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Home > Strategy > Starting an E-Retail Venture in India: Five factors to Keep in Mind

Starting an E-Retail Venture in India: Five factors to Keep in Mind


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Organized retail in India has been a grand success in the last decade-and-a-half. The rapid urbanization in Indian cities gave rise to malls, multi-brand and single brand stores. The increase in income levels across the population as well as double incomes of the new generation nuclear families contributes to the substantial increase in the disposable income of the Indian consumer. Of late, the physical infrastructure is not able to keep pace with the rate of increase in urban population, giving a chance for both the consumers and sellers to explore alternate options.

With the increase in accessibility of the internet in India, the retailers have started going ‘virtual’. The ‘virtual stores’ or the ‘e-stores’ scene is already bustling with activity in India and given the demand there is a huge scope of expansion for established players and also a scope for new entrants. E-retailing scores over traditional retailing in a number of ways. The retailer is spared of the costs related with the brick and mortar set up whereas the consumer gets the benefit of choosing from a wide range of products sitting in the comfort of her home thus saving on travel costs and time.

A country’s prospect for online retail success is closely related to how many people use the internet and how many of them are comfortable purchasing online. There are almost 120 million internet users in India and looking at the 2020 vision it could reach to 1 billion if it continues to grow at this rate. A quick look at the demographics of India reveals that 64% of the Indian population is in the working age group of 15-64 and 35.0% is relatively young, aged 15 to 34. This is the user group readily willing to adopt the e-retail culture.

Given these figures, the Indian e-retail market is a very attractive proposition. There are already many e-retailers in India and many are planning to set up shop here. Even though the market is attractive, every day there are stories of online stores going bust. This is because online retail in India differs in many aspects from the other parts of the world. I have listed below the top five factors which an online retail business needs to pay attention to if it wants to avoid failure in India.

1. The ‘hybrid’ shopping experience: The Indian e-retail market is not a pure-play ‘online retail’ market. It is gradually moving to and will firm up as a ‘hybrid’ model where the customer ‘orders’ the product online but ‘buys’ only after checking it physically at the time of delivery. Although, this happens more in the cases of apparel where the customer needs to try the fitting and size of the product before buying. With the customers already feeling comfortable with the model, it will spread to other product lines such as electronics and even consumables.

2. Reliable delivery and returns: One of the most important factors contributing to the success of an e-retailer is the on-time delivery of the products. It is a known fact that the supply chain infrastructure in India is not up to the global standards. So, an e-retailer has to ensure that either he sets up its own delivery network or partners with a trusted party. The delivery network not only needs to ensure the delivery of the products but also the returns in case of change of mind at the time of paying or in case of faulty goods.

3. Cash-On-Delivery payment mode: The unreliable delivery infrastructure in India helped ‘cash-on-delivery’ option gain popularity. The customers were wary of paying upfront in the wake of uncertainty of delivery. The COD option allayed the fears of the customers as the cash exchanged hands only at the time of delivery. Even with the improvement in delivery infrastructure, cash-on-delivery will always be preferred payment option. Consider the fact that an established e-retailer such as Flipkart, which has a robust delivery network trusted by the customers, receives 60% of its payments as cash-on-delivery of card-on-delivery.

4. Pass on the savings to the customers: The Indian customer is very price sensitive, especially in the case of branded products. She would check the price of the article at multiple websites or stores before buying it. The e-retailers generally save on costs which tradition brick and mortar sellers incur on the physical infrastructure. Majority of the e-retailers are already passing on these savings to the customers. This has helped building a perception that online prices of products are and should be lesser than the store prices. Any new entrant in the market will have to follow the trend.

5. Difficult to fit one size to all: Always remember that India is a country with 1 billion plus population which speaks 20+ major languages and boasts of diverse cultural and demographic characteristics. No organization to have uniform policies and tactics across the country and hope to succeed. Same is the case is with e-retailers. They have to customize the products and services according to the requirements. The mantra here is to be receptive to the feedback, sense the needs of the consumers, tweak your operations and serve the customers.

On a concluding note, although the Indian online retail market presents a great opportunity for retailers to explore, many factors need to be kept in mind before taking the plunge. The entry barriers are low and there are hardly any restrictions from the government agencies to set up an online store. This is bound to increase the competition. Only those who go to market with a customer centric approach will be able to survive and flourish.

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  1. September 16, 2013 at 3:33 am

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