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E-Tailing- a promising approach in Indian Retail Industry

John Jebaraj S.R. N.M.Gnanaprakash


Asst. Prof., Management Studies Asst. Prof., Management Studies
Mepco Schlenk Engg. College Mepco Schlenk Engg. College
Sivakasi Sivakasi
jebaraj_john@yahoo.com gprakash_m@sify.com
Abstract

“When a main street store builds a web site, they open up opportunities to expand their
market beyond geographic boundaries. The chances of losing sales from the physical shop are
slight, but the potential to increase sales through their web site could be enormous….”
(Tiernan, B., 2000.)

The two most powerful forces affecting the world economy and commerce today are the
increasing rate of globalization and advances in information and communication technologies
(ICTs). The Indian Retail Market is witnessing this kind of revolution. The growth of internet
has enabled the new retail format of the virtual retailer to emerge and forced the existing
retailers to consider e-tailing model of retailing as well. A large number of consumers
frequently use the Internet for shopping purposes. The e-tailing web site is the front door of the
online store that interacts between the e-tailer and consumers. Setting up the web site seems
easy, but to make the site that usable and effective is not so easy. Of the many e-tailing web
sites on the Internet, only a few can survive and make a profit.

The purpose of this paper is to explore the barriers and factors for achieving successful e-
tailing in Indian retail industry.

Keywords

E-tailing; Indian retail industry; E-Community; Website & Online Shopping.


E-Tailing- a promising approach in Indian Retail Industry

1. Introduction

The economist Peter Drucker has convincingly argued that this will be the century in
which knowledge and knowledge professionals dominate the economy and society (Drucker,
Peter, 2001). The last decade of the 20th century gave us a brief introduction to a society that
will be driven by information and knowledge. At the heart of this revolution is the incredible
speed at which information is transmitted and at which technology bears down on society,
constantly providing new ways of communicating, of preserving and accessing knowledge, and
of tracking persons and objects. These changes have brought with them tremendous
opportunities to enhance older ways of doing business, such as robotic and distributed
manufacturing (Rao, Bharat, 1999.) and - the subject of the present review E-tailing or the sale
of goods and services through the Internet.

As one of the market trends, e-tailing has been widely used in retail industry and more
retailers are starting to realize the benefits of e-tailing and believe that the knowledge about
how to achieve successful e-tailing may be the key to survive the competition in this 21st
century. (Ogden, J.R. 2005)

E-tailing – the online version of retail shopping has finally come of age. With
online community growing in strength there’s a larger platform for retailers to scout for
potential e-shoppers. One can buy anything from stereos to iPod’s without stepping out.
They serve 24 hours x 7 days, in trouble free manner. E-tailing accounts for about 10% of
the overall e-commerce market.

2. Background

E-tailing is “retailing conducted online, over the internet” (Turban, E., King, D., Lee, J.
and Viehland, D. 2006); it is also called B2C e-commerce which refers to retail transactions
of products or services from businesses to individual customers. Even though the most
common use of e-tailing is the sale of products or services online, but online retailing
businesses do not only undertake simple sales, they also include other applications, as do
physical retailing outlets.

2.1 Some of those applications of E-tailing include:

1. Selling goods and testing new products: Many giant retailers use the internet as a
tool to test their new products and services. This strategy is useful to reduce risks in
the initial stages of new product marketing and sales. (Mullaney, T.J. 2004)

2. For Market research: Retailers can use their online presence to gain valuable
customer information for predication of future customer demand. In the offline
environment, such data are difficult and expensive to collect and analyze. Online
market research has some powerful advantages, such as monitoring real-time buying
patterns, much more accurate and reliable data. (Baker, C. (2005))

3. Promotional experiments tool: Following on from market research, valuable


customer data can be used to conduct pricing and promotional experiments. A website
can be used as a tool to conduct promotional experiments, due to the wide reach of the
internet and its cost-effectiveness. (Rao, B. 1999)

4. Marketing tool: A website can also be an effective channel to communicate with


customer (Peterson, R., Balasubramanian, S. and Bronneaberg, B.J. 1997).The
internet has made businesses dreams of interactivity, personalization, customization
and 24/7 availability a reality.

