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Online retail sales in India showing tremendous rise

Online retail sales in India showing tremendous rise
November 07
10:33 2018

By Taponeel Mukherjee

As the retail industry story unfolds in India, new strategies come to the fore. Recent news of Amazon acquiring a stake in Future Retail 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 in India showing tremendous rise

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 market share, an offline presence is non-negotiable.

Additionally, besides the offline versus online demarcation, it is essential to understand that 90 percent of all retail in India is in the unorganised sector. The unorganised sector – primarily, physical stores — thrives due to an extensive last-mile distribution network and long-term relationships.

The key for new players is not necessarily the disruption of the unorganised sector but having access to retail stores that provide organised players with the same distribution networks and concomitant advantages.

Online retail sales in India showing tremendous rise

Given the industry dynamics in the last decade, retail e-commerce has dominated headlines. While e-commerce will continue to be a significant sector, the question is: What other exciting opportunities exist in Indian retail?

The division between manufacturing and branding businesses is what Poornima Vardhan, CEO of 335th, a luxury-focused platform, describes as the “delineation of product development and manufacturing from the branding and marketing”.

In common parlance, separation of the R&D and product development from branding creates the potential for business opportunities through specialisation. Such focused businesses hold promise in the Indian retail landscape.

Online retail sales in India showing tremendous rise

The next decades might also herald the creation of retail platform businesses that “corporatise” a portfolio of Indian brands.

The likes of Kering, Richemont and LVMH are examples of hugely successful global retail platforms that have delivered value. While Indian beauty products, jewellery and fragrances have been marketed to some extent, now is the time to create large scalable platforms that can combine front-to-back retail operations with global scalability for Indian brands. The ability to match Indian entrepreneurship with global capital and distribution will be the vital driver to create sustainable retail platforms.

There are many “markets” that offer opportunities in the Indian retail space. Therefore, while online mass retailers will look to create an offline presence, online “digital first” niche brands, backed by specialised manufacturing businesses, also hold value. It is vital to realise that given the diverse customer segments, different pockets of opportunities will require an agile approach.

Agency

Realme partners Reliance Digital for retail sales in India

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