ASSIGNMENT

On
' Impact of e-tailing on Retailing '

RM

Submitted By:
SNEHIL PEARL MASIH
17202281

Guided By:
Prof (Dr). ABHISHEK KUMAR
1. The current status of online retailing in India While
Providing a glimpse of its future

Introduction
The Indian retail industry has emerged as one of the most dynamic and fast-paced
industries due to the entry of several new players. Total consumption expenditure is
expected to reach nearly US$ 3,600 billion by 2020 from US$ 1,824 billion in 2017.
It accounts for over 10 per cent of the country’s Gross Domestic Product (GDP) and
around 8 per cent of the employment. India is the world’s fifth-largest global
destination in the retail space.

Market Size
India’s retail market is expected to increase by 60 per cent to reach US$ 1.1 trillion
by 2020, on the back of factors like rising incomes and lifestyle changes by middle
class and increased digital connectivity. Online retail sales are forecasted to grow
at the rate of 31 per cent year-on-year to reach US$ 32.70 billion in 2018.
India is expected to become the world’s fastest growing e-commerce market, driven
by robust investment in the sector and rapid increase in the number of internet users.
Various agencies have high expectations about growth of Indian e-commerce
markets.
Luxury market of India is expected to grow to US$ 30 billion by the end of 2018
from US$ 23.8 billion 2017 supported by growing exposure of international brands
amongst Indian youth and higher purchasing power of the upper class in tier 2 and 3
cities, according to Assocham.

Investment Scenario
The Indian retail trading has received Foreign Direct Investment (FDI) equity
inflows totalling US$ 1.42 billion during April 2000–June 2018, according to the
Department of Industrial Policies and Promotion (DIPP).
With the rising need for consumer goods in different sectors including consumer
electronics and home appliances, many companies have invested in the Indian retail
space in the past few months.
  Beccos, a South Korean designer brand is set to enter the Indian market with
an investment of about Rs 1.00 billion (US$ 14.25 million) and open 50 stores
by June 2019.
 Walmart Investments Cooperative U.A has invested Rs 2.75 billion (US$
37.68 million) in Wal-Mart India Pvt Ltd.

Government Initiatives
The Government of India has taken various initiatives to improve the retail industry
in India. Some of them are listed below:

 The Government of India may change the Foreign Direct Investment (FDI)
rules in food processing, in a bid to permit e-commerce companies and foreign
retailers to sell Made in India consumer products.
 Government of India has allowed 100 per cent Foreign Direct Investment
(FDI) in online retail of goods and services through the automatic route,
thereby providing clarity on the existing businesses of e-commerce companies
operating in India.

Road Ahead
E-commerce is expanding steadily in the country. Customers have the ever-
increasing choice of products at the lowest rates. E-commerce is probably creating
the biggest revolution in the retail industry, and this trend would continue in the
years to come. India's e-commerce industry is forecasted to reach US$ 53 billion by
2018. Retailers should leverage the digital retail channels (e-commerce), which
would enable them to spend less money on real estate while reaching out to more
customers in tier-2 and tier-3 cities.
It is projected that by 2021 traditional retail will hold a major share of 75 per cent,
organised retail share will reach 18 per cent and e-commerce retail share will reach
7 per cent of the total retail market.
Nevertheless, the long-term outlook for the industry is positive, supported by rising
incomes, favourable demographics, entry of foreign players, and increasing
urbanisation.
2. Factors Impacting Online Retailing

 Attitude toward online shopping

o E-stores logistical support
o Product characteristics and specification
o Web page technological characteristics
o Information availability and characteristics
o Homepage presentation
 Intention to shop online
o The past experiences
o The context or background
o The stimulus
 Perceived usefulness
 Perceived ease of use
 Trust

