E-tailing blooms with the Net
Brands ranging from Bata and Godrej to Benetton and Woodland are betting on direct sales over the internet, sharing profit margins with consumers while cutting distribution costs. Himani Chandna Gurtoo reports. The e-tail revolutionUpdated: Jul 08, 2011 21:50 IST
Daniel Ingti, a 26-year old software professional, is a shoe-lover from the fashion-conscious Northeast. After criss-crossing malls near his East Delhi suburban home for a pair, he decided on precisely the design he wanted. When he failed to get his choice, he discovered that he could buy what he wanted by simply logging on to the website of the company he preferred.
“The pair reached me within four days,” said a happy Ingti, whose purchase symbolises a new trend in internet shopping.
This is e-commerce, the Second Act. While online sales of various goods are by now common in sites such as Rediff, eBay, Yahoo and hordes of others that put up storefronts on the Internet, there has been a quiet surge of companies directly selling their own stuff to consumers.
The “e-tail” way is a smart option for firms as private labels threaten to crowd out established brands.
Footwear makers Bata and Woodland, consumer goods firm Godrej and apparel brands Westside and Benetton are among the growing number of companies that are bolstering their online sales platforms.
Bata’s online store is now among the company’s top-50 revenue earning stores of its 1,200 outlets across India.
Its peers Reebok and Woodland have put up similar channels in place.
Industry experts say e-tail stores typically offer goods at 10% cheaper prices than their retail counterparts, while products are usually readily available because they ship from their warehouses. On the other hand, the more a firm sells on its e-tail store, the less it needs to spend on shop rentals.
E-tailing is the second fastest growing online commerce segment after online travel bookings, say industry experts. The Internet and Mobile Association of India (IAMAI) has pegged the size of net commerce in India at about Rs 31,598 crore in 2010 and is growing at 10 to 15% per year.
Of this, at Rs 2,700 crore, e-tailing accounted for a little less than 7% of the total net commerce market, but has been growing at more than 30% over the past few years.
“The sales from our online store are rising by more than 25% month-on-month,” said Manoj Chandra, vice-president at Bata India Ltd. It helps that e-tailing builds nationwide presence for a brand, even in far-flung places. Bata for instance boasts of e-tail sales from the Andamans and Kashmir.
Woodland, like its rival Bata, has reported high growth at its online store.
“Our online sales have surged by over 20% on a month-on-month basis in the last four months,” said Harikirat Singh, managing director.
Ankur Dinesh, CEO of Wirefoot India Technology, a consulting firm that helps digital initiatives, said the past year has seen great demand for his work.
“We are working for a total of 193 retailers who are a mix of big brands and small or medium firms,” he told Hindustan Times.
E-tail helps companies save substantially on overhead expenses that include real estate rentals, staff salaries and store maintenance expenses, while also saving time.
“In retailing, as much as 50% of the initial investment could go towards acquiring real estate. But, online retail only asks for brand trust, nothing more,” said Cory York, who provides technology solutions to clothing chain Globus. E-tail also helps firms offer the widest range of products — from the basic to the most premium.
“We offer certain special things exclusively online. For example, a typical footwear sizes like UK 12,13,14 are not easily available in stores and a user struggling to find such a size then has an option,” said Sajid Shamim, brand director at sporting goods company Reebok. Much growth is seen ahead as e-tailing has only just taken off.
“The industry is at the very early stage of development but still the retail participants can expect to earn around 10% of revenues through this channel,” said Gaurav Gupta, director at consulting firm Deloitte.
While growth is sound a key old-world barrier remains as generating consumer trust in online sales is not easy and more because the “touch and feel” of a trial is missing in e-tail.
“Let more people join the internet. Youths are driving e-tailing but the trust in the concept among the elderly and mature age groups is required to turn the niche concept into a full fledged business,” said Vivek Mathur, head, e-commerce at retail chain Shoppers Stop.Some, like Woodland, have a complaint redressal mechanism in place. More e-tailers need to this and more to lure old-fashioned customers to the online game.