Online Retail Industry in India to reach $84 Billion by 2016; Small-town India Will Play a Big Role

A new report by the Boston Consulting Group says online retail in India could be a $84-billion industry by 2016 — more than 10 times its worth in 2010 — and will account for 4.5 per cent of total retail.

E-commerce entrepreneurs and experts say small-town India will play a big role in the online bonanza. More that 60 per cent of online shoppers would come from beyond the top eight metros by the end of 2012.

Organised retail is hardly a pan-India phenomenon and large chains make up less than 10 percent of the market. As a result, smaller towns often don’t have access to the merchandise available in metros such as Bangalore or Mumbai.

Internet and online retail sites have emerged as the great leveller. India has become the third-largest Internet market, based on the total number of users, and 60 per cent of these come from smaller towns. Besides books, online shoppers in India buy goods such as lingerie and jewellery. India has one of the world’s youngest Internet population, with 75 per cent of users under 35, and many of them have much more disposable income than their parents did.

For many Indians, booking railway tickets online was their introduction to Internet shopping. The government railways ticket booking portal and travel firm MakeMyTrip Ltd, which is listed on NASDAQ, revolutionised the travel industry at a time when buying train tickets meant waiting for long hours at railway counters. More than a decade after MakeMyTrip was founded, 75 per cent of the B2C online market is still dominated by the travel industry, according to a Dec 2011 study by Edelweiss.But the same study expects the next leg of e-consumption to be driven by apparel, books and consumer goods.

Already, it is the non-travel that gets the highest traffic in India among e-commerce sites. Apart from offering discounted and fast service, such sites have also provided a national platform to regional merchants by selling their products online.While many of India’s e-commerce sites have been inspired by successful models abroad such as Amazon, most have had to improvise to survive locally. The biggest departure from the western model has been offering cash-on-delivery for products.

E-commerce companies rely on courier service providers to deliver their goods. An Edelweiss study says that only about 10,000 of over 150,000 pin codes in India are covered by these delivery services — leaving out a huge chunk of the country

As the online battle heats up, tech experts say the coming year would be a time of Darwinian struggle, where few winners would emerge.Next 12-18 months, you will see a lot of consolidations happening in the industry

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