Some other factors that come into play in India are listed below

 Rising income levels

o Increasing purchasing power of people
o Increasing disposable income of the urban youth
 Changing socio-economic environment
o Rising middle class incomes
o Changing demographics (close to 50 per cent of the population is below
25 years of age)
o Global exposure (increasing penetration of global brands in India)
 Changing technology landscape
o Rise in internet usage (growing at 20 per cent) and 3G penetration
Increasing smartphone users with availability of internet on mobile phones
o Delivering high quality user experience (detailed product catalogue,
website performance)
 Changing consumer behaviour
o Less time to spend in traveling to places and shopping
o Increase in expenditure for luxury items
o Increased availability of global products making Indian customer
conscious of quality along with price
 Changing mindset and outlook of Indian customers
o Indians becoming more aware and embracing the idea of online shopping
3. ONLINE RETAILING WITH BRICK VS MORTAR
RETAILING
In today's digital age, the dominant narrative is that e-commerce has fully eclipsed
physical retail. The truth looks a bit different.
Based on example:

The Pros and Cons of Online Retailers vs. Brick and Mortar Stores
Moms love the convenience of online shopping – she can make a purchase in
seconds from the comfort of her home. It means no more long lines with the kids in
tow, and one less thing to add to her to-do list. However, there are certain in-store
experiences that moms cannot get online. For instance, clothing can’t be tried on
prior to purchase and toys can’t be felt for durability.
On the other hand, brick-and-mortar stores may not offer the seemingly endless
selection that online retailers do. Additionally, their reliance on foot traffic and
word-of-mouth to drum up business may put them at a disadvantage. Despite these
benefits and drawbacks, both types of store are valued by moms and chosen for
different reasons. Who will win the battle over moms’ spending power? Brands
must keep the pros and cons of each in mind as they market to moms.
Here is a quick overview of the benefits of each retail approach, and how it affects
moms:

Why Brick-and-Mortar Stores Still Matter:

61% of consumers shop in-store, compared to only 31% who turn to the internet.
This is good news for brick-and-mortar businesses. One of the largest drivers for in-
store shopping is the ability for customers to receive the product immediately. Until
eCommerce can find a less expensive solution for same-day or 1-day delivery, in-
store shopping will continue to win on this point. Also, moms often shop as a social
activity – whether it’s to look for new clothes (and get a second opinion) or as a day
to browse with friends. This experience simply cannot be replicated online.
Another major benefit for brands that operate brick-and-mortar stores is the way in
which consumers spend their money while shopping. shoppers spend more than they
had planned to while shopping in stores, while only 25% of shoppers do so when
shopping online. Beautiful storefronts and point-of-purchase displays can strongly
influence moms to make an impulse purchase, and are much harder to ignore than
online ads.
Moms may also enjoy the personal connection with store employees, a well-
executed store atmosphere, and the ability to touch and hold products before
purchase. All of these aspects can lead to higher in-store purchases. Apple, Whole
Foods, and Nordstrom’s are a few companies that have done an excellent job of
training employees to be knowledgeable about their products and services. This is
important more than ever, as consumers don’t get this immediate assistance when
they shop online. They may read review after review, but it’s not always as helpful
as in-person assistance. Brands must remember how crucial this is as they control
how their store is operated. Keep moms in mind, and you may see an increase in
sales.
The Pros and Cons of Online Retailers vs. Brick and Mortar Stores

The Many Benefits of Online Retailers:

For brands, the eCommerce route can have many benefits over a brick-and-mortar
store. They don’t require expensive storefronts; instead, more cost-effective
warehouses are used to hold inventory. With multiple warehouses, brands can ship
products quicker via online orders, and moms can receive products faster than ever
before. The convenience of shopping online is arguably the greatest benefit, as
consumers can select a product and purchase it within minutes. Moms can shop after
her kids are already in bed, or on a smartphone as she’s out doing errands. This has
opened up countless opportunities for brands, as advertisers discover new ways to
target moms where ever they are, in order to encourage immediate purchases.
Moms also love to shop online because it allows them to find the best price for
products. Whether they follow the brand on social media for exclusive deals or
search for online coupons, moms can find a product they want and save money at
the same time. In fact, 38% of moms visit manufacturer websites in search of
coupons. They can also more efficiently find the best price across many different
websites, instead of having to visit many different stores.

Which Will Moms Choose?

