compromising on cost advantage for the rising tier-3 city/rural customer, its yet to be discovered.

Conclusion Value proposition that e-tail brings to consumer is attractive, the main question is of its sustainability. Indias telecom dream was much more distant than this and raised similar questions. It got materialized and transformed Indian society. E-tailing can be the next.

http://www.avendus.com/Files/India_goes_Digital.pdf