VSRD International Journal of Business and Management Research, Vol. VII Issue XI November 2017 / 191 e-ISSN: 2231-248X, p-ISSN: 2319-2194 © VSRD International Journals: www.vsrdjournals.com

RESEARCH PAPER

INDIAN ONLINE (E-TAILING) MARKET : GROWTH, OPPORTUNITIES AND CHALLENGES

Md. Abdullah Guest Faculty, Department of Business Administration, Ranchi University, Ranchi, Jharkhand, . Corresponding Email ID: [email protected]

ABSTRACT

The Indian Online Retail segment is changing rapidly by the impact of technology. Smart phones internet enabled customers to connect e-tailing in a huge manner. E-Tailing has become popular over the decade. Today is the Era of Globalization and the consumer is not bound within a particular place to access products available anywhere in the world. Now he can go beyond the boundaries of any market area where he lives, to access the things of his interest. The medium holds many virtues favorable for the retail industry including a higher customer penetration, increased visibility, and convenient operations. India has an internet user base of about 354 million as of June 2015. Despite being third largest user base in world, the penetration of e-commerce is low compared to markets like the United States, United Kingdom or France but is growing much faster, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point. The current web-based models for e-tailing are part of an embryonic phase preceding an era of rapid transformation, challenge, and opportunity in Indian retail market. The Indian retail market is witnessing a revolution. In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.2015, six Indian e-commerce companies have managed to achieve billion-dollar valuation. Namely, , Snapdeal, InMobi, Quikr, OlaCabs, and .

Keywords:Internet, Retailing, E-tailing, growth, Challenges and Opportunities.

1. INTRODUCTION that are different from the ones required in the ticketing The E-Commerce market in India has enjoyed phenomenal segment. They will have to manage challenges associated growth of almost 50% in the last five years. Although the with a diverse supplier base, technological constraints, trend of E-Commerce has been making rounds in India for customer experience, and authenticity of information and 15years, the appropriate ecosystem has now started to fall grievancere-dressal. in place. The considerable rise in the number of internet users, growing acceptability of online payments, the The online retail segment has evolved and grown proliferation of Internet-enabled devices and favorable significantly over the past few years. Cash-on-delivery has demographics are the key factors driving the growth story been one of the key growth drivers and is touted to have of E-commerce in the country. The number of users accounted for 50% to 80% of online retail sales. Players making online transactions has-been on a rapid growth have adopted new business models including stock-and- trajectory, and it is expected to grow from 11 million in sell, consignment and group buying; however, concerns 2011 to 38million in 2015. surrounding inventory management, location of warehouses and in-house logistics capabilities are posing Venture capitalists (VC) and private equity players have teething issues. demonstrated their faith in the growth of E-Commerce in the country. This is amply substantiated by the significant increase in the total investments (US$305 million in 2011 2. WHAT IS E-TAILING? against US$55 million in 2010).Online travel has E-tailing or e-retailing refers to the selling of retail goods traditionally been the largest E-Commerce sub-sector (by electronically over the Internet. The term is a short form for "electronic retailing", and surfaced in the 1990s for revenue) in India. Nevertheless, online retail is catching up being frequently used over the Internet. The term is an fast and is expected to match online travel revenues by inevitable addition to other similar terms such as e- 2015. To improve margins, online travel players are business, e-mail, and e-commerce. E-tailing usually refers diversifying their offerings to include hotel reservations, along with the regular ticketing services. To make the to the business-to-consumer (B2C) transactions. E-tailing most of this move, players will need to develop skill sets is gaining ground. Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 192

Online retailing is classified into three main categories:

Model of e-commerce transactions

B2C C2C Online travel, B2B Online classified, Online retail/e-tailing, Online Classifieds Online retailers Online classifieds, Financial services

Online travel Financial services Customer buy tickets, book Online retail/e-tailing hotels and purchase tour Online sale of products such as Online sale of packages online. The books, mobile insurance, loans and ticketing services can be accessories, electronics and home mutual funds. for airlines, railways or and kitchen appliences among buses. others.

(I)Click – The businesses that operate only through the retail industry that is on a rise despite the disadvantages online channel fall into this category. Prominent examples associated with it. in this category include: Dell, Amazon.com and e-Bay.

