Can E-Commerce in India Overtake Offline Retail Business?
Posted in Marketing & Strategy Articles, Total Reads: 1544
, Published on 05 August 2015
India’s retail market value was estimated at $600 billion in 2014, and is expected to double to US $1 Trillion by 2020. Ecommerce in India has been rising at the rate of around 34% from 2009 to 2014 i.e. from $3.8 Billion to $16.5 Billion and is expected to reach $50 Billion by 2020.This certainly gives us reason for deeper search.
India has a population of around 1.25 billion with around 10-15% population having access to internet and around 4% population buying online which is quite low if you compare with other developed countries so it sort of provide a huge market for the companies to tap into this sector.
With the coming of new government and the launch of various campaign such as Digital India has given boost to the number of internet users in India, according to the reports of TRAI the number of internet users have increased by around 12.3% from December 2013 to December 2014.
Number of internet users
Percentage Of internet users with respect to population
This data is quite influential for ecommerce sector. The internet has given Indian consumers access to a wide variety of benefits such as-
If you open a business on an online medium it will incur a less cost as compared to a brick and mortar store. There is no rent, neither there is interior designing cost nor for other utilities, you have to pay expenses just for website creation, hosting and any support regarding it. If you open an online store, your costs are directly affected by your website management, logistics and online payments.
Online store saves a lot of time and cost since the inventory management is quite simple and the overhead of organising the product in a retail store is also reduced. Moreover you can display a wider variety of products as compared to a retail store. For e.g. you can browse thousands of brands at just few clicks and too just at a single online store, this kind of shopping experience can’t happen on an offline store.
Marketing plays an important role both with respect to online and offline business. But the base of customer of offline retail is quite low as compared to online business where customer base is the entire world. With the advancement in technology and increase in social mediums online the marketing here is quite easier and reach a wider audience where as an offline requires a greater budget, lot of man hours and time for promotion of your product. For e.g. various companies gives Facebook, twitter much of a preference for promotion of their product and services.
Problems that the ecommerce have solved?
• It has provide opportunities for Indian sellers to reach global markets.to expand their business. For e.g. various sellers from states such as Punjab and Surat on eBay and amazon to countries such as USA, Canada etc.
• Today‘s life has become immensely fast specially in cities people have no time even for themselves ecommerce play an important role in solving their shopping needs with various facilities such as online payment, cash on delivery, 30 days free return etc.
• It has helped rural areas in providing various necessity products at their reach. This has reduce a lot pressure on Indian Government.
• Ecommerce companies such as Flipkart, Snapdeal, and Ola along with the support of government policies have brought ecommerce in India to the centre stage which led to the growing faith and has led to various major players to venture into India. In present case these companies are giving companies such as Uber, Amazon and eBay a run for their money.
Though these benefits are there but we can’t ignore the offline retail because in India it is still playing a major role in cities as well as in villages of now. In today’s market they too are afraid with the level of rise of ecommerce as they are unable to provide the amount of discounts and level of facilities that they provide. It has led to manufacturers and retailers running brick-and-mortar stores pressuring government to undertake measures by forming a regulatory body to control the price that the ecommerce stores offer in order to remove competition as they feeling the heat that has arisen with the growth of ecommerce.
But we also have various offline retailers like Tata, Future Group and Reliance taking the pressure and competition onto themselves to innovate and collaborating with ecommerce giants to progress. Not only these big firms are selling but most of the ecommerce companies are following market model that they don’t maintain inventories directly provide product from the seller to the buyer when the order arises. Around 70% of the product are being supplied by the local traders and merchants. Both can work hand in hand to provide an overall shopping experience.
However, e-commerce is highly unlikely to completely replace offline store. In India offline retail especially malls are more than just shopping destinations they have become more of a socially connecting place rather than just shopping place .Moreover people in India are not much of comfortable with buying and paying online as they have to give their credit and debit card information. ‘Experiential Retail’ is the main requirement for an Indian shopper, which is to some level being overcome by try and buy concept of ecommerce websites.
This article has been authored by Ashish Gandhi from IIM Kashipur