The e-Shoppers

Twelve-year-old Vidyut Viswanath from Bangalore doesn’t think twice about using his ‘junior’ credit card, which is linked to his father’s bank account, to buy books, memory cards and games online. The youngster was gifted the credit card when he was 10. But he is careful not to exceed the limit of ₹10,000 set by his father. “My dad receives an SMS every time I buy something online, so he knows what I am buying and how much I am spending,” he said.

At the other end of the age spectrum, 70-year-old Sharda Senthilkumar, who lives in Chennai and dropped out of school after standard eight, actively shops online for herself and her two grandchildren. She uses her son’s debit card details to buy everything from Tata Sky movies to bhajan CDs and toys for her grandchildren.

While the 75 per cent of the over 243 million internet users in the country fall under the age profile of 15-34 years, people across all ages seem to be bitten by the online shopping bug. More important, it is not just the tech-savvy, metro-dwellers who are shopping online for everything from sketch pens, mobile phones and TVs to apparel, cosmetics and diapers; people in tier-2 and 3 cities are also doing so. For instance, Myntra recently sold a limited edition (10 pairs) of Puma’s Alexander McQueen exclusive collection on the first day itself. Some of the buyers were from Ernakulam, Aizwal, Rajkot and Gautam Budh Nagar. The shoe cost ₹20,999 per pair. Today, 55 per cent of Myntra’s sales comes from these smaller cities.

Similarly, Snapdeal.com , which till recently sold big-ticket products only to customers in metros, now finds shoppers from places such as Bhatinda lapping up 50-inch LED televisions that cost upwards of ₹60,000. Over 50 per cent of Snapdeal’s sales now come from non-metro markets.

“I buy gardening equipment, outdoor furniture and home furnishings online. I get to choose from the best brands, browse through an amazing variety and get some fabulous deals without the hassle of travelling once every few months to Bangalore or Chennai to shop for what I need,” said Hansa Pooviah, who lives in Virajpet, a town in Karnataka’s Coorg district.

E-commerce war The change in shopping patterns has been fuelled by an e-commerce war. Though e-commerce has been present in India for a little over a decade, it gained ground only in 2007-08 with the entry of aggressive players such as Flipkart. The company began by selling books and music, but sensing the opportunity, quickly diversified into all categories.

Today, Flipkart, Amazon and Snapdeal have clearly emerged as the top three e-commerce players (not necessarily in that order) and there is a fierce competition to woo the customer by offering products at deeply discounted prices. Indian consumers have never had it so good. “Online shopping has just taken off and people are beginning to experiment with it through handheld devices such as tablets and smartphones, as well as from their homes and offices on desktops and laptops,” says Arvind Singhal, Chairman of Technopak, an advisory firm.

However, he cautions, “discounting and the kind of deals online companies are offering right now are quite universal and some consumers are just checking out deals through smartphones but not necessarily buying the products”.

A study by Gartner says that the total market size of online plus offline (brick-and-mortar stores) retail is $500 billion today. Of this, online retail accounts for only $3.5 billion, or less than 1 per cent of the total offline market.

The shopping basket is also limited. According to Singhal, online shoppers are mostly buying mobile phones (25-30 per cent), consumer goods (25-30 per cent) and apparel (25-30 per cent). The rest includes products such as books and furniture.

This though could just be the tip of the iceberg. Technopak estimates that the online retail market will grow to $32 billion by 2020, constituting 3 per cent of the total Indian retail market. The growth could mirror the Chinese online market, which grew at a compound rate of 120 per cent from 2003 to 2012 and stood at nearly $150 billion in 2013.

A way of life soon As many retail companies, too, set up virtual outlets to grab a slice of this growth, online shopping might become a way of life. “E-commerce is the new commerce, where the traditional form of doing business will get redefined,” says brand consultant Harish Bijoor. But that is not going to be easy. Some shoppers might have taken to shopping online within a year of e-commerce coming in, but they are a minority. “The second type of customers takes about 36 months to transition to online shopping. But, to hook customers to online shopping as a way of life, e-commerce firms have to offer the same reliability to the shopper day in and day out by being consistent in supply, quality and delivery every single day,” Bijoor adds.

At present, there are multiple factors tilting the customer in favour of the online platform. “Customers are more globally exposed either through travel or through family and friends who live overseas.

“The change in demand-supply dynamics, where physical stores cannot keep up with the variety of product options that customers demand as a birthright today, also contributes to more people shopping online,” says Raghu Viswanath, Managing Director of brand value advisory firm Vertebrand. “It will take five to seven years for Indian consumers to shift to online shopping as the most favoured channel,” he noted.

The sway of m-commerce The online rush is aided by the increasing popularity of smartphones, which aid ‘mobile commerce’, expected to drive the next wave of e-commerce. The pace though has taken everyone off guard. “We never saw mobile becoming so big two years ago. Today, 50 per cent of the transactions on our site is through mobile devices, up from just 5 per cent a year ago,” said Sachin Bansal, founder-CEO of Flipkart, at the Global Mobile Internet Conference held last month in Bangalore. Relating an interaction with his driver, Bansal said: “When I asked my driver what gift he wanted for completing three years of service with me, he said, ‘smartphone.’”

It helps that prices of smartphones have been falling steadily, and even a ₹6,000-handset is “powerful” enough to enable shopping. “This, coupled with the cost of the internet, which will become cheaper with 4G rollouts — 4G is one-tenth the cost of 3G — will drive smartphone sales and mobile commerce,” Bansal said.

The story is similar at his competitors’ portals. At Snapdeal, 60 per cent of the sales comes from mobile-based transactions, up from 5 per cent a year ago. For Amazon, too, half of the buyers are now using the small device to shop.

Online transactions from desktops and laptops are expected to decline over the next few years with mobile dominating in almost everything from web traffic to transactions. In smaller cities and towns, where use of laptops, desktops and tablets is much less, smartphones are the first point of internet access for users.

According to a study by Technopak, there are nearly 73 million smartphone users in India compared with 51 million PC/notebook users. The number of smartphones is slated to grow to 440 million by 2020. “India is a mobile-first market, where 50-60 per cent of media consumption happens on smartphones compared with 30 per cent globally on mobile devices including smartphones, laptops and tablets,” says Naveen Tewari, founder CEO of InMobi.

Wooing customers The coming years will be the real test in hooking more customers online. This year’s festival season might have been indulgent for customers with companies going overboard in their marketing campaigns. The competition is rife as the market today is crowded with both horizontal (those who sell everything) and vertical (those who specialise in a few products) players.

But consolidation will soon set in and critics are betting on up to three horizontal companies and a few niche ones emerging as credible players.

Mukesh Bansal, CEO of fashion and lifestyle portal Myntra, summed it up saying: “Henceforth, it is about continuous scaling and maintaining the shopping experience, which will be critical for e-commerce firms.”

That is true because none of the companies is profitable yet and all of them will find it challenging to continue with the low-price strategy to woo new customers.

With inputs from: S Ronendra Singh, Pradipti Jayaram and Priyanka Pani

COMMENT NOW