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Online retail: The new marketplace

Online retail: The new marketplace

Aparna Dutt Sharma, Chief Executive Officer, IBEF

Jan 30, 2015 4:15 PM

With the number of internet users in India moving up from 50 million in 2007 to 300 million in 2014, the country is on its way to becoming the world’s fastest growing e-commerce market. Close to 32 per cent Internet users in India now shop online– up from 14 per cent in 2011. The rise of first generation start-ups like Flipkart and Snapdeal coupled with the entry of global giants like Amazon is powering the ecommerce industry in India. The marketplace model followed by these ecommerce giants has helped a large number of entrepreneurs/sellers to expand their businesses and explore new geographies.

Whilst manufacturers are embracing the changing behaviour of the Indian consumer and realigning their sales and distribution channels, leading brands like Nike, Puma, Mango, Vero Moda and departmental stores and retail chains such as Croma and Shoppers Stop have also established their ecommerce presence in the country. The margin between brick and mortar organised retail as part of the overall modern retail market and online retail is expected to narrow in next five years. The share of e-commerce is expected to jump from 2 per cent in 2014 to 11 per cent in 2019 whilst the share of physical, organised or modern retail is expected to fall from 17 per cent to 13 per cent.

It is noteworthy that retail spending in the top seven Indian cities currently stands at Rs 3.58 trillion (US$ 57.5 billion) with organised retail penetration at 19 per cent in 2014, comprising physical stores at 17 per cent and online at 2 per cent. The share of organised retail in the overall retail business is expected to move up from 19 per cent to 24 per cent over the next five years, driven by online sales. The online spending is expected to touch Rs 83,900 crore (US$ 13.47 billion) by 2019 from the present Rs 7,200 crore (US$ 1.15 billion). Moving forward, the number of online shoppers in India is expected to increase rapidly to over 250 million by 2020 with the total number of Internet users crossing 650 million. Factors like convenience, ease of payment, available options and better prices are expected to take the online industry even closer in market share compared to offline retail moving forward.

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