Ecommerce roundup – where does online retail stand?

Written by: Madhur

On Sep 30th, 2006

Bunch of news last week related to developments in the ecommerce industry in India, so I decided to do a quick rundown on the current happenings and present some thoughts.

Clearly, the leader is online travel market. You can get a lot of stats here but the bottomline is that it comprises of majority slice of the ecommerce indusy. It is not surprising then, that there are so many players (as many as 8 of them VC/Angel funded) that its already getting overheated for its size. The next two major sectors are matrimony/dating and jobs. Online matrimony sites have recieved a bunch of funding recently from big Silicon valley based VCs. You can read some news here and here. Online job listing sites are also turning out to be quite popular among Indian customers. Monster India has quoted an impressive figure of 1 crore (10 million) registered users, in a country where total number of internet users is estimated to be 37 million (of which only 10 million are “power users”). And then there are other verticals like online real estate (which has a bunch of players) and online movie distribution (which got quite a bit of news recently)

One sector that is lagging behind at this point is online retail market, with few major players(notable ones include rediff shopping, indiatimes shopping, fabmall, ebay.in, firstandsecond etc.) vying for a small market (roughly $250 million including travel, which is a significant chunk of it [pdf link]). But finally it looks like this sector is no longer being ignored and lot of big players are making an entry in this market. Here are some recent news bits:
1. Reliance and Pantaloon plan to enter the online retail market
2. Alibaba coming to India
3. Godrej and Boyce to launch online portal
4. Dominoes online pizza ordering and ecoupons

Now some of my thoughts:
As mentioned earlier, travel, matrimony and jobs sector have already grown big. They have recieved lot of funding, have a considerable user base and are set for more growth in years to come. The interesting sector to me is online retail, because this is one of the proven models of Internet business and have a large pie of the ecommerce industry in markets other than India (just for some perspective, US alone has at least 100,000 online retailers and more than double this number if you count all the small merchants on ebay and other marketplaces). Its not that online retail is something new to Indian market, in fact this has been around for a while in India, but has really not picked up because of various reasons including
1. Lack of credit card penetration, mindset of the Indian online population and lack of quality overall experience for shoppers.
2. Another interesting angle is that there are so many new and fancy shopping malls (note that these are not only very upscale ones, but for middle class population too like Bigbazaar etc.) springing up in India, which is relatively new concept for Indian customers. These malls not only provide a great shopping experience but have added entertainment value also as they are often seen as hangout places as well.

Considering above points, I am sure online retail market will take off, how fast depends on (obviously other than increase in number of internet users) how merchants can make the online shopping experience better than #2 above. The reasons cited in #1 can be overcome if the online merchants can provide a real cost benefit and top-of-the-line shopping experience. Good shopping experience may include reliable and smooth delivery process, easy returns, dependable product and merchant reviews and multiple payment options. If someone is really interested, Startup Review blog has interesting case studies on Newegg and Zappos, the two successful online retailers in the US, who developed their business against all odds and have sailed through bad times.

Update: Just after posting this, thanks to Venture Intelligence Blog got a link to this article from businessworld [free registration reqd], which has some interesting stats on online retail market in India. The main ones being:

1. Online spend on retail was roughly $260 million in 2005-2006, which is still a very small fraction of the total $11.5 billion of organized retail.

2. About 35-40 percent of the online transactions on Indian sites are done from abroad

3. Things that people like to buy online are books, electronic gadgets, railway tickets, accessories, apparel, gifts, computers and peripherals, airline tickets, music and movies (in that order)

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Entry Filed under: ecommerce,online retail

11 Responses

  1. 1. Vivek Garg said on October 7th, 2006 at 6:07 am

    About 35-40 percent of the online transactions on Indian sites are done from abroad – This is no surprise but if you have tried shopping from abroad you must have realized how bad the experience is for this customer segment. Before domestic retail experience I believe there is a potential to tap into this existing cusomter base and establish a brand that can compete and promote domestic online retail.

    If i had amazon shipping product in india, i would never order from any indian retail sites. Think amazon like brand. rediff, fabmall etc etc tried but failed. user experience ?

  2. 2. Madhur said on October 7th, 2006 at 7:24 am

    Yes, I agree with you that overall user experience is pretty bad on all the India sites. My appeal here is for all shopping sites across the board since if you are developing an ecommerce site, you cannot ignore either domestic or aboroad audience as the domestic market is set to explode in coming years.

  3. 3. Nishant said on October 10th, 2006 at 10:35 pm

    Having tried to order flowers online, i can share my experience. Onine shopping is still very nascent in india. I agree that we need to have some *amazonish* company to really make it big. The two site Indiatimes and Redif really suck at best in terms of customer friendly site. Maybe I have been spoilt by the site out here in US, but I really got frustated jumping through all the hoops.

    Online, I think User Experience and *percieved Security* are the two top ones to hit.

  4. 4. suman said on October 17th, 2006 at 3:31 pm

    Huh! so the online retail sector is set to take off. Lead the feeding frenzy begin. I think reliance online will be hard to beat if they get the end to end service side of things right. Remember how they bumbled trying to keep their RIM promises.

  5. 5. iLeher » Exclusive interview with redBus.in – India’s first vertical for online bus tickets- All about Internet industry in India said on October 18th, 2006 at 9:27 pm

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  6. 6. raj said on October 23rd, 2006 at 1:19 pm

    one of the online real estate web portals http://www.chennaitolet.com concentrating more on their local realestate search. they are also move on to other cities in 2007. It helps users search in depth based on areas in the city. is the site really helpful?

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