Is e-commerce a threat to traditional retail?

To most of us, a world without e-commerce would sound absurd now. From making e-payments for electricity and water bills to sending flowers and cake on your spouse's birthday, everything seems to have taken an online avatar. Offering a way to trends like
Is e-commerce a threat to traditional retail?

By invite: Dinesh Agarwal, Founder & CEO, IndiaMART

To most of us, a world without e-commerce would sound absurd now. From making e-payments for electricity and water bills to sending flowers and cake on your spouse’s birthday, everything seems to have taken an online avatar. Offering a way to trends like these, e-commerce in India has been constantly trying out various permutations and combinations for a perfect establishment.

Dynamic and lucrative, the size of India’s retail sector is currently $500 billion (constituting about 10 per cent of GDP), out of which about 8 per cent is organised retail and only 0.2 per cent (out of organised retail) is e-commerce.  The organized retail is growing at about 10 per cent and e-commerce is growing at 50 per cent – 60 per cent year over year, quite phenomenal!

Following a series of innovative endeavours to draw customers, country’s retail e-commerce industry has expanded to a market size of Rs 76,700 crore, witnessing a staggering compound annual growth rate (CAGR) of 34  per cent. And with competition rising, in order to make the loudest noise, e-tailers are moving forward with great enthusiasm and inventive strategies. A thriving industry today, until a few years ago, it was difficult to imagine that e-commerce in India would gain fervour in this manner.

Realising the high potential of the sector, investors are pumping huge sums of money into Indian e-commerce firms, providing a big boost to their growth. With recent rounds of funding to some of the leading names, the road looks bright ahead. The industry is aggressively looking towards a sturdy grasp in the mind of its 250.2 million internet users and 900 million mobile subscribers in the country. In fact, at the current pace of growth, it is poised to reach $76 billion by 2020. Considering that the entire evolution of e-commerce which took over 50-60 years in the US market, took place within a mere 15 years in India, the expectations are quite high.

 

Online medium: Posing a threat to traditional retail?

The retail transformation of physical stores into e-commerce enablers is picking up. Various Indian retail chains like Big Bazaar, Croma, Raymonds etc, are seen adopting the online model and are focusing on having an e-commerce presence. The pattern is changing, surely. With technology making inroads even in the rural areas, they also seem to be embracing e-commerce. Close to 68 million internet users are from rural India, who make up for half of total sales at leading online retailers in India.

Many of us think - Are e-commerce firms posing a threat to organised retailers? Is traditional retail heading towards extinction? I would say, no, not in India. Visiting the big bazaars and markets has always been an activity to look forward by the Indians, especially the youth. Shopping with friends or family is a pleasure that cannot be achieved through the communication with computers. However, a shift is happening, which cannot be ignored. Unarguably, e-commerce has attracted customers from traditional stores, but would not be able to reach a stage to completely replace it. The traditional stores could not disappear. 

The need of the hour is a quick adaptation by the physical retail outlets. Many of them are already focusing on strengthening their in-store experience. More changes are certainly on their way. Is it time that the definition of the retail industry would change? We will have to wait and watch.

 

Consumer Patterns

Recent trends indicate that there has been a considerable shift in the buying behaviour of the Indian consumers, who are increasingly willing to buy goods and services online and are swiftly stepping towards a more convenient, polished and advanced platform.

From a pen drive to a car, from a knife to a full-fledged furnished house, from nail paint to all the chemical formulations in the world, the online marketplace has developed to be the one-stop destination for everything. Also, the expectations of the consumers are shaping up, with rising benchmarks. Shoppers are cognizant of the values being offered, the variety of products that exist on the e-market and the comfort of making purchases right from their living rooms.

Trust in an e-business is very important. Although consumers are seen moving online for their buying needs, the third largest eCommerce market in the world, India, still faces certain challenges, when it comes to buying products off the internet. The Indian consumer still seems to be hesitant of making purchases online. People are anxious about sharing their credit or debit card details on the internet. Perhaps, some are unaware of the benefits of the new technology.

The onus surely lies on the e-commerce companies – how to gain the trust of the willing-to-change population. By offering features like Cash on Delivery (COD), return and exchange, free home delivery, etc, the move is certainly in the right direction, as is evident from the fact that consumers have shown their inclination towards websites which offer these policies. COD is currently availed on 50-80 per cent of internet transactions. Simplification of the payment methods could be looked at, along with ensuring the utmost security of the transactions.

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