IMPACT: International Journal of Research in

Business Management (IMPACT: IJRBM)

ISSN (P): 2347-4572; ISSN (E): 2321-886X
Vol. 6, Issue 12, Dec 2018, 31-38
© Impact Journals

ONLINE RETAILING IN INDIA: CURRENT SCENARIO DEY DASGUPTA

Shuvendu Dey & Ankush Dasgupta

Assistant Professor, Department of Business Administration, Siliguri Institute of Technology, Salbari, West Bengal, India

Received: 10 Dec 2018 Accepted: 17 Dec 2018 Published: 27 Dec 2018

ABSTRACT

Indian consumers are familiar with the concepts about the quality of products and services. These demands are
discernible features in the retail sector of India. The retail sector is going through the stage of tremendous transformation.
The impact of the changes in the format of the retail sector has changed the lifestyle of the Indian consumers radically.
With the swift growth of the internet and globalization of the market, the retail sector has become an increasingly
competitive and dynamic business environment. The developed countries have already started to reap the benefits by
transforming the old form of offline retail to online retailing but it is still in nascent business in India. The Online Retailing
is described as transactions that are conducted through interactive online computer systems, which link consumers with
sellers electronically, where the buyer and merchant are not at the same physical location. E-Retailers serve the
consumers 24X7 in a hassle-free manner. Thus, online retailing has set a new platform for the expansion of business and
has witnessed steady growth over the years. E-Retailing accounts for about 10% of the overall growth of the e-commerce
market and constitute about 4.5% of the overall retail market. This paper attempts to provide a clear picture of the online
retailing in India in recent times, its growth, prospects, and challenges faced by it.

KEYWORDS: Indian Consumers Radically, Platform for the Expansion of Business, Sale of Goods and Services

INTRODUCTION

Online retailing refers to the selling of goods and services through the internet. All over the world, internet users,
buyers, and businesses are growing at an exponential rate. The pervasiveness of computers and internet as one of the most
influential technologies and its integration with business has made the sale of goods and services through websites a
profitable and low-cost affair (Doostar, Akbari, & Abbasi, 2013). Businesses have realized that they can use the internet as
a powerful tool to increase overall service offerings (Griffith & Palmer, 1999). In India, online consumer base is increasing
radically, as gadgets like smartphones and tablets are available at reasonable prices and access to 3G, 4G and broadband is
easy. This technology adoption by masses has fueled the success of domestic e-commerce players like Flipkart and
Snapdeal and lured international players like Amazon and Alibaba into the Indian market. While domestic companies are
tweaking their business models to attract and expand their customer base (Awad, 2012; Chaffey, 2013; Kalia, Kaur, &
Singh, 2015; Laudon & Traver, 2007; Schneider, 2012), Transnational companies are relying on their monetary muscle,
strong domain knowledge, and international exposure. One of the fastest growing segments of e-commerce is online retail.
Young population, growing internet penetration and upwardly mobile middle class will propel e-commerce and overall
retail business in India in the coming years (PWC, 2016). But this opportunity can only be exploited by e-commerce
business if they have a significant understanding of evolution and current scenario of the Indian e-commerce market which

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 32 Shuvendu Dey & Ankush Dasgupta

has seen a dot com burst earlier in 2000 (Kumar & Mahadevan, 2003).

Online Retailing in India: Current Scenario

In spite of its huge population and alluring forecasts, India fails to reach among top 30 countries of Global Retail
E-Commerce Index because of meager internet penetration, infrastructure constraints, low credit card penetration, complex
tax laws and scarcity of funds. The first wave of e-commerce in India in (1996-2000) petered in 2000 due to similar
reasons like low internet penetration, paltry online shopper base, sluggish internet speed, poor infrastructure support and
little recognition for internet shopping concept. During 2000-2005 hundreds of e-commerce business in India crumpled.
The next wave, continuing till date, has been dominated by online travel throughout its evolution, but online retail is
catching up and more and more online users are showing interest in making a purchase online and it claims nearly fifty
percent share of non-travel B2C e-commerce. Despite problems discussed above, a potential of India’s online retail
industry is huge and it can be predicted from the fact that currently, it is just 7.9% of organized retail and 0.5% of overall
retail. Adoption of western lifestyles and growing internet penetration in the last few years are propelling India’s online
retail industry.