For moms, both brick-and-mortar stores and online retailers have their advantages,
but which one will she continue to shop? Ecommerce is a rapidly growing industry,
but until the Internet can provide all the benefits of in the in-store experience,
physical stores will continue to be in demand.
However, in-store experiences will need to grow and evolve in order to continue to
compete with the convenience of online shopping. Brands need to go above and
beyond expectations and provide an enjoyable, convenient shopping experience.
This can be done as brands incorporate new technologies into stores to make the
shopping experience more efficient, and continue to offer helpful resources for
customers. The biggest challenge for brands is to create one flawless and integrated
system to incorporate online and in-store shopping together. The brands that can
discover a seamless way to make shopping both online and offline connect will be
the most successful.
Moms expect a high level of service and dedication from all brands, whether they
are shopping online or in-store. Both methods have opportunities to grow and
improve as technology continues to advance. To learn more about moms’ online
habits, download our free white paper.

4. Emerging trends in online retailing

Retail markets in India: Opportunities in a dynamic world

Online retail sales as a percentage of total sales have shown a tremendous rise, going
from 0.8 percent in 2014 to 3.6 percent of total retail sales in 2017.
As the retail industry story unfolds in India, new strategies come to the fore. Recent
news of Amazon acquiring a stake in Future RetailNSE -1.22 % is an indication that
the strategy will be differentiated given the nature of the market and consumption
trends.

Amazon's acquisition of a stake in Future Retail is in addition to the stake it took in

Shoppers Stop, and the earlier Aditya Birla-backed "More" chain. These acquisitions
are an indication that large retail players think that, to gain a greater market share,
the online strategy will have to be complemented with an offline route as well.
Online retail sales as a percentage of total sales have shown a tremendous rise, going
from 0.8 percent in 2014 to 3.6 percent of total retail sales in 2017. While the growth
has been enormous and will continue to be fast, the fact that 95 percent of the market
is still with the offline sector drives home a few important points. Access to offline
stores provides a vast distribution network and brand accessibility, especially
beyond the Tier 1 cities. Therefore, for a player interested in a higher.
Factors for the growth of e-tailing in India No rent or land costs. E-retailers do not
require sophisticated showrooms in prime locations, and operate through their
websites or portals. This significantly saves the store maintenance costs, which are
pretty high for physical store retailers. Enhanced communication with the client. E-
tailing enables personalized interaction with customers. Universal reach. A
supermarket has a limited geographical area of operation. It caters only to a limited
number of customers of a particular locality, but a website can be accessed from any
part of the globe, which increases its market multifold. Such websites also serve as
a good medium of advertising at a minimum cost, and reach out to the world.
Effortless and joyful shopping. Online shopping saves time. Shopping in the comfort
of your home through the Internet is a huge attraction for customers. Any time
accessibility. The online store is accessible 24×7 and delivers your products home.
That saves time and effort. Prices can be compared. Online shoppers can compare
the prices of the products they want to buy with competitive sites, and then go for
the purchase. No duplication of products. Branded products are sold at competitive
prices on credible online portals. This reassures the consumer that no duplicated, low
quality products will be sold on these sites.

5. The emergence of mobile commerce

E-tailing in India According to a recent e-commerce survey by Visa, the credit card
company, eighty per cent of Internet users in the Asia Pacific made an online
transaction, and spent an average of over US$ 3,000 each in the past 12 months. The
survey revealed that, in India, digital downloads were the most popular form of
consumer ecommerce. Seventy-six per cent of respondents from India, the highest
among Asia Pacific countries (including Hong Kong, Singapore, Japan, Korea and
Australia), have bought some form of digital entertainment over the Internet .Indian
consumers recognize the convenience of online shopping as reflected in the high
percentage of Internet users who buy a wide range of products online—from those
for everyday use to the occasional high value item. According to the Visa report, the
top draws for shopping online were airline tickets, online travel agents, and travel
accommodation. Clothes and shoes grabbed the fourth spot. However, the food and
groceries segment was positioned seventh in this survey. The preferred source of
digital business analytics, comScore, reports that coupon (daily deal) sites are also a
part of the e-commerce craze. In November 2011, around 16.5 per cent of the Indian
online population visited sites such as Snapdeal. Kedar Gavane, director, comScore,
said, “The online channel is playing an increasingly important role in connecting
retailers with potential customers in India. The rapid growth of online coupon sites
suggests that consumers in India are looking for deals, highlighting the need for
online retailers to adopt effective marketing and pricing strategies.” A report by the
Internet.

