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 Raghavendra
Kamath, Business Standard
Mumbai,
1 October 2015
 India's
online marketplaces are blazing ahead with Amazon leading the
way, Flipkart a shade behind and Snapdeal at third position. As
per comScore data, Amazon India has received 23.6 million unique
visitors, Flipkart, 23.5 million and Snapdeal, 17.9 million in
May 2015, a recent study on the growth of retail (online and physical)
in India said. And the entire online retail segment grew 40 per
cent in the financial year 2013-14 while organised physical retail
grew by a mere 10-12 per cent and the whole brick and mortar retail
industry grew by just 6-7 per cent.
The country's retail sector has definitely turned a corner with
big brand brick and mortar stores going omni-channel and the large
online players breaking into a pace that could see them racing
past the old retail chains that do not have an e-presence. 'All
new channels grow faster than established channels in initial
years,' says Rakesh Biyani, joint managing director, Future Retail.
And he believes, 'Retail across channels has the potential to
grow over the next two decades. Any retailer that will create
an omni-channel retail presence (capabilities to service customers
seamlessly across channels) will most likely get a bigger share
of the growth in consumption.'
Some also say that the sharp rise of online retail is partly
explained by the low base the numbers have been calculated from.
Devangshu Dutta, chief executive of Third Eyesight, a retail consultant,
says that the base of online retail is significantly smaller in
absolute terms and hence online showed much higher growth.
That is true but there is no doubt that buyers are voting with
their wallets when it comes to the big players such as Amazon,
Flipkart and Snapdeal.
Drivers of the e-volution
According to the study by property consultant Colliers International
and Frost & Sullivan, cash on delivery has been the big game
changer for e-tailing. So has been the proliferation of high-speed
internet and internet-enabled smart devices and the transparency
in pricing. Buyers believe that they are getting the best deals
online.
'The entry of a number of high profile participants into the
online retail recently, along with an influx of private equity
funds and investment from foreign venture capitalists, has resulted
in a huge boost in funding that translated to tremendous sales
growth in e-tail,' the study says. Foreign venture capitalists
and private equity firms invested US $3.9 billion, led by Tiger
Global, Sequoia, DST Global, Soft Bank, and Sofina it adds. And
Amazon has announced that it will invest US $2 billion in expanding
its Indian operations.
Players such as Amazon and Flipkart are spending big on warehousing,
sortation and fulfillment centres and of course on advertising
and brand building. 'It has been observed that discounts offered
by e-tail companies are the primary driver…all the major
players, whether it is Flipkart or Snapdeal, are bleeding cash.'
Clicks for footfalls
Online retail in India is expected to touch $ 22 billion by 2018
and this will largely be on the back of the sharp growth in mobile
users to 300 million by 2017 from 159 million users at present.
The impact on brick and mortar stores has been brutal, especially
in sectors such as electronics. South India's largest brick and
mortar cellphone retailer, UniverCell is looking to shut the 380-store
chain according to the report.
There has been a sharp drop in footfalls and several large chains
have closed more shops than they have added in the past 3-4 years.
The study says physical retailers are cutting down on real estate
investments and store expansion plans.
Dutta of Third Eyesight, however, believes it is unfair to
pin the entire blame on online retailers for the cautious expansion
of physical retailers. "The economy has not been at the expected
levels and retailers are also looking at their own costs, efficiencies
and so on," he adds.
Besides Biyani says, 'Physical retailers continue to open new
doors and reach many more cities. Future Group is expanding most
of their concepts this year.
Still there is no denying that the physical stores are facing
an upheaval. Even those looking to set up e-stores are coming
up against the growing clout of e-commerce giants. The study notes,
'Certain brands sell exclusively on the Internet via tie-ups with
e-tail partners, thereby denying retailers, their online business.'
The only way to survive the onslaught of e-tail is for the physical
chains to integrate the online and offline presence as Future
Group, Shoppers Stop, Lifestyle and others are doing and to build
strategic alliances with e-commerce companies.
INDIAN E-COMMERCE INDUSTRY: ESTIMATED TO GROW TO $56 BILLION
BY 2023
- The Indian e-commerce industry grew at a CAGR of 34 per
cent from 2009 until 2014 touching $16.4 billion.
- E-tailing is the fastest growing segment in Indian e-commerce
at a CAGR of 56 per cent over the same period (2009-2014).
- Foreign venture capitalists and private equity firms invested
$3.9 billion, led by Tiger Global, Sequoia, DST Global and Soft
Bank.
- Global e-tailer Amazon has announced that it will invest
$2 billion in expanding its Indian operations.
(Published in Business
Standard.)
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