Consumers in India are accustomed to the concepts of quality of products and services. These demands are
visible impacts in the retail sector of India. The retail sector is going through the phase of tremendous transformation. The
developed countries have already started to reap the benefits by transforming the old form of offline retail to online
retailing but it is still a nascent business in India. Flipkart has changed the retail landscape in India by introducing online
retailing starting just a decade back. As the number of online shoppers is swelling across the world, the developing
countries like India have also started to take special interest by liberalizing their foreign direct investment (FDI) policies.
India has relaxed several key FDI regulations, like 100% FDI in single-brand, 51% in multi-brand retail and, in e-
commerce, the government now permits 100% FDI for online marketplaces (Ernst & Young, 2016). On the whole, the
changing policies are expected to boost market entry in online space and it is highly interesting that the government of
India has taken a big step by allowing 100% FDI in online marketplace model. Before Amazon entered the Indian market
in 2013, the local retailers were the dominant players in the online retail scene. Although companies like Alibaba have had
a stake in the fray via Paytm, etc. but the reforms came as a welcome relief for foreign online retail players who have been
eyeing the Indian market for their business expansion. At the moment, the major online retailers are, Flipkart, Myntra,
Snapdeal, Amazon, eBay, Jabong, and Rediff etc. The acquisition of Flipkart by Walmart has been the biggest such deal in
the entire world in the retail industry, the value of the acquisition being $100 billion. This speaks volumes about the
confidence reposed by the global online retail industry on the potential of the Indian online retail business. Furthermore,
the growth of internet and smartphone users changed the way how online retailing operated in India. However, online
retailing till date is limited to only major metros, tier-II and III cities due to relatively slow penetration of the internet,
complex taxation rules, unsecure transaction, and a paltry number of operational credit or debit cards in the market.
Furthermore, many Indian online buyers are unwilling to reveal their financial information online, which impedes the
growth of online business. Many people still access information online but buy their products from offline stores.

In the Global Retail Development Index 2017, India bagged the numero uno position beating competition from
countries like China, Malayasia, Russia etc. As a consequence retail space demand is expected to increase at the rate of

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 Online Retailing in India: Current Scenario Dey Dasgupta 33

81% to 7.8 million sq ft by the end of 2018. Joint efforts of financial houses and banks with retailers are facilitating
consumers to go for high ticket items with easy credit. Goods and Service Tax (GST) has been introduced in India
simplifying the tax structure as a form of the single unified tax system. Cumulative FDI inflow in retail is slated to reach
US$ 1.42 billion by June 2020. The Indian retail industry has come up as one of the most dynamic and high growth
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 retail powerhouse.

Market Size

India’s retail market is estimated to increase by 60% to reach US$ 1.1 trillion by 2020 supported by factors like
rising incomes and lifestyle changes in the last couple of years, burgeoning middle class and increased digital connectivity.
While the overall retail market is expected to grow at 12% per annum, its online variant would expand twice as fast at 20
per cent per annum and traditional trade at 10 per cent. Last year, the organized retail market contributed 7 per cent of the
total revenue. Remarkably, online retail is expected to grow in leaps and bound in the in the next five years and has grown
by 23% to $17.8 billion in 2017. With time, India is projected to develop into the world’s fastest growing e-commerce
market, driven by robust investment in the sector and rapid increase in the number of internet users with the e-commerce
revenue expected to reach US$ 200 billion by 2026 from US$ 39 billion in 2017. As per Assocham, a luxury market of
India is expected to contribute significantly which is slated to reach US$ 30 billion by the end of 2018 from US$ 23.8
billion 2017 supported by increasing availability of globally famous brands amongst Indian youth and growing purchasing
power of the upper class. The size of modern retail in India is estimated to touch US$ 11.25 billion in 2019 from US$
13.51 billion in 2016. The Indian retail trading has witnessed Foreign Direct Investment (FDI) to the tune ofUS$ 1.42
billion during the 1st quarter of FY 2018, according to the Department of Industrial Policies and Promotion (DIPP). Some
notable instances are listed below:

• Google and Paytm Mall to acquire 7-10 per cent stake in Future Retail with an investment of Rs 3,500-4,000 crore
(US$ 522.08-596.66 million).

• Investments by private equity firms and wealth firms in Indian retail sector reached US$ 800 million in 2017.