(ii)Click and Brick – The businesses that use both the 3. OBJECTIVES OF THE STUDY online as well as the offline channel fall into this category.  To understand the online retail market in India and its impact on Indian retail. (iii) Brick and Mortar – This is the conventional mode of  To study about e-tailing in India and growth in retailing. The businesses that do not use the latest retailing modern marketing. channels and still rely upon the conventional mode belong  To study about opportunities and Challenges of e- to this category. E-tailing offers the consumers huge tailing in India. amounts of information in the form of web sites with useful links to similar sites that allows consumers to compare products by looking at individual items. The 4. SCOPE AND METHODOLOGY OF THE convenience of is unmatched indeed. STUDY Shopping out of your home or office reduces the stresses The study looks into the online retail market and how it of waiting in lines and dealing with irritating sales people. had impacted the Indian retail industry. The scope of the However, E-tailing causes problems with fit, since the research study is limited to online retail market, the consumer cannot try the items on. Return policies may opportunities and challenges for the evolving online retail also act as turn offs and items can be difficult to return. market in India. The shipping and handling costs may turn the customers away. E-tailing requires technology savior customers and 5. SOURCES OF DATA this puts a limit on its potential reach. We can see that E- The study is primarily based on the secondary data tailing is emerging as an interesting phenomenon in the collected from magazine, journals, industry reports, Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 193

company websites, news articles and reports. the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India 1.Growth of E-tailing in India: is expected to grow at a rate of 22% over the next 4 years India's e-commerce market was worth about $3.8 billion in and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. 2009, it went up to $12.6 billion in 2013. In 2013, the e- Indian e-tailing industry is estimated at Rs 3,600 crore retail segment was worth US$2.3 billion. About 70% of (US$800 mn) in 2011 and estimated to grow to Rs 53,000 India's e-commerce market is travel related. According to Crore ($11.8 billion) in 2015. Google India, there were 35 million online shoppers in India in 2014 Q1 and is expected to cross 100 million Overall e-commerce market is expected to reach Rs 1, mark by end of year 2016. CAGR vis-à-vis a global 07,800 crores (US$24 billion) by the year 2015 with both growth rate of 8–10%. Electronics and Apparel are the online travel and e-tailing contributing equally. Another biggest categories in terms of sales. big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites. Key drivers in Indian e-commerce are:  Large percentage of population subscribed New sector in e-commerce is online medicine. Company to broadband Internet, burgeoning 3G internet users, like Reckwing-India, Buyonkart, Healthkart already and a recent introduction of 4G across the country. selling complementary and alternative medicine where as  Explosive growth of Smartphone users, soon to be NetMed has started selling prescription medicine online world's second largest smart phone user base. after raising fund from GIC and Steadview capital  Rising standards of living as result of fast decline in citing there are no dedicated online pharmacy laws in poverty rate. India and it is permissible to sell prescription medicine  Availability of much wider product range online with a legitimate license. (including long tail and Direct Imports) compared to what is available at brick and mortar retailers. However, with immense growth opportunities, the online retail market faces the challenges in terms of logistics  Competitive prices compared to brick and mortar services as the key to online retail is to deliver products on retail driven by disintermediation and reduced time. Logistics and infrastructure, huge maintenance cost inventory and real estate costs. of warehouses, costly middlemen, and error in online  Increased usage of online classified sites, with more payments are a few of the bottlenecks in the growth of the consumer buying and selling second-hand goods industry.  Evolution of Million-Dollar startups like Jabong.com, Saavn, Makemytrip, Bookmyshow, Improvements on the payment front have brought about Zomato Flipkart, Snapdeal Etc. the increasing use of plastic money by Indian consumers.Payment gateways have now been made more India's retail market is estimated at $470 billion in 2011 secure through multiple levels of authentication via one- and is expected to grow to $675 Bn by 2016 and $850 Bn time passwords (OTPs) and transaction passwords. This by 2020, – estimated CAGR of 10%. According to has helped strengthen users’ confidence in carrying out Forrester, the e-commerce market in India is set to grow online transactions. These enablers augur well for the the fastest within the Asia-Pacific Region at a CAGR of development of E-Commerce in India. over 57% between 2012–16. DEVICES As per "India Goes Digital", a report by Avendus Capital, (i) Increased spending power of Indian consumer a leading Indian Investment Bank specializing in digital Annual disposable income per household is expected to media and technology sector, the Indian e-commerce increase at a CAGR of 5.1% from2005 to 2025. market is estimated at Rs 28,500 Crore ($6.3 billion) for

