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Decoding: online retail – An India Perspective

, November 6, 2012, 2 Comments

The first article of this two part series on Online Retail

The Current Situation India’s retail industry currently accounts for 14 to 15% of the GDP and is estimated at approximately USD 450 billion dollars, making it one of the fastest growing markets in the world.

The retail industry comprises of many small to medium sized businesses and a fair amount of big brands that makes up for almost 40 million jobs all over the country.

While India ranks as the 3rd largest nation for Internet users with 137 million people browsing the web, only 27.2 million people currently use the Internet to purchase products.

The number is increasing gradually and retailers are starting to invest in online platforms, as seen by the eight fold increase in investments in 2011 when compared to 2010.

Today, we have many online retailers – some struggling to find their footing in the industry and some making waves much like Amazon did when it was discovered by millions of users in the US.

Major homegrown bigwigs of the Indian Online Retail Market

A close look at the growth trajectory of some of the leaders in the Online Retail space in India will indicate consumer behaviour patterns exhibited similar to other world markets  – to find everything under one roof. Indians who are driven by cost and deals attached to combo products resort to online retail to purchase a variety of products.

Many big guns today have expanded and sell everything from basic home goods (non-perishable) to consumer electronics.

Recent Changes in FDI policy for retail and online retail
The Indian government recently decided that it would allow 51% foreign direct investment (FDI) in multi-brand retail while not permitting FDIs to sell multi-brand products through online retail in India.

While this came as an unforeseen aspect, it helps tackle the problem of foreign investors bypassing authority advised by different states.As this comes off as a strategic bomb for alliances desired by local online retail firms, this is not an entirely bad thing.

 

The Positive Side
Brand Building

With online retail still a work-in-progress in India, brands can now focus on building a brand that holds the trust and loyalty of its consumers.

Opportunities for local businesses
With FDI out of the way, e-retailers have a better opportunity to promote local produce that not only cuts costs but also eliminates the prospect of foreign giants selling substandard goods with expensive price tags.

Encourage local entrepreneurs
Internet has made it possible for small business entrepreneurs to be noticed. Local entrepreneurs with creative and smart business talents can use this break to realize their dreams.

Everyday frustrations caused by road traffic jams, lack of ideal real-estate locations and the advantage of connecting with customers in remote locations makes online retail more attractive even for traditional retailers.

The Negative Side

Strategic alliances The recent changes affects local firms that seek strategic alliances or investments with foreign companies in terms of funding, sharing of technology know how and pooling of resources.

Trade practices The existence of foreign online retailers would help initiate world class trade practices to be practiced all over the country.

Challenges that curb the growth of the Online Retail space
Even as few Indians have begun to realize the benefits that this industry has to offer a consumer, a majority of the population irrespective of their exposure withdraws itself from seeing the full potential of online retail.

In addition to exposure and trust issues, there are other challenges that limit growth in Indian online retail today.


User interface:
Some say that first impression is always the best impression. Many sites lack trustworthy information on products to educate consumers.

Easy mobility to navigate the website is a key feature to improve user experience in online shopping.These features coupled with an easy and secure mode of payment marks the sign of a successful online retail site.

Availability of resources:
The concept of online retail is still fairly new among the working masses. There is a dearth of skills and people who understand this industry.

Many e-retailers use help from external businesses to fulfill their customer’s orders. In certain situations, this may increase the processing and delivery times for one’s online orders.

Logistics:
Logistics have forever been a problem in the Indian retail industry as a whole. The intrusion due to bureaucracy and a general delay caused by complicated procedures with logistics providers makes it a challenging process for online retailers to create a firm trust in the minds of Indian consumers.

Language and perceived security of e-commerce:
Besides the young population who know their way in and around the internet, there is a major portion of the indian population that is apprehensive about purchases made online.

Till date, many Indian consumers rely on kirana shop owners who speak the local language for their regular purchases. Not having to worry about compromised credit cards adds to the trust many place in local shops over online portals.

Return policies Indian e-retailers struggle to help consumers enjoy the experience and benefits of shopping online despite their biggest concerns of physically viewing a product. Return policies define the level of customer service in any organization.

The ability to cater a large population while handling returns on a large scale is indeed quite the challenge.

Strategies that work:
Some successful strategies that have worked have professed one thing – customer is king. If online retailers can create strategies that keep the customer in mind, the sky is the limit!

Cash on Delivery Before Sachin Bansal and Binny Bansal founded Flipkart in 2007, they worked for Amazon – one of the biggest online retail giants in the world today. Much of their strategies resemble Amazon’s customer service. What works for Flipkart that sets them apart from many online retailers today is their cash on delivery feature.

Many Indian consumers question the security of using credit cards for online purchases. The truth is there is little to no difference between using a credit card on the Internet or giving it to a waiter to swipe your card at the restaurant. However, a feature such as this helps create trust in the mind of an apprehensive consumer.

Customer always comes first Amazon has one of the best customer services in the world. Amazon replaces products even before customers mail in the defected product. Placing the customer’s priorities before theirs gain the trust of consumers and in turn, create a loyal following in the long run.

Customer Service
Customers like queries to be answered in a language they can understand and in the simplest manner possible. Online retail businesses are in a precarious position of being unable to get as up close and personal with customers like kirana shop owner scan.

Being able to talk in the regional language or the ability to use simple English words that customers can understand makes an online retail site the top-of-mind recall for customers.

A few final thoughts…
While I’m no expert in entrepreneurship, I am a consumer and I know what I want when I go to an online retailer!

To get what I want, when I want and where I want in the click of a button!

The first article of this two part series on Online Retail






About author
Divya Ramamoorthy is a graduate from Madras university and a post-graduate (MBA) from Jain Group of Institutions- Bangalore, India, based in San Francisco Bay Area, United States. Divya area of expertise revolves around creating careers, identifying talents, recruiting and assisting people . she is also currently enrolled in a certificate program in human resources with the University of California, Santa Cruz. ...more ...more