• India’s retail sector attracted Rs 9.5 billion (US$ 147.40 million) investments in FY18, at a growth rate of 35 per
cent year-on-year from Rs 7 billion (US$ 104.34 million) in FY17.

Further, the Government of India has also taken various initiatives to promote the retail industry in India. The
Government of India could change the restrictive FDI rules in food processing to encourage e-commerce companies and
foreign retailers to sell consumer products that are made in India. A government of India has already permitted 100% FDI
in online retail through the automatic route, thereby providing clarity on the businesses of e-commerce companies currently
operating in India.

Competitive Scenario: Online Retail Market

In India, many national and global online retailers are waking up to the current and future market opportunities.
The following list comprises of category wise online retailers:

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 34 Shuvendu Dey & Ankush Dasgupta

All Product Categories

• Amazon India (Online Shopping: Shop Online for Mobiles, Books, Watches, Shoes and More )

• Flipkart (Online shopping Site: Shop online for mobiles, electronics, fashion & more @ Flipkart )

• Snapdeal (Snapdeal.com )

• ShopClues (Online Shopping Site India: Buy Mobiles, Electronics, Fashion, Clothing, Shoes, Laptops, Tablets at
Best Prices - ShopClues.com

• PayTM ( Online recharge | mobile recharge for prepaid & pay postpaid bill@Paytm.com )

Fashion

• Myntra (Online Shopping India - Shop Online for Branded Shoes, Clothing & Accessories in India | Myntra.com )

• Jabong (Online Shopping India- Shop for Shoes, Clothing, Bags, Watches Online in India )

• YepMe (Buy Shoes, Clothing & Watches in India at Yepme )

• Voonik (Online Shopping Site: Shop for Women Clothes, Shoes, Bags, and Watches in India )

Grocery

• BigBasket (Online Grocery Shopping and Online Supermarket in India )

• Grofers (www.grofers.com )

• ZopNow (ZopNow - The Online Grocery Shopping Store )

Wholesale Items

• IndiaMart (http://www.indiamart.com )

• ShopClues (Online Shopping Site India: Buy Mobiles, Electronics, Fashion, Clothing, Shoes, Laptops, Tablets at
Best Prices - ShopClues.com )

Directory Sites

• JustDial (http://www.justdial.in )

• Sulekha Yellow Pages (Sulekha US - Indian Events, Roommates, Day Care, IT Training, Classifieds, Jobs, Local
Services)

Traveling

• MakeMyTrip ( MakeMyTrip, India's No 1 Travel Site )

• Yatra ( Flight, Cheap Air Tickets, Hotels, Holiday, Trains Package Booking - Yatra.com )

• GoIbibo ( Online flight booking, Hotels, Bus & Holiday Packages at Goibibo )

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 Online Retailing in India: Current Scenario Dey Dasgupta 35

• Hotels ( http://www.hotels.in )

• Trivago ( http://trivago.com )

• Trip Advisor “Not Indian but Helpful” ( TripAdvisor: Read Reviews, Compare Prices & Book )

Matrimonial Sites

• Shaadi (http://www.shaadi.com )

• Bharat Matrimony (Matrimony, India Matrimonials, Matrimonial Sites, Marriage, Brides )

• Jeevansaathi ( Matrimony, Marriage, Matrimonial Sites, Match Making )

Classified Sites

• OLX 'Mostly Indian’ (Free classifieds in India, Classified ads in India, Online Classified Advertising )

• Quickr (Free Classifieds India, Post & Search Ads Online| Quikr )

• Customized Items

• Printvenue (India's #1 Customized Printing Services For Businesses & Individuals )

• VistaPrint ( http://www.vistaprint.in )

• PrintLand (Online Printing Services India, Digital Photo Printing Company, Print Shop )

Online Jobs

• Truelancer (Hire Freelancers & Find Freelance Jobs Online - Truelancer )

Furniture Stores

• Pepperfry (Online Furniture Shopping Store: Shop Online in India for Furniture, Home Decor, Furnishings,
Kitchenware, Hardware, and Kids Products @ Pepperfry )

• Urban Ladder (Furniture Online: Home Wooden Furniture Sale @ 40% Off )

Car Information and Enquiry

• Carwale ( New Cars, Used Cars, Car Prices, Reviews & Photos in India )