2005 2015 2025 US $2,632 US $ 3,823 US $ 6,790

Source: Research on India

The last decade saw high GDP growth in India, leading to 2005 to 61% in 2015 and 70% in 2025. enhanced income levels. This helped position India among the fastest-growing consumer markets in the world. (ii)Discretionary vs. non-discretionary spend (%) Discretionary spending is expected to rise from 52% in

Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 194

120

100

80

60 Non-discrtionary Discrtionary 40

20

0 2005 2015 F 2025 F

Source: Master card worldwide insights 4Q 2010 PWC e-commerce in India report, TechSci

Declining prices of PCs (on the back of technological users in absolute terms. India is considered as one of the advances) and increasing disposable income make it prominent IT hubs in the world but, all these have affordable for the majority of people to buy PCs, which somehow not translated into positives in the retail space. are now available atlow a price of US$400–500. PC sales Retail industry in India stands at $390 billion (Source: have been improving steadily in India over the years India retail blitz, A T Kearny) and organized retail is fast (stood at 89.3 million in 2011 and forecast to rise to 217.3 catching up. Many of the big retailers have forayed into million by 2015). the on-line mode without much success. On-line retail forms a meager 0.47% of the total retail market. This 2. Opportunities for E-tailing in India: shows the plethora of opportunity for on-line retailing in A quick survey of average Indians who have access to India. The Indian e-commerce market at INRI 9200 core is Internet showed that most of them hardly could recall 1-2 heavily tilted towards travel sites. More than 75-80%of on-line retail portals and most of their responses were this market is constituted by travel portals like travel site. In comparison an average Indian settled in Makemytrip.com, Yatra.com etc. About 12% of the rest is America could recollect more than 5 on-line portals. This contributed by on-line classifieds like matrimonial and job clearly indicates the huge gap between the retail setup portals. between India and other developed countries. Internet penetration rate of 7.1% in India is one of the highest in E-Commerce Industry in India: world and we have one of the highest numbers of Internet

E-commerce Industry in India

2020 F

2016

2015

0 20 40 60 80 100

Source: Master card worldwide insights 4Q 2010 PWC e-commerce in India report, Tech Sci

The above mentioned data is motivating enough for both buyers and sellers, who are willing to use internet as a Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 195

source of their commerce, as always we are focused on the towns which are growing fast, the life of an average customer centric market where the customer is god, and person has become very fast. He has very little time after every dance on the stage of market is performed according his normal routine office schedule to go to the market and the tune of customer, here we will analyze some of the purchase even the daily need items. factors which attracts the customers preferring the online purchasing. (vii)Market Research: Retailers can use their online presence as a tool to gain (i) Convenience Factor: valuable customer information to forecast future customer Online retailers are moving towards enhancing the demand. Baker (2005) has pointed out that online market convenience factor and thus attracting the shoppers to use research has some powerful advantages, such as this channel. Moreover the growth of the mobile monitoring real-time buying decisions. In addition, online communication has led to the growth of the online customers have the knowledge and experience necessary retailing as people are more accessible to internet 24 x 7. to answer the questions, which produces more accurate Like in the case of purchasing from the physical market and reliable data. we have to wait for the shop to open and certainly we try to get our merchandise before the shop closes, but in case (viii) Online Customer Service: of online retailing there is no time limits involve all you In India, websites are becoming new channels for need is a internet connection and money in your pocket to conducting customer service; therefore their general pay the price and everything is at your door step. acceptance level will increase, due to the benefits provided to customers. For example, a customer could ask for a (ii)Price and Selection: product introduction or a personalised product in the pre- One of the biggest advantages of online shopping is to find purchase stage, and could also check the delivery status out quickly deals for items at services with many different online. All such services can be available uninterrupted vendors. Search engines, on-line price comparison online, which is almost impossible in the physical world, services and discovering shopping items can be used to due to the cost. find out sellers for a particular products or services. Some retailers also offer free shipping on sufficiently large (ix) Promotional Tool: orders. Searching an online catalogue can be faster than A website can be used as a medium to conduct browsing the physical catalogue of a brick and mortar promotional experiments, due to the wide reach of the store. internet, and the low cost (Rao 1999). Therefore, it will be a great opportunity for Indian companies to promote their (iii) Payment Mode: businesses. As compare to the earlier days where we have to make the payment in advance and wait for our order for weeks, now (x) Marketing Tool: we make the order first and make the payment when the A website is also an effective channel to communicate goods are delivered to us, WatchKart.com, lenseKart.com, with customers. Organizations do not need to rely solely FlipKart.com, etc. are some of the examples. on one-way communication media, such as TV and newspapers. The internet provides a two-way (iv) Delivery: communication channel. As a new communication For general type of products line DDV, CD, Goggles, channel, the internet can provide benefits to retailers, such books etc., are being delivered to the customer in 2 to 3 as low costs, interactivity, personalization, and continuous working days and the goods which are required to be communication. produced like special print sarees, customized bags etc., are delivered within 5-6 working days. Moreover single Sector's High Growth Potential is Attracting Investors: unit of any product chosen by the customer can also be  India has occupied a remarkable position in global delivered transborder, which may not be possible to import retail rankings; the country has high market potential, in case of physical purchase. low economic risk, and moderate political risk  India’s net retail sales are quite significant among (v) Product Comparison: emerging and developed nations; the country is Without having to move from one shop to other for ranked third (after China and Brazil) comparing the benefits of the product, the shopper gets the  Overall, given its high growth potential, India benefit of comparing the features and cost analysis at one compares favourably with global peers among foreign place. Most of the sites are providing this facility wherein investors shopper can choose the product which exactly suits him.  With investment of around US$ 511.76 billion, the first half of 2016 witnessed the highest annual private (vi) Cost and Time Saving: equity (PE) in the retail sector, since 2008. A shopper saves a good amount of time and money by shopping online. In the metros and even in the smaller

Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 196

FDI Confidence Index 2016

Singapore 1.57

India 1.6

United States France 1.6 China 1.63 Australia Canada Germany Japan 1.73 United Kingdom United Kingdom 1.73 Japan Australia Germany 1.75 France Canada 1.8 India Singapore China 1.82

United States 2.02

0 0.5 1 1.5 2 2.5

Source; AT Kearney 2015 FDI Confidence Index, AT Kearney 2016, Tech Sci

3. Some Challenges for E-tailing in India: There could be a huge difference in the click to sale ratio (i)Slow change in the buying behavior: of many e-commerce sites if they make the browsing Indians are still reluctant to buy on-line and prefer brick experience hassle free. One of the biggest challenges is to and mortar models. Indians still like to have a feel of offer merchandise to the consumer in such a manner that product and spend time in buying. he "feel like buying" instead of the site "trying to sell." Most of the e-tailers want the customer to register first; (ii) On-line portals are not up to the mark: only then one can enter the site. It’s like covering the There have been few lacuna’s in the exiting on-line windows of a showroom and asking the window-shopper websites like poor front ends, website search options are for personal details if he wants to even window-shop. not good, lack of sufficient information about products and terms and conditions, slow websites etc. They are: (i)Slow change in the buying behavior(ii)On-line portals (iii) Lack of seriousness: are not up to the mark (iii) Lack of seriousness (iv) Issues A lot of on-line portals have come up in India backed by concerning security and transaction frauds (v) Competitors major retail distributors but, for many it seems to have are just a click away (vi) Visitors can disappear in 15 been just a onetime setup. Post this there hasn’t been seconds or less(vii) Shopping is a multistep process enough drive to propagate the brand and services of the (viii) consumers can not touch and feel products, (ix) portals among potential clients. Our discussion with few orders can take several days to be delivered,(x) shipping portal owners gave us a feel that many big retailers have costs are often excessive and (xi) customer service is often opened a website because their peers are doing so. poor and (xii) Returns can be difficult, Deighton have identified a number of consumer characteristics as (iv) Issues concerning security and transaction frauds: potential obstacles to Internet growth, including consumer In addition many of the web portals don’t support all on- traditional shopping experiences, an aversion or lack of line modes of payments. There are high occurrence of access to the required technology and the perceived risks failed payments and this if often a deterrent for clients to of electronic shopping. revisit the portal. Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 197

