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E-commerce to thrive in India despite challenges

E commerce to thrive in India despite challenges 002In the $710 billion retail industry, e-retail has been one of the fastest growing formats in India owing to convenience and personalised shopping experience factors. It was estimated at $16.3 billion in 2017 and is slated to grow at CAGR of 45 per cent to reach $49.5 billion by 2020. Much of the credit for this stupendous growth goes to government initiatives like ‘Digital India’, because of which Internet penetration reached 400 million, and around 48,000 gram panchayats are connected by optical fibres under 120.8 million have access to broadband.

Apparel and lifestyle category top buys

While the segment is led by electronics category with a share ofE commerce to thrive in India despite challenges 001 49 per cent, apparel and lifestyle take the second spot at 25 per cent (including footwear, bags, belts, wallets, watches, jewellery, etc.). The adoption of e-tail in apparel and fashion industry is resisted by consumers preferring to touch-and-feel a product before making purchase decision. And to rule out this concern, initiatives like cash on delivery, easy return and exchange, discounts and offers are being implemented to encourage online shopping.

And to capture higher market share, e-retailers are opting for an omnichannel retail model by opening physical store to capture a bigger market audience. In addition, e-tailers are also investing in studios to improve uniformity in product catalogue for different suppliers, thereby enhancing customer’s shopping experience. Along with faster and easier navigation, most e-tailers provide detailed specifications of the products to make it easier for consumers to make purchase decisions. For instance, high resolution pictures and zoom in features are provided on the website to showcase the details of the products. Multiple images from different angles enable detailed view of product. Measurement charts assist the customer to make the right fit decision in case of apparel products, etc.

Fraught with challenges

While there are innumerable opportunities, there lie challenges as well. These include intensive competition. As per research, changing customer preferences and competitive demand has made e-tailing a highly tough business, resulting in cash-burn with regular promotions/discounts. High discounts by e-retailers to acquire customers have led to unreal customer expectations, low loyalty and losses. Besides, most logistics companies do not have pan-India reach. As some regions are not easily accessible, retailers have to cancel such orders due to inability of logistics partners to provide service in those areas. Inadequate infrastructure such as poor conditions of roads, highway, etc., is one of the main challenges faced by the e-retailers.

Conventional brick-and-mortar channel still has the ability to convert return of product into sales. When consumers go to shop to return the product, they generally shop for other goods due to easy accessibility to other designs and variety in the shop, which is not the case in online shopping. Additionally, the purchase drivers are different across different geographies, regions and population centres. Factors such as promotions, discount and offers are the key driving factor for online purchase across all the regions – metros, Tier I and II cities. But there are other region specific factors such as, availability of new products, better product assortments, easy return policy, express delivery options, etc., which drive growth in different cities and regions. Because of such compounding issues, e-commerce companies need to continuously devise newer strategies to sustain their presence in the market.

What lies ahead

Despite disadvantages no way do consumers move-away from this wide retail channel. They are up for experimentation and innovative offerings. The key lies in creating a memorable and personalised shopping experience, at the same time, ensuring lower logistics and operational cost, leading to higher revenues. Increasing internet penetration is just a sign of good times ahead for the e-commerce and retail industry as a whole. E-tailing has the scope to consolidate wholesale and distribution channels and develop India-specific business models.

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