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Digital Retail Ready to Rise?

28-January-2011
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Digital Retail Ready to Rise?

Is India ready for e-commerce? It is a well-known fact that most retail activity in the country still happens through small family-owned neighbourhood stores, which have so far been able to face competition from the organised retail sector. Unlike other countries, where the retail sector has been around for a very long time, in India, it is a nascent proposition. In such a scenario, can retail players really find a foothold online, or is e-commerce to be relegated to just a few services, like travel?

Raghavendra Madhav, Executive Director, Astro Group, whose organisation has invested in Aircel, Red FM and Sun DTH, to name a few companies, felt that this wasn’t necessarily the case. He said. “The issues facing us are lack of trust in the seller, that the product that a customer gets will not be what he asked for, fear of credit card payment, and the ‘touch’ issue, of wanting to see and feel a product before spending our money on it. But these problems are steadily being resolved. Other issues include those about back-end and supply chains, and attitude change. At the end of the day, the reason why a lot of companies are not online is because companies are run by people and the people running companies are not comfortable with the technology. As that changes, the adoption rates will increase.”

The emergence of a number of successful categories, like fashion and group buying, have also shown that there is a market for online transactions, and adding value propositions will lead to more users. Madhav cited the example of the mobile space, where until an year ago, VAS was considered secondary to rolling out more coverage, more stores, and picking up more subscribers. He said, “For Aircel, the proposition right from the beginning was that the mobile is for everyone, the Internet is for everyone. Even the guy who just wants to pay for a ten rupee pre-paid card to access it for just one day. Outside of Delhi and Mumbai, in small towns and semi-rural areas, that’s where India is and those are the people one has to reach. Mobile is going to be one of the key drivers there.”

Kedar Gavane, Director, comScore India, sees a growth in digital retail as well, and points to how in the last 12 months retail sites have seen a 39 per cent increase in traffic. He said, “The top categories for online sales were for software, movies, and now increasingly, electronic goods.” Gadgets are quickly becoming very popular items to buy online, perhaps because one is buying the brand, it is standardised, so if you know the model number, you know exactly what you’re getting. As a part of the overall online audience, Gavane said, “In the US, 85 per cent of the audience visits online retail. In India, the number is around 55 per cent, but this has been rising. Around 70 per cent is male and 30 per cent female, but retail has a broad appeal through the age demographics, unlike, say banking or social media, which are skewed towards younger users.”

While retail is on the rise, Gavane does caution that for marketers online, it is important to look beyond the clicks. He said, “The Internet is very measurable, but are we measuring the right things? Every other medium receives ads based on reach and frequency. It’s time that the Internet also started doing this, on an engagement model instead of performance. The fact is that the Internet is often seen as a low cost path, this has already happened with ad rates, and one worry is that retailers are bringing people online through discounts, but if that is the only feature that is stressed, then that could also become a bottleneck to eventual growth.”

Paresh Rajde, Founder, MD and CEO of Suvidhaa, is of the opinion that online service is far closer to maturity that physical retail. He said, “Our business runs a series of franchises, where a person can come with cash to our retail point and perform the online transaction. Our partners are varied, from Fun Cinemas to IRCTC, but in all these cases, it works in the Indian scenario because with the franchisee, we promise customer-friendly service, which allows them to transact in cash, and as soon as they’re done, they get what they paid for. With goods, it becomes more complicated – people would have to wait for delivery and might not be satisfied with the product, but with services, like bill payment for example, it’s a simple, well-understood premise.”

While the issues are at hand, the fact is that as adoption rises, which could get a boost with the coming 3G wave, mobile commerce will in particular be at the forefront of developments in retail, whether offline or online, and the real growth opportunities lie with the big brands, which do not have to overcome issues of trust or standardisation and already have many resources in place to help cover the logistics of such an operation. Whether this will actually happen remains to be seen, but more and more players are now entering into the space, so that instead of solely digital operators, we are seeing a market where digital and offline will complement each other, not compete.
 

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