Online shopping in India is growing by leaps and bounds. A recent study of the e-tailing market in India, performed by the Internet and Mobile Association of India (IAMAI), estimates the size of the online retailing market for 2006–2007 at Rs 850 crores (about US$198 million). E-tailing contributed nearly 12% (about $24 million) to the total e-commerce market size during the year. The report says: "With branded stores coming online, providing consistent service delivery, both online and offline, this segment is expected to rise by 30% to Rs 11 billion (approximately $26 million) at the end of 2007–2008. These branded stores are likely to be visited by more buyers in the metros than from nonmetros."
The growth in Internet connections is a major factor for the emerging e-tailing scenario. Everything from flowers to books, from personal computers to jewelry is being bought and sold online. The convenience factor continues to draw in more shoppers. Consumers can avail themselves of better deals—the low cost of operation allows retailers to save on inventory handling and maintenance costs, resulting in attractive discounts to consumers.
Appliance E-Tailing Yet to Take Off
But for appliances, e-retailing has not yet emerged as a viable sales channel in India. "LG was the first recognized company to use the Internet as a medium for sale for its portfolio of products through its shop-ping portal, www.lgezbuy.com," says V. Ramachandran, director, sales and marketing, LG Electronics India Ltd. "However the fact is that online retailing is a very small contributor to our sales revenues and accounts for less than 1% of our turnover."
"E-commerce is in a nascent phase," adds Arindam Nag, who heads www.storeguru.com, the e-tailing division of the Network 18 group. "Sales of consumer appliances and durables are nothing to write home about, particularly because of the nature of the business. Though increasingly in the metros, people are catching in on the trend."
It is felt that the lack of touch and feel in online shopping transactions presents a huge barrier in marketing appliances online.
"Customers prefer the comfort of neighborhood stores as they can touch and feel the products," says Ramachandran of LG. "This is a traditional habit and will continue to remain so. However, among younger consumers, online shopping is more popular. It is also preferred by NRI (Non-Resident Indian) customers who are buying for their relatives back home."
Concerns about Internet fraud and payment mechanisms also discourage some consumers from making online purchases.
"Product delivery and high shipping costs are other barriers to e-commerce," adds Nag. "Further, there is resistance from traditional offline retailers. If a company offers attractive discounts on an e-tailing site, offline retailers are unhappy as they fear that it will discourage customers from visiting their outlets."
However, many marketers, says Nag, particularly in the IT space, "have found a way of using both offline and online retailers. As a result, delivery of products that are purchased online are made through a network of offline retailers. This ensures lower shipping costs as the products are shipped from the nearest offline retailer, and also, commissions to offline retailers are protected."
Appliances like microwave ovens, says Nag, lend themselves more easily to online sales: "There are no gray market producers of microwaves. And they are mostly purchased by working couples who have already checked out the various available models. Once they have made the decision of which brand/features they will go in for, e-tailing becomes the best option for them."
Marketers are definitely not looking at online sales as a major driver of sales revenue. However, they cannot ignore the rapid growth of e-commerce. As the IAMAI study points out, in 2004–2005 the share of metro cities purchases in e-commerce was nearly 85%. Today nearly 36% of online shoppers belong to nonmetro cities, and this share is expected to rise in the years to come. Higher penetration of Internet in the smaller towns, higher disposable incomes, and limited reach to physical retail outlets of the big brands are changing shopping habits. This has led many companies to maintain full-fledged shopping portals on the Internet. LG and IFB are among the big names that have a considerable Web presence. Marketers of personal appliances such as notebooks and cellular phones too are increasingly looking at online retailing to target small-town consumers. E-tailing thus presents an opportunity for driving sales revenue in the not-too-distant future.