Home > opinion > India at the tipping point in e-tailing

A consumer building a house in the hills in Himachal Pradesh ordered a lot of branded hardware—tiles, bath fittings and other stuff—online. It not only saved him the legwork, but also freed him from the anxiety that his contractor might procure and use sub-standard material.

This example was cited at a recent conference in New Delhi by Kunal Bahl, co-founder of Jasper Infotech that owns and operates the online marketplace Snapdeal. It epitomizes the emerging online shopping behaviour of the new Indian consumer, who is comfortable buying a wide variety of things off the Net.

According to a report by I-Cube and IMRB International, there were 169 million Internet users in India in December 2013. This figure was to touch 192 million in June 2014.

To be sure, a curious mix of products is being sold online by various e-commerce websites with the total business valued at $3.1 billion, excluding travel services and tickets, according to a November 2013 report by securities house CLSA.

The Internet and Mobile Association of India (IAMAI) claims India currently has 25 million shoppers who are ordering products ranging from baby diapers and men’s grooming products to groceries and home furnishings online. Fashionistas are either flocking Indian portals such as Myntra, Snapdeal or Limeroad or swarming international online shopping destination like ASOS, Neiman Marcus and Macy’s. The affluent are ordering their children’s dresses online from GAP, yet others are addicted to Gilt.com, a New York-based flash sales portal.

There is a market to buy and sell second-hand products, too, ranging from bird cages to cars. According to a report on GenerationZ comprising the 14- to 19-year-olds, by design consultancy FITCH Design India, which works in the area of retail, this generation may be “cash-poor but savvy—there is no shame in using bargain websites such as eBay, nor in picking up a good deal second-hand".

“There has been a definite social change—and the improvement in infrastructure has also greatly contributed to the boom in Internet sales," says Tripti Lochan, chief executive officer, VML Qais, a strategic, full-service digital agency.

According to her, India is absolutely at the tipping point in e-tailing, what with the two big firms making waves recently—Flipkart with its announcement of $1 billion raised from investors and Amazon with plans to invest $2 billion in India.

A large part of the change in consumer behaviour towards online shopping has also been brought about by the big expenditure on advertising by dotcom companies. Suchi Mukherjee, founder and CEO of fashion portal Limeroad, says the shift in mindset is directly proportionate to the advertising dollars spent on creating awareness and building trust for the brands. The initial advertising expenditure incurred by a few firms benefited all by expanding the e-commerce business.

“Such heavy advertising gives consumers the impression that you are big and affects their buying behaviour," says Mukherjee, adding that the growth in the sector could partly be attributed to the big marketing spending by dotcoms that exceeded the budgets of consumer goods makers this year.

Secondly, the advertisements publicised the easy return policy of the e-commerce sites that de-risked buying for the mass consumer who immediately bought into this brand promise. That is not all. The introduction of cash on delivery further bumped up sales in a country where credit-card penetration is low.

Although most studies talk about heavy Internet browsing and shopping by the young, the older age groups are also coming into its fold albeit indirectly. “Anecdotally speaking, we know of 60-year-olds browsing and buying sarees on limeroad.com with the help of youngsters in the house. So a new consumer demography is being added to Internet shopping," says Mukherjee.

Although the key categories in e-tailing are travel, personal computers, mobile accessories and consumer durables, interest in jewellery, textiles, health and beauty products, cars, real estate and investment, packaged consumer goods and food is also growing. “What’s more, e-tailing is not just replacing traditional retail transactions but also stimulating consumption—through research and comparison—that would not otherwise take place," says Lochan.

Lucy Unger, managing director, FITCH, refers to this research and comparison phenomenon, driven by the Internet, in the GenZ report. “In terms of shopping, the behaviour of Gen X and Y is a very linear ‘see and buy’ process. However, with GenZ that ‘see’ and ‘buy’ are separated by a period of ‘aspirational browsing’. They will have Googled items before leaving home, browsed Pinterest, used the Web to cross check prices and Instagram their friends for assurance before a purchase is made and it’s Tweeted about," the report observes.

India is a vibrant market for Internet sales growing at 88-90% a year, says Unger. Of course, lower prices are a big factor pulling shoppers online, but the medium also allows for disruption and fast change as well as very targeted and tailored retail opportunities. “We know that, on the whole, consumers like retail to inspire, entertain and engage them, and the Internet certainly facilitates this..." she says.

FITCH calls GenZ (14 to 19-year-olds) the most complex and critical shopper, for, by 2020, it will be the largest group of consumers worldwide making up 40% of the US, Europe and the BRIC countries and 10% in the rest of the world.

E-commerce may be a growing area for India but challenges still remain. For Unger, pragmatic things like simple access to the Internet particularly in rural areas (where coverage is less reliable) and the relatively low penetration of credit cards are both key factors. Neither of these factors is insurmountable of course.

It’s very possible, however, that rather than becoming an e-commerce nation, India could become an m-commerce nation. Mobile penetration in India is extremely high and increasingly cheap smartphones mean access is becoming more possible for more people. India could leapfrog e-commerce, Unger says. Mukherjee could not agree more. Within three months of the launch of its mobile app, 65% of limeroad’s total sales are now coming from the mobile.

Subscribe to newsletters
* Enter a valid email
* Thank you for subscribing to our newsletter.

Click here to read the Mint ePaper Livemint.com is now on Telegram. Join Livemint channel in your Telegram and stay updated

My Reads Logout