The last two years we have seen rapid growth in Online Shopping within India. While globally this model is now approaching maturity state, within India it still is in its nascent stage. One of the key factors in this growth is that Online Shopping provides greater customer choice and also increases the convenience. However, a strong business model coupled with a first class level of service is imperative for this business model to be successful.
Let us first have a look at what is the potential we are looking at vis-à-vis Indian Market.
The total online revenue in the year 2013 has been to the tune of about USD 20 Billion. Of these, more than 70% of the transactions have been travel related. So we are having at least $ 2 Billion Gross Merchandise Value transacted online.
This again is just a pittance when compared with the total market potential. In India, The Offline Retail businesses still control more than 99% of the total volume of the business.
Of this, the unorganised sector commands a phenomenal share of around 90% of the total sales. The brick and mortar business (organised retail stores) hover around 10% of the total sales.
Is this likely to change? What about the Indian Retail customers’ buying mentality “can’t touch, won’t buy”?
The internet penetration in India has been growing at a phenomenal rate also. There were 20 million online shoppers in India and it is likely to double within the next two to three years to 40 million by a very conservative estimate.
Will this increase in the user base have a corresponding increase in the volume of the business done online?
A bit of extrapolation will reveal the answer.
In US, though the online sales is just 10% of the total offline revenue, the increasing trend is that in one way or other more than 49.5% of the total sales is affected by the web. Either in the form or reviews from experts and or peers, or comparison (price, feature), the presence of the products online is becoming a necessity. Will this trend be replicated in India?
Let us now have a look at how connected India has been in the past and how connected it will be in the coming days.
From around USD 2 billion in 2013, we are looking at it becoming more than USD 8.5 billion in 2016.
If you are looking at the experience of the US market, where more than 50% of the total retail sales is in one way or the other affected by the content on the internet, the need for an online shop becomes more compelling.
If you are in the retail business, and you haven’t got your online store as yet, get on to the eCommerce bandwagon before it is too late.
** Acknowledgement: We have used the data from Accel India VC’s report extensively. Click here to view their document in SlideShare