Foreign direct investment in multibrand retail may have been relegated to the cold storage, but competition is still burgeoning for the neighbourhood store — from a plethora of e-retail websites ranging from eBay to those run by popular brands. E-tail is clearly coming of age in India.
Analysts tracking the industry feel that at least for now, e-retail is not creating new customers, just weaning away existing customers from a physical retail shop to online boutiques, where the range of products is increasing every passing day, ranging from mobilephones and gizmos to books, designerwear and lingerie.
Silently, steadily, e-retail has been gaining ground and is expected to touch a market size of around $70 billion (Rs 3,56,000 crore) by 2020 from the present Rs 2,700 crore. In fact, the industry is upbeat and feels these are estimates are conservative, and the growth and market size could be even higher by 2020.
The growth and optimism have led to a surge in private equity (PE) investments in online and e-commerce ventures. Estimates suggest PE investments have shot up by as much as 147% during the last one year.Leading brands such as Woodland, Samsung and Nokia among others have woken up to the potential of online retail shops, and joined the fray. Apart from tie-ups with generic e-retailers, big companies are opening dedicated online retail stores to tap the customer who shops online. The consumer has never had it so good.
"These days the consumers are a bit reluctant to go to a mall as they are too tied up with their routine and the whole habit of purchasing is undergoing a change," said Harkirat Singh, MD of Woodland. "We do not want to miss out."
He said online sales via the company-owned website is doubling every month and expects it to total around Rs 20 crore within the year. Small numbers, compared to the total sales of around Rs 750 crore, but Singh feels that the share of online sales will spurt in the coming years.
The same is true for Samsung, which expects around 5% mobile handset sales to come from its online retail store within a year.
Apart from the companies, there are dozens of generic e-tailers who project themselves as one-stop-shops for everything from lingerie to laptops to luxury goods. Sachin Bansal, CEO of the runaway success flipkart.com, said his aim was to sell anything and everything that can be sold online.
The e-retailers are benefiting from the ever-increasing penetration of internet broadband, and the rush for internet-enabled computing devices such as smart phones, tablets and laptops, and more consumers shop online.
"We wanted to sell things on the Internet which hitherto nobody had thought of," Manmohan Agarwal CEO of Yebhi.com. "Books and electronic items have been sold online for many years. We had to be different to evolve into a complete home and lifestyle store."
Purnendu Kumar, senior vice president at Technopak a consultancy for retail firms, sees consolidation in e-tailing happening over the next five years. "Only those e-retail firms that can maintain consumer stickiness for over one to two years will be able to survive."
But if the scramble for consumers grows and e-tailers localise to the last mile, it could leave neighbourhood shop owners high and dry.