Amazon’s recent foray into India has delivered a crucial message. Despite all the e-com players losing money in India, growth potential of this business segment is immense. As Sandeep Komaravelly, vice-president, marketing, Snapdeal puts it, “The advent of global giants has reinforced our belief into the potential of online retail”. Market skeptics may have some of us believe that the Indian market is not mature, consumers are not ready or that the e-com boom could suffer the fate of dot.com companies in the early 2000s. However, VCs remain bullish on e-com and investors continue to show faith in the industry.
Flipkart.com in its third round of funding recently raised $20 million from a venture capital, valuing it in excess of INR 1,000 crore. Additionally, Myntra.com raised $40 million and Snapdeal.com’s parent Jasper Infotech recently raised $40 million from VCs. Going by this trend and the fact that it took Amazon 8 years to breakeven, investor sentiments seem more calculative than speculative.
Investment in the Marketplace Model
VCs are pumping in money, ecommerce companies are wooing customers through aggressive marketing campaigns, internet penetration is rising at an exponential rate and customers are getting too busy to maneuver their way to physical stores; Indians are simply not curious about buying online, they are buying, period. According to eBay India, 10 million monthly visitors buy 13 products every minute on its platform from over 30,000 sellers. Further, a Flipkart spokesperson was quoted by Business Standard, as saying, “We just completed sales of one lakh books a day about a week to 10 days back.” And some of us thought the idiot box had long taken over the book reading routine!
Increasing Internet Usage
The Internet and mobile telephony growth story in India has given e-com the much needed boost. Indiaplaza Founder and CEO, K Vaitheeswaran reiterated this fact by providing some encouraging statistics in an interview to Deccan Herald. He said that Internet penetration increased from 3 million in 2001 to 100 million in 2013. “Earlier only around 1 per cent of internet users were shopping online, now about 8 per cent or 8 million shop online,” added Vaitheeswaran. Internet connectivity in tier II and III cities has opened up a largely untapped market for e-com companies.
Though 60 per cent of online sales currently come from the top 10 cities in India, the percentage of online shoppers from small cities is rising everyday. Myntra CEO Mukesh Bansal told Deccan Herald, “Thanks to the spread of internet, even small town buyers are shopping online for branded products from us. Normally big brands don’t have outlets in small towns and even if they do, stocks and varieties are limited”. Quikr CEO Pranay Chulet was quoted by PTI as saying, “Today Tier 2 and 3 cities account for over 50 per cent of our traffic,” Further introduction of 3G services and smartphones can also made online shopping more accessible to people.
Wider Range of Products and Convenience
With e-com companies offering a wide range of products and variety to choose from, attractive discounts and offers, cash on delivery payment option, easy accessibility and the convenience of shopping at the click of a button, Indian mindsets are fast changing in favor of shopping online. “I order everything from groceries, to toiletries, shoes and bags online. Who wants to go out in the blazing heat to buy every small item one needs?” Says Neha Soni from Jaipur. Goodlife.com that offers 182 varieties of just face wash from 40 brands and delivers the purchase in 3 working days is her preferred site for shopping toiletries.
So is it the right time?
With even conventional stores like Vijay sales going online, industry experts are led to believe that the time is ripe for big and small retailers alike, to start selling online. Vijay Sales, a privately held electronics retail chain that started out from Mumbai in 1967, has 50 stores and over INR 1,500 crore annual revenue. Currently it uses Infibeam’s solution, buildabazaar.com, to power its own ecommerce store and is being courted by the likes of Flipkart to start selling on the marketplace. Additionally, with the third-party marketplace (ecommerce platforms where retailers and brands can sell to customers directly) concept (followed by eBay) gaining steam in India, SME enterprises have a host of new options and opportunities to start selling online. According to a 2012 CRISIL report, Indian online retail industry will grow from INR 32 billion in 2012 to a projected revenue of INR 100 billion in 2015, a CAGR of 45%-48%.
“Black ‘Murrah’ buffalo with short and tightly curled horns for Rs 80,000”, reads an Indian online classified! So if you have something to sell, there is someone to buy it and now is the time to start selling it online!