Internet Retailing in Indiaby Udit Jain on June 20, 2007
The benefits of internet retailing are unanimously accepted and acknowledged by most manufacturers, retailers and consumers alike. From manufacturers and retailers’ perspective, internet retailing offers benefits in the form of cost-effectiveness, profitability and easy accessibility and can be utilized across diverse products and services in grocery as well as non-grocery items. Internet retailing allows greater access to products, enabling second tier cities and suburbs to acquire a wider variety of goods. At the same time, the internet allows consumers to compare and contrast price points and product benefits and thus make informed decisions on purchases. While internet surfing, emailing and other web-enabled services gained vast popularity, the internet retailing and actual purchases are confined to a very niche consumer base. Unlike other developed countries, Indians are not overly enthusiastic about non-store retailing. Indian consumers’ prefer to touch and feel items before making their purchasing decisions and prefer to go to a physical store instead. Also the products are not standardized and there could be tremendous amount of variability in products, sizes etc. This proved the key challenge for internet retailing and it therefore enjoyed only a restricted appeal for Indian consumers.
Besides pure play internet retailers, companies such as Fabmall (India) Pvt Ltd decided to adopt a mix of online and offline retailing. Fab Mall’s online-offline model is unique in Indian retailing but demonstrates how positive synergies can be achieved between the conventional retail models and the new age online counterparts. Customers can order online and pick up offline. During busy periods, this can reduce crowds and checkout times. The online channel can also help build a customer loyalty program, increase direct interaction at lower costs and help to build the Fab Mall brand making up 23 percent of the value shares in internet retail in 2005. LG Ezbuy was at the forefront of internet retailing. Its success is due to its high value durable goods sales, despite the small volume sales that it contributed. However, it is yet to take off in a big way as a revenue contributor for LG Electronics.