E-retail to reach $10 Bn
E-retail to reach $10 Bn

E-retail in India is touching new horizons with new players emerging, the existing one's evolving and established one's doing a reality check. Ashish Jhalani has over 18 years of work experience in retail and internet retail industry in India and the United States. Till recently, Ashish ran a very successful e-commerce venture in USA, and has just moved away from that business to start Etailing India. In a candid conversation with the Retailer magazine, Ashish talks about the horizon of e-retailing in India.
 

Saniya Seth (SS): How has e-retail developed over the years?

Ashish Jhalani (AJ): In India e-retail has grown over the last eight to ten years. Bazi and Taj Online started the trend, over the last three to four years larger players like Fashion Andy You, Yebhi and India Times have entered and capturing the market. The market today is estimated at $ 1.6 billion. Most of this growth has happened over the last four to five years.

SS: 2012 has been the year of building blocks, what will be the focus of e-retail and e-retailers in 2013?

AJ: The focus is going to be the bottom line because all the e-retailers till now have been working on the top line model which is to get more revenue. What they have realised is that the market cannot survive just on the top line numbers so they are all looking to concentrate on the bottom line which is to look at profitability, cutting costs, logistics and  cutting distribution cost.

SS: How different is the Indian e-retail sector today as compared to the global market?

AJ: It is fair to compare one on one, India to Latin America which is also a developing market. As far as the other mature markets are concerned, we are way behind China, Europe and America. The comparison is incorrect because we are still at a very nascent stage.

SS: What are the key challenges in this industry and what is the ideal way to deal with them?

AJ: One of the challenges is the penetration of human solutions in India because most people do not own debit and credit cards. As the penetration of the debit and credit card start happening more, the ecosystem is going to improve. Also there are a lot of alternate solutions that are coming up – the ability to pay through the e-commerce purchase through even a kirana store or even through a small set up in a remote town, these kinds of systems are quickly coming on board.

Secondly the cost of doing Cash On Delivery (COD) transaction is high for most of the e-commerce players. Even though they are doing it, it is one of the reasons that they are losing money. The next problem is the distribution network−deliveries reaching the remote areas. The market has to mature which it slowly is as more players like Fedex are coming in.

SS: Where do you see e-retail in the next 5 years?

AJ: The sector should grow to about $ 10 billion which is about eight to nine times the growth.

SS: What is the ideal format for e-retail in the country? Should the pricing be different as compared to the prices in the retail outlets?

AJ: It depends on who the e-retailer is. There is an opportunity still for the larger market places where they carry all types of products. There is also an opportunity for niche players which are very specifically in particular industries like shoes, baby products. The opportunities exist in both. It is not just the product selection but also how they are structured. India is a big player of omnichannel which means if you have a physical store and an online presence it gives you a better return than just being an online player.

If you have the same brand being sold both places you cannot have different pricing, you will be going against the retail rule. The online product selection and mixture could be different where the price mechanism is different but again it cannot be different in both formats.

SS: How do e-retailers deal with competition and thrive in today's market? 

AJ: The biggest mantra across the world is customer service. The Indian consumer in particular is so used to having face to face interaction that they are used to customer service. That should be the first focus of all the players to differentiate themselves from the rest.

SS: It has always been survival of the fittest? So what qualities will the fittest poses?

AJ: In today’s market fittest are going to the ones those who understand the customer which is where the customer experience and service comes in. They look at each cost independently so that they can figure out how to fit things to the bottom line. I think these will be the ones that will survive and not necessarily the ones who are selling more.

SS: How many new e-retailers can India see in 2013? Or is it more of correction time for the existing ones?

AJ: Markets regardless of how mature or new will always have new entrants and India being a new market will have a lot more new entrants. At the same time there is also going to see lot a of correction happening−mergers and acquisitions will happen.

SS: What kind of impact has e-retail had on the whole sales, marketing and reach of brands?

AJ: It depends on how we are approaching it−it is both an advantage and disadvantage. It is an advantage because you are in a position to leverage your marketing to get sales through both channels. On the other side if you are not careful you might cannibalize your won market in one or the other format.

SS: For brands that have their own stores and e-retail portals, what are the pros and cons of this?

AJ: Such brands are able to offer a larger customer service because the customer not only has a place online but also have physical brick and mortar store. Secondly trust is easily built and the consumer always thinks that they always have to have something tangible, and the store is that tangible credibility.

The disadvantage is pricing because it is important to make sure that the pricing is standardised. The other disadvantage is the inventory because the way the online and retail store work, their inventory is very different. If they stick to one format of inventorying they will not succeed if they have both, that paradigm will have to come where they basically balance the two.

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