6. How do you foresee the prospect of M-Commerce in India

in the coming five years?
What the future holds for e-tailing the e-commerce market in India is estimated to
grow at 30 per cent year-on-year. E-retailing comes under e-commerce. E-tailing
helps retailers build loyal customers and is aimed at selling in areas where they don’t
have a physical presence. Sank arson Banerjee, CEO of Future Bazaar (the Future
group’s e-tailing venture), says, “E-tailing accounts for 7-10 per cent of our
worldwide sales. We expect this share to increase in coming years. Electronic goods
and apparel are the most popular online purchases.” He adds, “Besides international
orders, we get orders from J&K, Andaman & Nicobar Islands, etc.” Ambareesh
Murty, country manager, eBay India, concurs, “Online marketplaces help create
trade between metros and Tier II and III cities by bridging the demand and supply
gap. Over a third of all products bought by eBayers in hilly areas (North East, Jammu
& Kashmir and Himachal Pradesh) are tech gadgets (mobile phones, digital cameras
and USB drives). While women from the metros are buying a lot of sarees, the sellers
are spread across various cities and towns of India, including manufacturing hubs
and handicraft hubs like Davangere (Karnataka), Chittaurgarh (Rajasthan),
Lucknow (UP) and Kunnamkulam (Kerala).” Moreover, e-tailing helps retailers
save on the real estate cost. Also, an e-tailer does not have to carry huge inventories
and can cut supply chain costs. However, Banerjee disagrees, “E-tailing has other
cost factors like delivery, technology, etc. It’s not cheaper.” Replicating the success
such ventures have had in the developed world is a challenge, considering the
broadband bottleneck in India. Anand Ramanathan, manager, Business Performance
Services, KPMG, says, “E-tailing is a good complimentary service but I don’t see it
making a big contribution to sales in the near future.” When asked if e-tailing is
aimed at getting customers where retailers don’t have a physical presence,
Ramanathan says, “Not really. The retailer has to have physical presence for
delivery.” Murty says, “We welcome the entry of reputed brands that consumers
trust. The launch of IRCTC (Indian Railway’s e-commerce arm) to power sale of
railway tickets has encouraged a whole new demographic to shop online. We see
new e-commerce entrants helping increase the size of the market by encouraging
new non-shoppers to turn online shoppers.” Incidentally, e-tailing is not limited to
retailers. FMCG major, Amway, also launched its e-tailing portal in 2008. For the
direct-selling company, the online medium is aimed at expanding the company’s
existing distribution network across 500,000 Amway Business Owners and also at
tapping the vast semi-urban customers’ base with direct access to Amway’s product
range. But capitalising on India’s growth online is no cakewalk. Sachin Bansal and
Binny Bansal, the found- Market Survey 12 FACTS FOR YOU • July 2014
www.ffymag.com ers of Flipkart, have set up delivery operations all across the
country because Indian shippers do not have the delivery and package-tracking
abilities that companies like FedEx provide for American customers. Sachin Bansal,
the company’s chief executive, says that by having its own staff, Flipkart avoids
paying courier services commissions of more than 2 per cent to accept cash on
delivery, which makes up about 60 per cent of its orders. It can also track packages
more accurately. And because labour costs are relatively low in India, its delivery
cost is a modest $1 a package. “More than 90 per cent of retail transactions in India
are in cash. People like my dad and my uncle are much more comfortable with cash.
If we have to increase our customer base, we have to accept cash,” he says. Flipkart
is not alone in tweaking its model to suit Indian conditions. Snapdeal offers
customers the option of making partial payments online, and paying the balance
directly to merchants whose products and services it sells. With the growth of
disposable incomes, people have a lot more money to spend. They are finally
opening up to shopping online and are willing to take a chance. Also, ecommerce
companies are going out of their way to give the consumer not just a product but an
online shopping experience. Credibility, too, does not seem to be an issue, with more
and more branded players stepping into the e-commerce scene. The online retail
segment in India is growing at an annual rate of 35 per cent, which would take its
value from ` 20 billion in 2011 to ` 70 billion by 2015. Online shopping has come of
age in India, with people shopping through the convenience of online portals from
