Is E-commerce Replacing Physical Retail In India..?

Is E-commerce Replacing Physical Retail In India?

Mr. Anuj Puri, Chairman &
Country Head, JLL India

India's retail market value was estimated at $520 billion in 2013, and is expected to grow to $950 billion by 2018. With a CAGR currently pegged at 13%, the Indian e-commerce market is expected to grow the fastest within the Asia-Pacific Region – with its market size doubling every 2-2.5 years. This certainly gives us reason for deep introspection. While the global growth rate of online shoppers is estimated at 8-10%, India currently has more than 10 million online shoppers.

Though 70% of India's e-commerce market is related to travel (flights, hotel bookings, etc.), electronics and apparels are by far the most important categories in terms of sales. The key driver Indian e-commerce is the rapid increase of broadband internet penetration, which is growing at a whopping 20% every year. The rising standards of the mushrooming middle-class with high disposable incomes, coupled with the urban influence on rural aspirations, have led to an exponential growth of the internet culture in India.

This is very pertinent to the Indian retail sector. The internet has given Indian consumers access to a wide spectrum of products and services, even in places where brick-and-mortar shopping complexes have not reached. Also, the availability of a much wider range of products when compared to physical retail stores, coupled with relatively lower prices, is driving demand for online retail. With the evolution of the online marketplace, sites like Flipkart, Snapdeal, OLX and Jabong are thriving and more and more Indians are buying goods online.

E-commerce in India took off with a deluge of portals, including many focused on travel, media and jobs. The governments’ drive to open the sector for FDI in B2B business via the automatic route and bring e-commerce to the centre stage has caused a number of major players to venture into India. Today, Ebay, Amazon, Expedia and some serious Indian players are giving these physical retailers a run for their money.

Flipkart and Snapdeal’s recent fund-raising exercise put paid to the argument that investors are moving away from Indian e-commerce. The change in government and the stride of positive sentiment across the nation has led to growing faith in India and Indian business models. The governments’ initiative to simplify regulations and make India a business-friendly nation is definitely benefiting e-commerce.

Today, manufacturers and retailers running brick-and-mortar stores are anxiously asking the government to intervene with the creation of a regulatory body to stop e-retailers from undercutting prices. Physical retailers are definitely feeling the heat by the marketing blitz of their online counterparts, and the question of whether e-commerce is pushing out brick-and-mortar retailers looms large.

Many big companies are rising to the challenge and adopting smarter strategies to guard their turf. The likes of Tata, Future Group and Reliance are expanding their reach by foraying into e-commerce via alliances with leading online players. Indian retailers have clearly read the writing on the wall. As the competition grows, an omni-channel approach to delivering a unified and consistent customer experience is the new watchword.

Improving the overall experience is the avenue to success. Regardless of whether we’re talking about e-retailing, traditional brick-and-mortar retailing or a combination of both, the winners in this new steeplechase will have to evolve their offering to meet the needs, wants and desires of consumers. Retailers will increasingly have to offer services through various mediums.

However, e-commerce is still unlikely to completely replace or even seriously dent physical retail in this country. For Indians, malls are more than just shopping destinations – they are getaways from the humdrum and constraints of their day-to-day life, and mall developers have been catering to this dynamic by creating shopping complexes that offer retail, entertainment and dine-out option under a single roof.  This is not a combination of offerings that even the slickest e-commerce operator can hope to compete with. ‘Experiential Retail’ is the holy mantra of the Indian shopper, and in the years to come, every mall across the country will do everything it can to turn the whole shopping experience into an entertainment experience.

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