E-tailing: the next big thing
The convenience of shopping from home and paying cash on delivery is driving online retail in India. And, contrary to predictions, it will not drive mom-and-pop shops to extinction. Vivek Sinha and Manoj Gairola report. E-commerce in India: a snapshotindia Updated: Jan 26, 2013 02:48 IST
The mushrooming of online retailers has made life easy for Myra Khanna (37), an executive in a foreign airline. She now buys her eight-year-old son’s clothes and shoes online. Recently, she even bought a flat-screen television set online.
“It’s such a relief. I can even shop from office and it is delivered at home,” said Myra. “No longer do I have to drive out on holidays to shop for mundane things, go around in circles trying to park and then have to lug the stuff back home.”
Click, and it’s couriered home in 72 hours, cash on delivery.
That’s fast becoming the new mantra of the upwardly mobile Indian online consumer.
You can’t miss them. Switch on any TV channel and chances are that you will be bombarded with ads from e-commerce companies. Jabong.com, Myntra.com, Quikr.com, snapdeal.com… Not many people heard of them even a year ago. Now, chances are you have, or know someone who has, bought or sold something through an online portal.
No wonder, the size of e-commerce market has grown to $10 billion (R54,000 crore) by the end of 2012, according to an estimate by Technopak, a research firm. It is projected to expand at a compounded annual growth rate of 45% to reach $200 billion (Rs 10.8 lakh crore) by 2020.
“We are riding a wave of growing consumerism and internet penetration,” said Kunal Bahl, CEO of Snapdeal.com, a leading online market place. “Now, people are connected through high-speed Internet and have more discretionary income." Snapdeal, launched by Bahl and his friend Rohit Bansal three years ago, is expected to generate revenues of R500 crore by March, 2013.The early success stories of Indian e-commerce were the travel portals, job sites and matrimonial website, but this story about the lot that came later.
There are a number of reasons behind the success of online shopping in India. On e-commerce portals, products are priced lower than in brick-and-mortar shops, customers can shop at their convenience, a customer in a small town can buy products that are available only at big stores in cities.
Most e-tailers (online retailers) also offer cash on delivery (CoD), a big draw. According to estimates, nearly 40% of the total sales e-commerce portals are through CoD.
“We have a healthy mix of customers from metros and Tier-I and Tier-II cities. E-retail sites such as ours offer a convenient platform for people living in smaller cities to purchase branded products,” said Mukul Bafna, co-founder, Jabong.com, which offers 50,000 products across 700 brands.
Contrary to expectations, e-tailers will not drive mom-and-pop shops out of business. “It will be a win-win situation for online and brick-and-mortar retailers. The retail market will expand at a rapid pace and there will be space for both groups to grow,” said Ankur Bisen, VP, Technopak Advisors..
Speak to experts and those who have invested in these companies and they will tell you, off the record, that most of these e-commerce companies are running at losses. According to data compiled by Microsoft Corp’s India office, of the 193 e-commerce firms that were set up over the last three years, 87 have ceased to exist.
The competition is severe and cut-throat and a shakeout is expected by next year. Companies make wafer-thin margins. So, only those who manage their back-ends (things like order processing and dispatch of goods) properly and handle their cash flows efficiently will survive.
“We have been doubling our revenues every six months for the past 15-18 months and hope to turn profitable over the next 12 months,” said Mukesh Bansal, co-founder and CEO of Myntra.
The introduction of 4G services later this year is expected to boost e-commerce services. Once that happens and some companies begin to show profits, you can expect a number of these companies to go public.
That, surely, will spawn a new breed of Indian tech millionaires and, maybe, billionaires, too. But a caveat: for every e-commerce success story, there’ll be many more duds.
Whatever the fate of individual companies and entrepreneurs, the next few of years promise to be packed with action in the e-commerce space.