BackIndia absent in top global e-tailing market rankings
Significantly low Internet penetration, poor infrastructure are major roadblocks to India's entry into etailing market
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New Delhi: Despite the buzz around online retailing in India, the country does not feature even among the top 30 markets for online retail investment, according to consulting firm AT Kearney’s Global Retail E-commerce Index released on Thursday.
Significantly low Internet penetration and poor financial and logistical infrastructure are major roadblocks to India’s entry into the index. To be sure, the index is a compilation of sales of physical products and excludes services.
In 2012, the global survey ranked only the top 10 developing countries in online retail investment, and India did not feature on that list. For 2013, the consulting firm ranked both developed and developing countries in its survey.
“India is still trailing far behind its other emerging market counterparts in terms of overall value," said Debashish Mukherjee, a partner at AT Kearney. He added that a more mature approach towards providing a multi-channel retail experience is needed among Indian online retailers. Internet penetration, according to Mukherjee, both on mobile phones and desktops, needs to go up to enable a more hybrid model of online shopping.
India’s online population is close to 205 million according to an October report by the Internet and Mobile Association of India (Iamai) and IMRB International. Besides, of the 900 million people with mobile subscriptions, only 10% use smartphones and can access the Internet.
“Greater access, coupled with aspiration to buy into brands and services will undoubtedly fuel the growth in tier II cities, and across the socioeconomic spectrum," said Vikas Ahuja, chief marketing officer at online retailer Myntra.com. “We haven’t even scratched the surface yet."
The report pegs the Indian online shopping market at $1.5 billion, where online shopping portals such as Flipkart.com, Jabong.com and Myntra.com retail books, electronics and fashion labels. Amazon.com Inc., the world’s largest online retailer, is present in India through a marketplace model called Amazon.in.
China ($64 billion) continued to be at the top spot for the second year in a row for online market attractiveness, followed by Japan ($52 billion) and the US ($177 billion), according to the global Retail E-commerce Index.
Developing countries feature prominently on the index, holding 10 of the 30 spots. “These markets have been able to shortcut the traditional online retail maturity curve as online retail grows at the same time that physical retail becomes more organized. Consumers in these markets are fast adopting behaviours similar to those in more developed countries," the report said.
India’s online market is at a nascent stage, with companies seeking to adapt to consumption behaviour online along with maintaining cost structures. The report notwithstanding, online retailers believe in the India story.
“When the initial wave of e-commerce started, infrastructure was underdeveloped. That’s changing and there is serious investment going into the back end," said Harish Bahl, founder the at Smile Group, which runs e-commerce sites such as Fashionandyou.com and Bestylish.com.
Bahl said that although the maturity curve for e-commerce in India is longer than its global counterparts, the fundamentals remain strong. “There is top-line demand. Still a lot of work remains to be done, but we are in a good place compared to the last few years."
Praveen Sinha, co-founder of New Delhi-based e-retailer Jabong.com, said Internet accessibility and affordable gadgets that enable access will play a critical role in increasing the reach of online retail. According to him, an increase in the sheer number of online users who can be potential consumers will be pivotal.
India’s large population base and a relatively younger population is an attractive long-term proposition for retailers, according to the report.
AT Kearney’s Mukherjee said that companies will need to do more both in terms of ad spends and better logistics management. “Logistics and payment systems must be seamless to ensure a better value proposition of convenience associated with online shopping while ensuring profitability," he said.
Consumer electronics and apparel are the dominant categories for online retail sales globally with a 25% and 19% contribution, respectively, to total online sales.
Relaxing foreign direct investment (FDI) norms would help e-tailing companies not only in terms of investments, but even in bringing in the necessary knowhow, Mukherjee said.
In the last couple of months, Indian retailers have lobbied with the government to ease FDI rules in e-commerce, which is facing a paucity of funds due to the capital-intensive nature of the business.
An estimated 70-80% of e-commerce companies are in dire need of funds, according to a recent KPMG and Iamai report titled e-Commerce Rhetoric, Reality and Opportunity.
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