A recent report on Global Retail Expansion by AT Kearney, a Management Consulting firm presents a comparative analysis for potential markets for retail & online retail and their respective challenges.
The findings have put India on 5th position in its Global Retail Development Index (GRDI) and second in Asia after China. The report highlights how Online Retail is changing International Retailers Global expansion strategies and presents an ecommerce index about which of the developing markets hold the most potential for online growth.
Globally, retail expansion is increasingly occurring through online as a way to tap into growing markets, for building brands and learning about consumers, as an online presence is proving to be a low-risk way to test new markets and complement existing store footprints. Ecommerce is thus playing a vital role in multichannel strategies, which are new to many growing markets including India.
A country’s prospect for online retail success is closely related to how many people use the internet and how many are comfortable purchasing or buying online. Though India is ranked 5th in GRDI, it is not ranked in the Ecommerce Index, as the internet penetration is still low when compared to global average and those who are connected to internet avoid ecommerce because of poor infrastructure that prevents reliable delivery and returns. Below is the classification of top 30 Countries in Global Retail Development Index (GRDI) as per their ecommerce potential.
The analysis put India in Infrastructure impediment quadrant as internet penetration and supply chain infrastructure for ecommerce is lower than global standards, still the sales for ecommerce in India as the size of the bubble indicates are more than many top ranked countries in the ecommerce index.
Talking about the status of India in Global Ecommerce Index Hana Ben-Shabat, Partner, ATKearney commented, “India doesn’t make it into the top ten of A.T. Kearney’s eCommerce Index because its infrastructure is underdeveloped, and there are still cultural reservations that keep it from leaping ahead. India is a big market (1.2 Bn people) but infrastructure—technology, finance, logistics—still needs a lot of work, and only 8% of the population uses the Internet.” She also added, “Obviously, with a growing middle class and increasingly urbanized population, India is an exciting opportunity market, but we will have to wait for developments in payment mechanisms to improve and Internet usage to increase. We’re seeing increased use of air and rail ticketing sites, which, for a market like India, is a precursor for broader eCommerce usage. ”
Though the Indian Market has a long way to go for ecommerce and unranked in top 10 by the consulting firm, we feel it still offers an early mover advantage and the growth of the market seems inevitable due to following reasons:
- With 8-10% of Internet penetration it offers a huge market for growth potential as around 120Mn of the population is accessing internet
- Number of online shoppers in India is on a sharp rise as the market is building; new customers are getting acquired every day
- Rate of Internet penetration is 10.2% according to Internet world stats
- Mobile & Smartphone penetration rates are high where users are switching to Smartphones for internet and there is a rise in mobile shopping
- Logistics Services in India are aggressively coping up with the current demand of ecom players with new specialized players coming to the scene
- Rise of disposable income and middle class is adding consumers’ willingness to spend
- Low penetration of Organized retail and lack of availability of products is facilitating ecom transaction in Tier 2/Tier 3 cities which are witnessing sharp increase in demand
However, we feel that there are also some challenges that have to be overcome on the way for the potential to become a reality:
- Weak consumer laws which does not make consumers confident about buying from a virtual store, something which is even misused by certain ecom players affecting the overall trust
- Infrastructure –Technology, Finance, Logistics are underdeveloped
- Lower penetration of credit cards and electronic transaction are still a bottleneck as COD may not be an online retailer’s first choice
- Lack of multichannel strategy players in the market, which could drive offline trust online
- Lack of loyalty in Indian consumers for brands
- Lack of skillful human resources for ecom jobs
Success in online retail in India will requires patience, persistence, and an ability to adapt to the markets. There are key points which can help entering India either online or as part of a multichannel strategy.
Develop a customized value proposition – As in bricks-and-mortar retail, e-commerce requires adaptation to local markets. A one-size-fits-all approach will not work because online consumers in India exhibit unique behaviors and may make Internet purchases for different reasons. Success requires adjusting websites, payment methods, shipping options, and business models according to the needs of the market.
Manage the customer experience. The convenience of ordering products at the click of a button and having them delivered to your home is a main benefit of online shopping. Thus, managing the customer experience from online browsing and product purchase to delivery and return is critical. In India where logistics can be a challenge, constant communications with customers about shipping timelines, offering Cash-on Delivery, Payment at Door via Card, Multi-Language support can help manage expectations and build trust.
Have a long-term focus. Launching e-commerce operations in India will demand patience. It takes time to understand the market, online consumers, and to build a reputable online brand.
The above post includes a part extract from the latest reports by ATKearney Management Consulting Firm, with added Indian Market Perspective. The full original reports can be downloaded from here.