Growing up,
Puneet Verma, an artist from Bihar often asked his relatives in New Delhi or
Mumbai to gift him books. He had no other option because his neighbourhood
book-sellers had never heard of his favourite writers such as Neil Gaiman or
Junichiro Tanizaki.
This was before
Verma discovered online shopping. Six years ago, he first used Flipkart.com,
currently India's largest online retailer of books and has been hooked to it
ever since. Now he buys almost all his books and gadgets online.
"It is
convenient," Verma says. "You get stuff at competitive prices that
you will not find in local stores."
A new report by
the Boston Consulting Group says online retail in India could be a $84-billion
industry by 2016 -- more than ten times its worth in 2010 -- and will account
for 4.5 percent of total retail. E-commerce entrepreneurs and experts say
small-town India will play a big role in the online bonanza, according to Reuters.
Balendu
Shrivastava, Group Business Director, Internet & Mobile Association of
India, says more that 60 percent of online shoppers would come from beyond the
top 8 metros by the end of 2012.
EASY ACCESS
Organised retail
is hardly a pan-India phenomenon and large chains make up less than 10 percent
of the market. As a result, smaller towns often don't have access to the
merchandise available in metros such as Bangalore or Mumbai.
Internet and
online retail sites have emerged as the great leveller. India has become the
third-largest Internet market, based on the total number of users, and 60
percent of these come from smaller towns.
"Internet
penetration ... has allowed online consumers to actually get access to the same
selection, pricing, discount and deals, that so far was available to their
cousins in larger cities," says K. Vaitheeswaran, CEO of Indiaplaza.com.
Besides books,
online shoppers in India buy goods such as lingerie and jewellery, said Kunal
Bahl, co-founder of Snapdeal.com.
"Where will
you find Victoria's Secrets in place like Bhatinda?" says Bahl, whose site
offers daily deals and is considered India's Groupon.
"However,
Bhatinda is also very rich and people have aspirations to these products,"
he said, referring to India's rising middle-class.
India has one of
the world's youngest Internet population, with 75 percent of users under 35,
and many of them have much more disposable income than their parents did.
TRAVEL
REVOLUTION
For many
Indians, booking railway tickets online was their introduction to Internet
shopping. The government railways ticket booking portal irctc.co.in and travel
firm MakeMyTrip Ltd, which is listed on NASDAQ, revolutionised the travel
industry at a time when buying train tickets meant waiting for long hours at
railway counters.
"I keep
telling people that IRCTC created e-commerce in India first," says Alok
Kejriwal, CEO of online gaming company Games2win. "…and with that the
government solved the biggest problem on earth, and that is buying
tickets."
More than a
decade after MakeMyTrip was founded, 75 percent of the B2C online market is
still dominated by the travel industry, according to a Dec 2011 study by
Edelweiss.
But the same
study expects the next leg of e-consumption to be driven by apparel, books and
consumer goods.
Already, it is
the non-travel Snapdeal.com that gets the highest traffic in India among
e-commerce sites.
Apart from
offering discounted and fast service, such sites have also provided a national
platform to regional merchants by selling their products online.
"India is a
country of micro entrepreneurs," says Snapdeal's Bahl. "We are
enabling these … unknown brands of local merchants to get access to consumers
across the country."
While many of
India's e-commerce sites have been inspired by successful models abroad such as
Amazon, most have had to improvise to survive locally. The biggest departure
from the western model has been offering cash-on-delivery for products.
"A lot of people
do not understand how to use a credit card," says Rohit Bansal, co-founder
of Snapdeal.
ROADBLOCKS
Shashank Tiwari
is a 25-year-old mining engineer in Jharkhand. In his neighbourhood, there are
no shopping malls, cinema halls or bookstores. He calls it one of the most
"backward" districts in India, and none of the online retailers
deliver there. He has to travel almost three hours to collect his shipments.
E-commerce
companies rely on courier service providers to deliver their goods. An
Edelweiss study says that only about 10,000 of over 150,000 pin codes in India
are covered by these delivery services -- leaving out a huge chunk of the
country.
"Areas not
served by logistics companies will not be able to participate in online
commerce or else, ecommerce companies will have to extend their backend for
additional coverage," the report said.
But reworking
the supply-chain can add to the financial burden on e-commerce sites, which
critics claim are already unprofitable because of the heavy discounts they
offer to attract customers.
"The people
who are financing and managing this industry … have lost track of what real
business is," says Kejriwal of Games2win. "The same goods are being
sold by zillions of people and there is no price control."
The lack of a
money-making business model makes these sites vulnerable to bankruptcy or
acquisition. Amazon's entry into India, with the website Junglee.com, makes the
competition even fiercer.
Business owners
say that Amazon's entry validates the Indian e-commerce industry and they can
learn a lot about the business from the world's biggest online retailer.
As the online
battle heats up, tech experts say the coming year would be a time of Darwinian
struggle, where few winners would emerge.
"Next 12-18
months, you will see a lot of consolidations happening in the industry,"
says Vaitheeswaran.
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