(v) Competitors are just a click away: reach them in due time. When consumers search, they have multiple options available, and many use search to navigate the Web rather (xiv) Offline Presence: than type in or bookmark specific sites. The customers of India should be assured that the online retailers are not only available online but offline as well. (vi) Visitors can disappear in 15 seconds or less: This gives them psychological comfort and trust. The Online consumers are goal-oriented shoppers. If they don't concept of e- retailing or online retailing in India has not immediately find what they're looking for when they reach gained prominence as Indians prefer to touch the products your site or landing page, they're gone in under 15 physically before buying them. Studies have also revealed seconds. the preferences of the customers towards the traditional shopping methods. Hence the online retailer in India (vii)Shopping is a multistep process: should first make it a point to spot the potential customers Online consumers love to browse. Many spend a fair bit of and accordingly plan out the product. time visiting several sites just to gather information. They may also compare the offerings of several competitors (xv) Language Problem: before hitting the "buy now" button. Most internet retail shops use English as their mode of communication. English may not be comprehensible to the (viii) Controlling Customer Data: majority of the Indian population. To increase the As the delivery services are becoming more modern in customer base, content in the online retail shops should be using information technology, e-tailers may face some provided in local language. With the economic slowdown risks to properly handle on their consumer data. The data worldwide, many retailers who preferred having a related to the socioeconomic status of customers to their presence are looking to go online at minimal costs and buying patterns and preferences, helps intermediaries and keep the sales increasing. Compare to a traditional brick shippers reduce costs. and mortar store front which has a commercial address and where address and where customers can transact face-to- (ix) Problems with the Payment System: face, e-store is relatively small, convenient and low-cost People in India are not accustomed to the online shopping start-up. The only costs involve in the e-tailing platform system and moreover the online payment system through include the monthly hosting and ISP bills. With a web-site, the credit card is also totally alien to them. Most of them an online retail has the adaptability to gauge the market do not avail of the transaction facilities offered by the condition and market attractions accordingly. credit cards. They are also dubious regarding the online payment system through the credit cards. Companies should protect their system from hackers as customers 6. CONCLUSION often worry about theft of their personal information, such Indian retail sector is witnessing dynamic changes over the as a credit card number. Both technological and legal tools years. With a steady growth rate of 50- 60% online retail should be used to enhance the security of e-commerce. can make significant contribution to retail industry and economy of our country. But to capitalise on these growth (x) Lack of Full Cost Disclosure: trends we need to improve our physical infrastructure, It is easy to compare the basic price of an item online, it policy framework and operational environment in our may not be easy to see the total cost up front as additional country. fees such as shipping are often not be mentioned.

(xi) Handling Returns: 7. REFERENCES The problem of returns is very much prominent in e-tailing [1] Arora, J. (2013), Prospect of e-retailing in India, IOSR businesses in India. The customers can return defective or Journal of computer Engineering, P 1-5 unwanted merchandise which he receives. E-commerce [2] BW (2014) - The Marketing White Book -2014-15, retailers, with their emphasis on convenience and Business World, P63-65. [3] CRISIL (2014) – e-tail eats into retail, CRISIL research, P1- customization, must match this standard of service. At 14. present, they do not. [4] “India’s Smartphone Market grows 68%, Android scores with 10% growth,” Gadgetizor website, (xii)Delivering the Goods Cost-Effectively: www.gadgetizor.com/indias- smartphonemarket/8981/, At present, every single transaction challenges e-tailors to accessed 28 March 2015. deliver the goods quickly, cheaply and conveniently. The [5] Forbes Online (2014) - Amazon India and Flipkart betting existing mode for home delivery works well for letters and big on India’s e-commerce growth- (Accessed on 23rd flat packages but not for e-tailing as it encompasses with September, 2014). high volumes and wide variety of package shapes and [6] Forbes Online (2014) - India’s 243 million internet users sizes. and the mobile-commerce revolution- (Accessed on 23rd September, 2014). (xiii) Problems with Shipping: [7] “MakeMyTrip limited,” Oppenheimer, 29 September 2011, The customers using the online shopping channel should via Thomson. be assured that the products that they have ordered would [8] “Online Travel Industry – India (Part III),” Research on Md. Abdullah VSRDIJBMR, Vol. VII (XI) November 2017 / 198

India, February 2012, p.6. [9] Research.“India: Telecoms and Technology Report,” EconomicIntelligence Unit website, www.eiu.com/index. [10] RBI (2014) - Mobile Banking – Report, RBI P 1-37. [11] The Hindu (2014) - Indian e-commerce nowhere near maturity - [Accessed on 21stApril, 2014]. [12] The Hindu (2014)- Indian internet users to surpass US – [Accessed on 12th August, 2014]. [13] Tripathi, S (2013) - An overview of India’s Urbanisation, Urban economic growth and urban equity, MPR Archive (Institute of social and economic change), P 1-21. [14] www.etailingindia.com [15] www.iosrjournals.org/ccount/click.php?id=170 [16] www.iamai.in/ 