E-Commerce Boom in India: Why online shopping is here to stay

The Internet has exploded in India, spreading its reach further than ever before. As more and more consumers embrace the virtual world as a safe and convenient place to shop – either on computers or using their smartphones – one thing is for certain, e-commerce is here to stay.
A new study by Forrester Research has stated that approximately a fifth of total retail sales will take place online by 2021 in Asia Pacific, 78 per cent from smartphones. The study adds that online retail via mobile will grow at a CAGR of 15.6 per cent, to reach $1 trillion in 2020.
The study further goes on to say that Asia Pacific will be the largest region for online retail sales in the world, with China being the largest market for e-commerce with $681 billion in sales. However, the fastest growing e-commerce market in the world, according to Forrester, is undoubtedly India.
The Indian Institute of eCommerce states that by 2020, India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce. Online apparel sales are set to grow four times in coming years.
Gadgets 360 CEO, Bhawna Agarwal says there are plenty of reasons for this this monumental growth in e-commerce in India. “The Internet and mobile usage has increased tremendously over the last five years. Today, there are 100 million Internet users, a number which immediately creates an easy reach for all e-commerce sites. There is a very large base of active Internet shoppers, facilitated by the Cash on Delivery (CoD) service offered by e-tailers in the country.”
Agarwal states that CoD literally exploded the entire Indian e-commerce market. CoD – which accounts for 67 per cent of the total e-commerce transactions in India – gave the online market an artificial push. The initial inertia of the consumers turned into trust when they realized that they could buy online and pay only when they were satisfied with the product.
She also adds that the rising disposable income in the largest class in India – the middle class – and an increase in the standard of living in Tier II cities has further aided the e-commerce boom in the country.
Clicks Vs Bricks
Agarwal says that the growing popularity (and convenience) of e-commerce is affecting offline retail, mostly because retailers are transitioning to better pricing – which is more readily available online – and promotional strategies, which have a wider reach on the Internet. The online channel also provides customers the convenience of shopping anywhere in the world, as long as they are connected to the Internet. These are some of the main reasons that offline retail chains are entering the online segment.
There is also a lot of reverse pressure on offline players to adopt similar discounting strategies. Brands preferred to sell discounted items online, over offline, creating more pressure on traditional retailers.
“Also, there are millions of products online compared to offline so yes, there has been a slight dip in footfalls, affecting sales. The great discounts and flash sales online further affect brick-and-mortar players,” says Agarwal.
However, she admits that the reverse also holds true for a market as diverse as India. Indian e-commerce players are expanding to brick-and-mortar outlets.
“As a country, we can accommodate good, healthy competition between online and offline. Online players should look at developing their physical presence mainly to enhance the customer experience. The idea is not to do this from the perspective of competition, but to take it to the next level –differentiating and innovating. If online retailers can improve and master their Omnichannel strategy and optimize their m-commerce experience, they will be in winning a position,” she says.
Sustaining the High Growth Momentum
Agarwal says if online retailers stay consumer-centric and plan their strategies around what the customer wants, sustaining the stupendous growth which the sector has witnessed in recent times is not a tough task.
“Offline retailers need to effectively keep reinventing their strategy to enter the Omnichannel market. They need to become more consumer-centric and use big data to plan for the whole supply chain, all the while keeping their corporate strategy in mind. Brands with physical stores need to opt for an integrated approach that will take the whole organizational structure of the retailer in its fold,” says Agarwal.
“At the same time, pure play online portals also need to be agile, reinvent themselves. They will have to develop sustainable business models, keeping the consumer at the heart of it,” she adds.
The Future Belongs to Everyone
Bhawna Agarwal feels that there something called the concept of unified commerce.
“In 2017, we will see that there will be no such thing as online vs offline experience. There will be a single touchpoint, focusing on the consumer. Not just brands, but hyperlocal delivery networks will also evolve. Consumers will be able to order online and then pick up their package from an offline touchpoint. These offline stores will actually be an extension of online businesses. And vice versa, traditional retailers will tie up with bigger, horizontal players to extend their brand reach – like Croma with Snapdeal and dozens of brands with Flipkart and Amazon,” she says.
“People are not competing anymore – they are co-opting. Shoppers Stop is also in the process of revamping their entire platform. Everyone is understanding that online has a further reach and so it cannot be looked at as a competing channel,” she adds.
Key E-Commerce Trends For 2017-18
Aggarwal says mergers & acquisitions will lead the way this fiscal – “it is better unit economics”. Retailers will focus on better business models.
“Certain market leaders will evolve and their models will change from the current aggressive strategies to more balanced, sensible ones. They will be less discount centric for starters. There will be more room to evolve. Growth will come from beyond metros in terms of high engagement experience,” she says, adding, “With the rise of AI, companies will be able to market their products a lot more effectively using data analytics. They will be able to run targeted campaigns. Companies and brands will understand where their consumers will be and target them specifically through the channels that they are consuming.”
For existing players to grow, a lot more effort towards higher consumer engagement is needed. This will help in building consumer trust, not only in terms of pre-sales experience, but centered around the entire value chain.
“Retailers need to involve consumers at every step of the way and to keep them coming back. They need to be able to attract and retain new customers and effectively communicate with them. They also need to localize the content of the Internet to better target consumers. It’s about delivering quality, value and efficiency all at the same time,” she concludes.
(With inputs from Charu Lamba)