Online Retailing: The Channel Forward
Retail e-commerce is perhaps the most written about retail topic in recent days. But this has not been an overnight phenomenon. During the mid-nineties VSNL introduced internet to India and the it was during the noughties when internet penetration increased steadily and technological advancements enabled better online interfaces with safer transactions; and e-commerce inched into common man’s life through travel retail, financial services and e-tailing; and the decade of 2010 is taking this phenomenon to the next level where it no longer can be ignored.
The market size of E-commerce in India is estimated to be $14 billion in 2012 and is projected to reach $74 billion by 2017. E-tailing is essentially the selling of retail products and services through internet. The late nineties and early noughties saw the launch of several e-tailing sites such as www.rediff.com, www.indiaplaza.com, et cetera. However, the real defining entry in this domain was that of Flipkart in 2007 and since then we have seen an increased urgency in the space with the entry of several new players across categories; highly discounted pricing, better interfaces and delivery, high decibel media campaigns and investments in players at high valuations - all leading to aggressive competition to grow and scale-up as quickly as possible. Though e-tailing is still a very small part of the overall retail industry in India (0.2 per cent), it is projected to grow at a fast pace (reaching 2 per cent by 2017) and over the next decade its presence will be even more significant.
Whatever the model they opt for, given e-tailing is a volume game, all the players in the space have been aggressively trying to capture a large consumer base to grab the top slot in the long run. E-tailers in India are still evolving and most of them are yet to make money from their ventures – the frenzy to attain the critical mass of consumers where they can start to make money is leading to customer acquisition by heavy discounting (even below costs). Clubbed with mass media advertising and lucrative delivery options (such as cash on delivery which results in high returns) the online channel players will continue to face the challenge of disengaging from the bleeding price wars in the near future.
Key drivers for e-tailing include: