The Indian Online Retail Battle

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In the Internet age, Consumers all over the world doesn’t feel the necessity for ‘touch and feel’ shopping. Apparels, books, electronic items, beauty products and even groceries are now a bought online. The dedicated e-commerce portals offer the consumers to choose between international brands without stepping out of the house. Compared with China, India’s online retail market isn’t very much established, but the billowing Indian internet users are set to buy millions of products through the virtual shopping cart.

Credit Rating Information Services of India (CRISIL) recently conducted a study, giving stupendous data on the growth of Indian online retail market. According to the report, 50-55 percent of growth is expected in the next five years. A four-fold rise is estimated. Flipkart, India’s largest online retailer saw its revenue increasing five-fold in the FY 2013-14 (from 2048 crore to 1,180 crore). The spurt in online retail growth has also sparked an energetic clash between Flipkart and Amazon.

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Flipkart recently announced about raising $1 billion funds (from group of investors including Tiger Global, Nasper and Singapore’s GIC). The co-founders Sachin Bansal and Binny Bansal – former Amazon employees – said the funds would be used to make long-term strategic investments in India, especially in mobile technology. A day after this announcement, Amazon said that it will invest $2 billion in India to support its growth. Jeff Bezos, founder and CEO of Amazon thanked our customers as India is on track to become the fastest country ever to cross billion dollars in gross sales. Within a year, Amazon India has amassed over 17 million products and sells it under 28 categories. It also opened five new networks of warehouses in metropolitan cities.

Flipkart, right from the start, is following Amazon’s trail, in terms of marketing. Same-day and next-day delivery became Flipkart first; a subscription service similar to Amazon Prime; its own indigenous tablet brand. Flipkart is perfectly replicating a business model (of Amazon’s) that has proven its success in multiple markets. The customer service programme and fastest delivery services are slowly bringing in Amazon to become 2nd largest online retailer (beating Snapdeal) in India (in terms of sales).

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Experts in the retail businesses are divided over Flipkart’s decisions. Some say, Flipkart’s, in its limited market experience, haven’t put up many original ideas to sustain against global online retailers. There was also heavy criticism on its tablet, which was solely introduced to garner domestic market, while Amazon’s kindle has a global appeal and market. Others perceive that Flipkart’s India-centric innovation is the right way to go forward. They applaud Flipkart’s ‘Cash-on-Delivery’ service which gave instant access to a large Indian buyers who weren’t comfortable with sharing banking details online and to places where credit and debit card penetration was low.

Nonetheless, the analysts believe that it’s not always going to Flipkart vs Amazon battle, since specialty websites for untapped customer segments are also growing rapidly. For example, Flipkart recently bought the smaller e-portal fashion site ‘Myntra’ for 2,200 crore. It shows how a site selling niche products could still challenge the giant market leaders.

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The way of doing business across the globe is gradually changing as the world is in online grip. The rapid online retail growth should also alert the Indian physical retailers. They also need to embrace the online world before becoming extinct. As of now, this entire sector is a uncharted territory and those with innovative ideas are in for a long haul.

 

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  • Athenas Take

    There are those who have started venturing into the online world but agreed that India still has a lot of catching up to do.