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Virtual Buying | More Indians are shopping online

Virtual Buying | More Indians are shopping online
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First Published: Mon, Aug 13 2007. 12 41 AM IST
Updated: Mon, Aug 13 2007. 12 41 AM IST
The latest Harry Potter book has bewitched even virtual India. An online shopping site, Indiaplaza.in, reported 15,000 advance bookings of J.K. Rowling’s final book in the series, Harry Potter and the Deathly Hallows. The figure might be a tiny fraction of the 240,000 sales reported in the country, but given that only 2.2 million Indians shop online regularly, and only 21% of them buy books, the Harry Potter order marks a milestone in online shopping in the country.
A much-hyped retail medium since the dot-com bubble in the early 2000s, online shopping has been slow to click here, however. The limited spread of the Internet and digital payment options such as credit cards has stalled its growth. But recent data shows a surge in the number of online shoppers, and a definite shift in buying patterns. A survey conducted by online research firm Juxtconsult in April, covering 10,000 households in 31 cities, shows a 22% jump in the number of online shoppers—from 11.9 million in 2006 to 19.1 million in 2007—though the number of “active buyers” has not changed.
Changing profile
The profile of the online consumer is changing. While 73% of the shoppers last year were from SEC (social economic classification) ‘A’ and ‘B’, including high-income groups in metros, that figure dropped to 67% this year. The spread of online shopping to smaller towns and lower SEC groups, however, has not meant a dip in the economic profile. About 32% of buyers were from households with a monthly income of more than Rs30,000 in 2007, compared with 22% last year.
The improving economic profile has led to significant shifts in the buying pattern as well: the value of purchases made online has gone up steadily.
Says K. Vaitheeswaran, chief operating officer, Indiaplaza.in: “In the last few years, so many brands have come in, offering standardized products, that people are comfortable buying a Nokia or a Motorola without touching it. Also, a lot of purchases these days are driven by word-of-mouth and peer pressure.” He says electronics (25%), books (20%) and mobiles (20%) account for the bulk of his company’s business. And the buys range from Rs250 to Rs1,10,000.
Going up the price line
This represents a marked shift from the earlier trend, when shoppers preferred to buy cheaper products. “Earlier, people were comfortable buying mobiles and MP3 players but now, they have extended their range to buy camcorders and laptops as well,” says Deepa Thomas, spokesperson for eBay (known as Baazee.com, until it was bought over in 2004).
It is not just electronic gadgets that have become more popular. Over the past two years, lifestyle products, too, have found buyers online. “People are buying diamond and jewellery sets and home décor,” says Thomas. eBay claims it sells a piece of jewellery every six minutes.
The most popular online buys, however, are train and air tickets. More than half the respondents in Juxtconsult’s survey said they bought rail tickets online—a 20% increase over last year. About 45% bought air tickets online, a jump of about 23%.
Credit crunch
The convenience of online buying—which includes easy search options and the fact that you can avoid long queues at railway ticket centres—has helped overcome reservations about online payments through credit cards. “It began with the railways, and also with low-budget carriers,” says Sharat Dhall, head of Expedia India, a popular travel site in Europe and America that is set to launch in India. “They offered such attractive prices that the perceived risk of using a credit card online was offset by the benefits these carriers were offering,” he adds.
According to the survey, only 10% worry about misuse of a credit card now, a vast improvement from the 27% last year.
Hurdles remain
Overall, however, the Indian online shopper still appears to be more interested in searching for products than buying them. While 19.1 million Indians search for products, only 10.8 million actually buy anything. Payment options remain one of the biggest hurdles. Of the non-buying online shoppers, 42% cite “not having a credit card” as a reason for not buying online.
Even those who buy are not tempted to do so often. Only 9% of Indians online make monthly purchases. In absolute terms, the number of “active buyers” remains stagnant—2.2 million in both 2006 and 2007.
It is the 8.6 million irregular buyers that the e-commerce companies are keen to court. A host of companies, including Television Eighteen India Ltd, have launched a slew of websites in anticipation of growing Internet use in India.
The largest shopping website by far is eBay India, the online marketplace, which 34% of shoppers “use on a preferred basis”, according to Juxtconsult. The site has more than two million registered users, and more than 100,000 products.
New entrants such as futurebazaar.com, a unit of retailer Future Group, have made appreciable gains online. The site, launched in November 2006, has a 6% share—preference for the older players, eBay and rediff, dipped 4%.
Online glitches
While user figures might seem promising, the sales and profit figures are not as easy to master, with most companies struggling to break even. Among the biggest casualties are travel websites which sell low-cost airline tickets. “You’ve got to understand that the margins in this business are very low,” says an official at a travel website who did not want to be identified. “It’s about 5%, and that’s before 1.5% is shaved off for credit card charges. And then there are site costs, which further cut into the margin,” he points out. E-commerce companies are currently more bothered about ticket sales than the bottom line, a situation that Dhall says is unviable in the long run. “You will see consolidation in this segment soon,” he adds.
The costs and logistics of running an online retail network are as cumbersome as running an offline one. When the new Harry Potter book was released, it was not the huge demand that challenged Indiaplaza.in, but the logistics involved in the shipping.
“Packing 15,000 books over three days is no big deal,” says Vaitheeswaran. “Packing them and delivering them on the same day when the books arrive in the morning and shipping them from Bangalore to all over the country is a humongous logistical exercise.” The challenges of doing business online in the country have changed steadily. Different states have different paperwork, West Bengal’s being the most complicated. And this results in difficulties in shipping and inefficient service.
About 36% of Juxtconsult’s respondents complained about “delayed delivery” of the goods ordered. For the Harry Potter book too, the online sellers, including Indiaplaza.in, could not deliver to buyers in smaller cities and towns on the first day of release as promised. The eight metros, according to the site, were serviced on the first day.
Spreading the Net
Revenues of Indian online shopping are dependent mostly on sales to the consumer and commissions from the seller. eBay, which allows netizens to host auctions of used goods, charges the sellers a certain percentage of the sales price.
It has also recently begun displaying advertising on its site. Ads contributed Rs210 crore to the revenues of Indian websites in 2006; a tiny fraction of the $16.9 billion (about Rs68,000 crore at today’s rate) generated by online ads in the US.
The idea is to generate volumes, both in terms of visitors to the site and product options. While Sify.com acquired US online company Globe Travels last year to target the US-India travel segment, rediff.com offers a platform through which a company can list its products for free and is charged only when a consumer views them.
A big drawback is poor Web access for half the population. Internet usage in the country is male-dominated, a fact e-commerce sites have been well aware of. On eBay, 85% of all product buyers are men, and the company has begun attempts to lure women into the fray.
Sanjay Tiwari, director, Juxtconsult, says the lack of women online is due to many factors. “It’s a combination—inaccessibility, a lack of women-specific content, ignorance, inertia (and) other priorities. It is not the need or utility factor per se, because most online activities are as relevant for women as they are for men. The barriers are more perceptual than real,” he said in an emailed response.
For now, e-commerce in India is more about investing in the future, and hoping that technology spreads enough to make business viable.
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First Published: Mon, Aug 13 2007. 12 41 AM IST