the comfort of their drawing rooms. However, Indian marketers are also increasingly
becoming aware about the need for a good policy for returned goods, in case a
customer is not satisfied with the product. It has been estimated that about a fifth of
the orders purchased online are returned to the vendor. Most online portals announce
that money will be returned if a customer is not satisfied with the product. Customers
who pay on delivery can also return a product if it does not come up to their
expectations. The Indian consumer base is supported by a vast rural market that
accounts for 70 per cent of the country’s population. With a rise in rural incomes,
there has been a change in India’s consumption basket. As consumer product
companies compete among themselves to get a larger share of the consumer pie,
technology and innovation will play a key role in their future growth. Conventional
strategies of physical distribution and communication will no longer guarantee the
pace of growth or success seen in the past. Companies will try to find easier and
cost-effective ways to reach out to a larger base of consumers. Online retail in India
is expected to penetrate categories beyond apparel and electronics, as companies
attempt to sell essentials such as grocery and personal care products online. A few
websites are now promoting social shopping, which enables an interaction between
old and new customers on queries related to any of the products sold on the site.
Social shopping helps to increase the credibility and popularity of an etailer, as a
customer who has used a product from a site can advise another one who is planning
to buy it from the same site. Online shopping in India has created a new scope for
retailers, too, as they can advertise their products easily on the websites of these e-
tailers, and the amount paid is much less than they would pay for advertising on
other media like television. The link between e-tailing and technology In India, e-
tailing has the potential to grow to US$ 76 billion dollars by 2021. This would be
possible if a large part of India’s rural population is also brought under the fold of
the Internet, and has access to online shopping. E-retailers also need to instil
confidence in online customers with prompt delivery of goods, discounts for bulk
purchases, delivery of quality goods, etc. The Indian consumer market is set to attain
a different look. Technologies that aid in managing inventory, capturing sales data,
forecasting demand and generating automatic replenishment to reduce time-
tomarket are likely to gain prominence. Inventory tracking technologies, such as
RFID (Radio Frequency Identification), which have been so successful in developed
countries will see greater adoption in India. Meanwhile, Quick Response codes, too,
are expected to be in widespread use in the country with the growing use of
smartphones. With sustainability becoming integral to corporate strategies, the
adoption of cost-effective green technologies—that reduce energy consumption,
emission levels and wastage—is also expected to increase. The next battle for the
consumer market will be fought on the back of technology. Companies that are able
to use technology to their benefit will move far ahead of those that do not.

7. What is the significance of trust factor in M-Commerce and

how it can be built up?
Barriers to the growth of the e-tailing market No negotiations possible. Online
shopping does not allow negotiations or bargaining, which price conscious Indian
consumers love doing. Lack of touch-and-feel experience of the products. Customers
cannot physically examine the products they buy online. They get to do that only
when the product is delivered to them. The trust factor. Sometimes, online
consumers are unable to trust new e-retailers with respect to safe and timely delivery
of a product that is ordered online. Increased competition. Big eretailers are already
dominating the Indian market, making the entry and survival of small e-retailers
tough. Privacy concerns. Consumers fear that the information they provide may lead
to spam e-mails or identity fraud. Possibilities of fraud. Unscrupulous e-tailers can
damage the faith of the common consumer. No direct interaction. In eretailing, there
is no face-to-face interaction between the customer and seller. Some consumers are
not comfortable about this. Delivery of products. E-tailers who do not deliver on
time spoil the market for other genuine e-tailers. Language. To reach a wider base
of consumers in India, websites must enable communication in local languages. At
present, most e-tailers use only English as the mode of communication.