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Analyze the Indian online retail market potential and growth for next 5 years. Take margins also into consideration

The online retail industry in India is likely to be worth Rs 7,000-crore by 2015 due to easy availability of broadband services and increasing internet penetration, according to industry body ASSOCHAM. India is set to become the third largest nation of internet users in the next two years with a large chunk of youngsters eager to adopt new technologies with rapidly changing lifestyles, it says. he online retail market stands at Rs 2,000 crore and is growing at an annual rate of 35 per cent, industry chamber Assocham said.

Mumbai: An industry report has projected that domestic e-commerce market will grow manifold in a decade, from Rs 50,000 crore last year. The report, E-commerce: A boon for the current economic downturn by First Data Corporation and ICICI Merchant Services, says urban Indian consumers are now confident enough to make online purchases upto Rs 25,000, up from Rs 2,000 -5,000 range in the recent past. With different levels of adoption, the e-commerce market has the potential to grow anywhere between $70 billion and $150 billion under one scenario, and at a more robust growth scenario it can grow between $125 billion and $260 billion by 2024-25, it says. According to the report, almost 57 percent of e-commerce sales come from small towns.
report has projected that domestic e-commerce market will grow manifold in a decade, from Rs 50,000 crore last year. Reuters

On the global level, the report says Brazil, US, Europe and China are showing tremendous growth. China is expected to add the equivalent of the entire population of Canada as eshoppers in each of the next four years. It also says that even though there are only under-10 million internet users who actually buy online in India, there are about 150 million internet users or around 75 million households that are ready for e-commerce. According to the report, almost 57 percent of e-commerce sales come from small towns, while the eight metros account for the remainder.

According to IAMAI, the sectoral umbrella body, current e-commerce market in India is around $10 billion, while US e-commerce market is set to touch $200 billion in 2013, growing at 17 per cent.
Growth Drivers The growth in the E-tailing market is driven by the need to save time by urban India. Besides with over 2.5 billion internet users, access to internet has also played an important role in growing the markets. Changing demographics (youthful India), changing lifestyles and exposure to the developed markets sure give a fillip to this fledgling industry. The soaring real estate costs in India have certainly inspired many an online venture. Also E-tailers have developed many innovative promotions to lure customers and there by growing the market. Barriers to Growth But then all is not well in the E-tailers paradise. The cost of customer acquisition is pretty high in India about 1100 INR/customer which eats into the margins, as most goods retailed are low value items such as books, CDs and electronic gadgets. High margin goods such as apparel are not very popular because of the touch and feel factor. Most Indians are not comfortable using their credit cards for shopping and there is always a fear of what you see may not be what you get. There may be a problem with complaint resolution, especially after receipt of wrong goods or delayed delivery. 3. New Business Models E-tailers always search new and innovative business models. Case in point being US based Power Reviews where it provides free review technology to E-tailers and all it asks in return is that the reviews collected on the retailers web site are syndicated, which is then aggregated on the Buzzillions.com, its sister website. Some Indian sites simply collect orders over a period of time say a week, order in bulk from the vendor and finally ship it to customer at a discounted rate. The customer is told beforehand about the delivery date, of course. 4. Comparison Shopping and Customer Reviews All the E-tailers are present on comparison shopping sites is of paramount importance especially since people now visit these sites before they place the order. Being present on well known sites such as compareindia.com andwize.com is a very good idea. Also they encourage customer to write the product reviews nothing authenticates their offering to an undecided customers like a good product review. The Conclusion Though much is yet to be achieved, remember E-tailing is a new industry in India. With broadband internet access still accessible to entire population, this industry may see an explosive growth. Most growth drivers are in Indias favor demographics, economy, changing lifestyle, exposure to new ideas. It is just a question of creating a sustainable eco system for E-tailing, which is at an inflection point. Time to fasten the seat belts!