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How eCommerce is Innovating & Leading Growth of Retail Business Globally ?

August 29, 2014


eCommerce Versus Store RetailingOur analysts keep perusing through dozens of reports and in an e-mail thread have harnessed interesting insights about eCommerce Vs Old brick & Motor Retailers Globally. We’d like to present those snippets for our ever enthusiastic readers.

In the USA, e-commerce still accounts for only 6% of retail sales. However, Amazon and e-bay had US$222 bn of sales in 2014 (up from US$73 bn in 2004) while Walmart moved to US$244 bn from US$229 bn in the same period. Look at the Growth e-Retailers had in the last 10 years Vs WalMart. The availability of organized information in the retail segment in the US is far higher than in India, which allows for a better ecosystem of online retailing.

New malls in Dubai are allocating no space to electronic goods retail. So all of Electronics Retail is now Online.

The share of top-10 offline retailers in China has moved to 9.0% of all retail sales in China in 2012 from 11.2% in 2007. In the same time, the share of online retailers has moved up to 6.3% from 0.2%. This impact is being felt most strongly with electronic goods and apparel retailers.

India’s Gen-Y is tech-native rather than a tech-migrant as was the case with Gen-X. The 19-24 year old Gen-Y will bring in ~40 mn new buyers compared to the ~20 mn that Gen-X has currently. Gen-Y has a greater propensity to spend online.

The big Opportunity for Indian eCommerce
Of the 600 mn books sold in India in CY2013, only 55 mn were sold online. Of the 247 mn mobiles sold in India in CY2013, only 4 mn were sold online. Similarly, only US$0.5 bn of sales of the US$43 bn fashion and footwear category was online.

Indian e-commerce companies currently suffer from a very underdeveloped ecosystem: an e-commerce company needs to be a Walmart, a Fedex and a PayPal all rolled into one. We believe eventually de-bundling will take place, which will mean that the proposition that the e-commerce company will need to bring to the table will be its ability to attract and retain customers.

In India JustDial is helping offline businesses to come online. For example, of the around 60K hotels, only 20K are online. For the others, JustDial is offering a text-plus-web service to allow them to tap online customers and also participate in instant reverse auctions. Vendors are keen to offer good stuff as their livelihood depends on the same. Hence, the offline retailers are not going away anywhere soon, as their service will differentiate them.

If a website/portal gets <50% of its traffic without paying for it, it counts as a successful business; around 30% is exceptional and late teens is a world-beater. However, if it is higher than 50%, that is typically not a good sign. Finally, while wrapping up everybody says that Free Shipping is a Curse as India Guzzles Billions of Liters of Oil which affects the bottom line of e-Retailers directly but Free Shipping will stay for sometime until the market shake out happens as Indian e-Commerce is still nascent compared to the Offline Retail which is bulk of the Retailing. What about Organized Retail Stores, will India skip that like we did in the Cellular technology skipping TDMA and directly logging on to GSM / CDMA 2000 ?

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