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Online retailing gathers steam in India

Seema Sindhu  |  New Delhi 

E-tailing, or online retailing, is catching up in India with major retailers setting shop online.

The latest one to join the bandwagon is the Tata group, which recently announced that it would open an e-mall for the group’s products in the next two months. Earlier this month, Vishal Retail launched its online shopping portal — Vishalmegamart.com.

It was the Future group’s foray into e-tailing in 2007 that started the trend, though Fabmall was the first e-tailer in India (it set up an online shop in the late 1990s). Shoppers Stop followed by its e-tailing venture in late 2008 and so did the Anil Ambani-owned ADAG group, which launched RelianceMoneyMall the same year.

The Internet and Mobile Association of India (IAMAI) has pegged the e-commerce market in India at Rs 9,210 crore. The market is estimated to grow 30 per cent year-on-year. E-retailing comes under e-commerce.

E-tailing helps retailers build loyal customers and is aimed at selling in areas where they don’t have a physical presence. Sankarson Banerjee, CEO of Future Bazaar (the Future group’s e-tailing venture), says the foray has worked well for the group. “In FY09, Future Bazaar sold Rs 122 crore worth of goods, 1.5 per cent of total sales of the Future group. By 2011, we expect it to be 2-3 per cent. Worldwide, it contributes 7-10 per cent of sales,” he said . Electronic goods and apparel are the most bought products online.

Banerjee agrees, “Besides international audience, we get orders from J&K, Andaman & Nicobar, etc.” Ambareesh Murty, country manager, eBay India, concurs, “Online marketplaces help create trade between metros and Tier II & III cities by bridging the demand and supply gap.” Over a third of all products bought by eBayers in hilly areas (North East, Jammu & Kashmir and Himachal Pradesh) are tech gadgets (mobile phones, digital cameras and USB drives). While women from the metros are buying a lot of sarees, the sellers are spread across various cities and towns of India, including manufacturing hubs and handicraft hubs like Devanagere (Karnataka), Chittaurgarh (Rajasthan), Lucknow and Kunnamkulam (Kerala).

Moreover, e-tailing helps retailers save on the real estate cost. Also, an e-tailer does not have to carry huge inventories and can cut supply chain costs. But Banerjee disagrees, “It has other cost factors like delivery, technology, etc. It’s not cheaper.”

This year, there will be more such ventures. Arvind Retail, which sells a small part of its apparels through third-party e-commerce websites, is understood to be planning a foray into e-tailing. TV18, which already owns a 24-hour home shopping TV channel and a price checking site, called compareindia.com, is also learnt to plannig an e-tailing foray.

But replicating the success such ventures have had in the developed world is a far-away dream considering the broadband bottleneck. Anand Ramanathan, manager, Business Performance Services, KPMG, says, “It’s a good complimentary service but I don’t see it making big contribution to sales in the near future.”

On if e-tailing is aimed at getting customers where reatilers don’t have a physical presence, Ramanathan said, “Not really, the retailer has to have physical presence for delivery. Consider the Fabmall (a part of Trinetra Super Retail Limited) story.” Fabmall also opened brick-and-mortar stores. Two years back, it was acquired by the Aditya Birla Group.

These new ventures will be pitted directly against established players like eBay, Indiatimes, Rediff and Sify. Murty says it will only help the established players. “We welcome the entry of reputed brands that consumers trust. The launch of IRCTC (Indian Railway’s e-commerce arm) to power sale of railway tickets has encouraged a whole new demographic to shop online. We see new e-commerce entrants helping increase the size of the market by encouraging new non-shoppers to turn online shoppers,” said Murty.

Incidentally, e-tailing is not limited to retailers. FMCG major Amway also launched its own e-tailing portal in 2008.

For the direct-selling company, the online medium is aimed at expanding the company’s existing distribution network across 500,000 Amway Business Owners and also to tap the vast semi-urban customers base with direct access to Amway’s product range.

First Published: Sun, May 31 2009. 00:28 IST
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