• CarDekho ( CarDekho - Cars in India, New Cars Prices 2016, Buy and Sell Used Cars | CarDekho.com)

Entertainment and Food

• Book MyShow (BookMyShow )

• Food Panda (Order Online with foodpanda India ) “Not Indian, but playing separately in India”

• Ticket Please (ticket please )

• Zomato (http://www.zomato.com )

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 36 Shuvendu Dey & Ankush Dasgupta

• Faasos (Faasos - Order Food Online in Seconds, Get it Delivered in Minutes )

• Swiggy (Order food online from India's best food delivery service. Order from restaurants near you. Swiggy.com )

Household Services

• UrbanClap (www.urbanclap.com)

• HouseJoy (www.housejoy.in)

Online Retail Growth Factors & Opportunities

Online retail in India has been experiencing remarkable growth, successfully changing the way people transact.
Online retail represents a very small fraction of the total retail market of India i.e.US$ 16 billion out of US$ 641 billion in
2016 (IBEF, 2017), but holds immense business potential-driven mostly by growing internet penetration, increasing usage
of smartphones, cost and time advantages etc. Eager consumers for modern ways of shopping, the popularity of cash on
delivery (COD) and growing acceptability of online payments, favorable demographics are the other key factors driving
the growth of online retail in India.

Road Ahead

E-commerce is making rapid strides in the country as customers are lapping up the ever-increasing choice of
products at the cheapest rates. E-commerce is possibly creating the biggest disruption in the retail industry which is
expected to continue in the coming years. India's e-commerce industry is projected to notch up US$ 60 billion by the end
of 2018. E-commerce provides a unique cost-cutting option for the retailers as makes it possible for them to minimize
investment on real estate while reaching out to more customers spread all over the country. Retailers should wake up to this
opportunity and leverage the digital retail channels. Both organized and unorganized retail companies have to work
together to ensure better prospects for the overall retail industry while generating new benefits for their customers. The
long-term outlook for the industry is positive, bolstered by rising incomes, favorable demographics, entry of foreign
players, and increasing urbanization.

CONCLUSIONS

There are divergent views on the future of online retailing in India. But from the studies examined above it is
possible to conclude that online retail business will have exponential growth in India, though much is yet to be achieved.
Most growth drivers such as demographics, economy, changing lifestyle, payment systems, increase in internet users &
mobile subscribers etc. are in India’s favor. Also, the government of India has further relaxed restrictions on foreign
investment in a communications network and taken measures to reduce communication cost effectively. India has a
massive population with relatively young median age. As this group of people joins the labor force, they will also add to
the country’s new, expanding consumer class. Online retailers have opened up for the consumers with a range of options
and offers in products and services, which the traditional brick and mortar businesses were unable to do. The ease and
sheer convenience of browsing and buying whatever a consumer wants from any given location at any time have added to
the popularity of online retail. Secure payment systems knowledge may encourage customers to transact online with less
hesitation. And the unique offer of cash on delivery (COD) has proven to be the perfect alternative for those with

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 Online Retailing in India: Current Scenario Dey Dasgupta 37

remaining uncomfortable with online payments in India. As the number of players continues to grow, competition will
become even fiercer, and markets must develop according to the customer psyche for better segmentation, targeting
perspectives and a stable market share. Online retailers should continuously monitor customer lifestyle trends and further,
understand factors that impact online consumer behavior. In order to improve their chance of success, companies are
learning and adopting certain strategies. The successful companies in India are focusing on strong customer service and
establishing trust with buyers. This leads to repeat buyers, lowers customer acquisition and retention costs and improves
profitability. In addition, some companies are differentiating themselves by focusing on niche product categories and
market segments. To outlast their competition retailers will also need to build a strong brand. This is what Amazon was
able to do in the USA, and probably what Flipkart, Amazon India and some of the other larger players are emulating and
trying to do in India. Convenience, choice, discounts and payments options all goes in accordance with the generation next
requirements. With all these the online is bound to be the next phenomenon in India. The trends that would be followed in
future would be increased use of smartphone and tablets for shopping. Delivery lead time can be reduced with the
development of new warehouses and logistics network. With the great potential and opportunities, there are many pitfalls
and challenges along the way and it enhances the prospects for further research in the areas to examine the trends,
challenge, and innovations which are taking place in the online retail business in India.

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