eCommerce and India

As being pointed out by Ashis Jhalani from etailing India, this year, investments in the e-commerce sector have been about Rs 20,000 crore, four times as much as 2013. The e-commerce sector’s share in total organised retail is much less than 1% of total retail at present.

Now this was to set the context of online retail in India. Is it really that big as it is being projected and when I say ‘big’, I mean is it really making money?

During one of my recent meetings, I had someone telling me how they have been successfully selling toothbrushes worth Rs. 750 (for a single toothbrush) online through their channel partners like Flipkart. That did amuse me a bit and I thought that may be the current frenzy over online retail is indeed substantial. For a moment I wanted to believe that eCommerce in India has definitely taken the country by storm and the shopping bags at retail stores must be gathering dust on them with people shopping online. Just as I was about to convince myself, I thought of doing a bit of my own research to stamp my newly found belief. The first thing I did was to check on with this gentleman on the repeat orders for the toothbrushes. That would throw light on whether online shopping is just all about impulse buying and getting carried away by the frenzy or is it serious buying for things that are needed on a daily basis. The reason I wanted to know this was to ascertain the predictions that online shopping is going to replace traditional shopping channels / mediums. The gentleman couldn’t “confirm for sure”. Well, I got my answer!

Just as the hype around organized retail in India seems to have come on track after the initial predictions way back in 2002 that modern / organized retail in India was on its way to having the local kirana store down your road shut its shutters, we shall also witness industry experts toning down their super expectations from eCommerce in India. It shall be interesting to find out if the recent numbers as revealed by a research undertaken by Google will actually meet with reality. What the research has predicted is that the Indian online shopping market is all set to touch $15 billion by 2016. Back in 2012, the size of this market was $8 million and is currently $ 35 million.

As predicted by the retail gurus and kartadhartas in 2002, modern retail in India was slated to have a pie of about 30 per cent in 10 years from then, but still, it has not even crossed 4 per cent! Ouch! Did I hear you say so? So now, if modern retail in India has not managed to live up to its prediction, I am not too sure if it is wise to expect eCommerce to rule the game of retail in India. Even in the U.S., eCommerce contributes towards less than 5 per cent of the overall retail sales.

For online retail in India, to grow to the predicted figure of USD70 billion by 2020, the size of retail in India will have to stand at USD 1.4 trillion. But even if these figures are achieved, online retail in India is not expected to have a share anything larger than 5 per cent. Venture Capitalists and Investment Firms are pumping in big monies – be it for established players like Flipkart of the recent players seen joining the bandwagon of online retail. What though remains to be understood is the fact that are these online retail players making money even as much as the newsprint that is being dedicated towards writing about them? Marked with huge inventories, innumerable returns that are not considered during the accounting stage and of course money towards the manpower being sourced and a sizeable chunk towards larger than life advertising campaigns; online retail in India is playing a challenging and difficult game.

With due respect, I do accept that this festive season, the online retailers managed to pull in a lot many customers to the disappointment of the brick and mortar retailers. As reported by the Confederation of All India Traders (CAIT), in 2014, 30% of watches, 30% of eyewear, 18% of books, 25% of imported cosmetics and 10% of mobiles were sold online.

But if we take a rational look, the online retailers managed to offer huge discounts. In the electronics category, the margin was almost wafer thin. It would be interesting to see if incase the discounts and offers are stripped off when would the medium still have shoppers glued to e-shopping?

So all in all, I have put my doubts to rest on the super success of online retail in India. We have a long way to go and especially so because there are too many loose ends to tie.

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