Some details about Indian e-tail

It’s raining Diwali offers from some of the Indian e-retailers like Flip kart, Homeshop18 (B2C), Jabong etc. but here are some aspects that consumers might be missing out on.

Want to buy a digital camera, a smartphone, a tablet, a part of furniture, apparels, accessories, home ware kitchen ware, you name it or Google it and there’s a sweet deal offered by one of the many e-retailers ( as we call them) trying to be a part of the big future retail business of India.

It’s true that these ventures-websites have so far managed to prove their original critics wrong that the Indian consumer is averse to online transactions and an Indian would always prefer to physically inspect and buy his merchandise.

The new age generation having high disposable incomes, tech savvy are pretty comfortable swiping their plastic cards online. Concepts like cash on delivery and the return policies have also played a key role. We can say that the last year has been really exciting for the entire industry. Certain estimates state that apart from the handful 10-20 leading e retailers there are currently more than 4000 websites in the b2c segment in India. I call them the e-retailers!!

These are over and above the actual brand and product owners of the consumer goods industry having their direct platforms and websites for e retail. Like Croma online, Samsung, HP and others.

We think the smartphone revolution (credit to android-goggle) in our country which led to high internet penetration (3rd biggest internet user base in the world) has also played a key role in taking the e-retailing industry a step ahead.

During this festive period traveling in a Mumbai local first class compartment will confirm this view. People of all age groups from 14 to 40 are talking about flip kart, e-bay, amazon, olx and numerous websites. Comparing and even placing orders on their smartphones and tablets. Picture this with an entire country. One of the biggest consumer markets in the world. Whoa!! We are looking at one of the biggest business opportunity in our country in the last couple of decades.

So can we say that the time has arrived for the big leap for these e-retailers? Has it? Let’s try and dig in.

First a closer look into the internet surfing statistics shows that the conversion ratio of booking a product online after researching it and comparing prices is still pretty low.

Analyzing the purchasing pattern online it is very clear that maximum purchases are affected only when sweet deals or attractive discounts compared to local markets are offered, thus squeezing the margins of the online retailers. So managing their costs both procurement and operations simultaneously and scaling up volumes has become the key for survival in this industry and not all start-ups have been able to successfully manage that.

Also the recent boom in the industry is restricted to a very select group of product categories of Electronics, Apparels, Accessories, Kitchen-ware and also more of the branded goods – the organized sector. So a large pie of the Indian retail – consumer goods industry has still to find its footprint in the online space.

Even though internet penetration has increased significantly and there’s this phenomenon of the changing tech savvy plastic money user (Youth of India). But it’s still restricted to the metros and certain tier1 towns. The real challenge for the online retailers now is to go beyond these markets and tab the rest of Indian consumer markets.. If they can find a way to make inroads there then surely they have the biggest business opportunity in our country in the last couple of decades at their helms.

Right now it’s a buyer’s market out there.

We feel at this stage we can compare this industry to the story of the Indian air travel carrier industry. Since the last decade many major players or new players have wanted or have tried to tap this industry and we all know their fate.

It’s similar in the online e-retail space. There’s been a lot of funding and capital raised by the major and small players in the industry in the last couple of years. But looking at their PnL’s they are not just losing money but bleeding. They are pitching and justifying by market share and valuations and long term horizons.

But just as in the case of air carrier industry we all know that this business logic is not universal for all industries.

Except one exceptional player (Deccan), it has succeeded to be profitable because it was able to understand the Indian market. It’s peculiarity and controls its cost excellently while striking a balanced between its price offerings and quality of services.

So it will be pretty interesting to see who manages to be the Deccan of the e retail industry and also the fate of the numerous smaller players in the coming few years. Till then it’s a buyer’s market out there. So let’s sit back enjoy the sweet deals till they come, especially this Diwali it’s a carnival out there!!

Advertisements

5 thoughts on “Some details about Indian e-tail

  1. So.. basically the reason why they r able to provide savvy deals just cause they sell it as an wholesaler only the catch is that the nation is considered!?!?

    • They are burning cash presently. The biggies just concluded another round of fund – raising. Need to wait and see when the business model actually stabilises following the footsteps of the Chinese behemoth Alibaba and western giants.

      • Exactly they are burning a lot of cash now… Most of the Indian cos are focusing on market share and volumes…maybe because they are playing the valuation game.. Sellout plans…

        However its not that easily to keep funding such operations… They soon need to find profitability.. Deeper penetration.. Dynmic procurement srtategies..More indigenous products with better margins… N effective cost controls …Lets wait an watch…

  2. So whats ur basic impression on this?
    What kind of business model strategy will willing suit this style although Alibaba and western giants are more like reference at this point!

    • Alibaba is seeking to list in the US with a valuation of $ 100 billion plus with Sales of $ 150 billion plus. It essentially runs two online retail platforms; TaoBao and Tmall which have clocked highest single day transaction value there. Regading margins, even our offline retailers dont exactly earn great margins, just that increasing the scale of operations quicker would help.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s