5. Online customer service: Many new services (i.e., delivery status information and
personalized products and Interaction forums) can be available uninterrupted online,
which is almost impossible or too expensive to have in the physical world.

3 Reasons for e-tailing becoming a hot opening in India:

• No real estate costs

E-tailers do not have to maintain expensive showrooms or warehouses in prime


locations; they operate through their web sites and thus save drastically on the real estate
costs. The real estate costs in the metropolitan cities like Chennai, Mumbai and Delhi are
very high. And also the maintenance costs of a virtual store is very very less when
compared with the maintenance of a physical store.
• Easy and comfortably obtained information

Easy and comfortably obtained info is another advantages that shopping on the
Net offers. On the Internet, product information is just a few clicks away, all accessed in
the comfort of a home. Traditional retailing stands out in stark contrast: the consumer
searches frantically, runs up and down, grills poorly trained store person who is unable to
help him out. In the bargain, valuable time is lost. Simply put, shopping on the Internet
for, say less than 10 minutes could save a two-hour trip to the shopping mall. Consumers
prefer to save this time so that they can devote more time for their professional and
domestic priorities.

• Better interaction with the customer

The greatest benefit of online commerce is its ability to establish interaction as a


group. An interaction refers to the ability of reaching customers on an individual basis
and reacts appropriately to responses of individual customers. Interaction is a vital tool
for mass customization. Examples are many and include online marketing of flowers,
cake, software books and education. This has also led to greater satisfaction among the
online buyers. According to a research agency, 82% of the online buyers have been found
to be satisfied with their purchases.

• Mass Media

A supermarket has limited area of operation. It caters to customers of a particular


city (and/or its suburbs), but a web site can be accessed from any part of the country or
for that matter from any part of the world, thus increasing the potential customer base.

4 Reasons Why Indians frightened to e-tail shopping:

The Internet provides a progressive dimension to most of the industries on global


platform. The retail industry has also benefited from its online version which has resulted in the
growth and expansion of the sector worldwide.

In India, e-commerce has been on a slow track in comparison to other parts of the world.
There has been a visible growth in the e-retail sector yet the industry is being seen in its
incipient stage. Earlier, the reasons cited for the weak response towards online shopping was
blamed on the lack of Internet facilities and inadequate online transaction facilities available in
the market.

Since then, there has been technological boom in India. Now, the Internet is easily
accessible to urban India and even rural pockets are getting Internet accessibility at select
places. Growth in the credit card industry and other online transaction methods has also been a
boon for e-shopping. Despite the recent developments, response to online trading and
transaction has been feeble in this part of the world.

4.1 Some of the reasons which potentially work against the industry in India include:

Most of the e-tailing ventures have not been as profitable as they were expected to be, the
reasons being: -

• One estimate is that India has a mere 4 million Internet users, mostly are from metros.
According to web analysts many areas of retailing, Internet is unlikely gather a sizable
slice of market. And that could be several years to come. , Especially in businesses where
margins are thin.

• Despite a higher Internet penetration, cities like Mumbai or New Delhi might not be a
haven for an e-tailer. Reason: for things like grocery, there is a shop out there at every
nook and corner. All that an individual has to do is just make a phone call and the goods
are delivered at his doorstep. Thrown in along with free home delivery is a month's
credit.

• Cheap labour Thanks to easy availability of domestics at an affordable wage bill, quite a
few of the rich customers hire them for doing domestic chores, which include shopping.
The usual Indian aversion to use credit cards. Thanks to low penetration of credit cards
and the lack of popularity of debit cards, e-tailing might find it an uphill task to catch on.

• Mounting competitive pressures: The market for online buying is still at a nascent stage.
The turnover of the sector is relatively small and many players have already entered into
it. Thus many e-tailers are eyeing a small market, exerting more pressure on operating
margins.
• Shopping is still a touch--feel--hear experience: Unlike the Americans, Indians do not
suffer from 'time-poverty' and shopping is still considered to be a family outing. Hence
this type of an environment creates a problem of customer retention.

• In e-tail, customer retention by 5% leads to increase in profits by 25%. Most people


buying on the net do it out of curiosity and a repeat purchase is unlikely.

4.2 The other reasons are:

- Bargaining is not possible


- Product trial is generally unavailable
- Insecurity surrounding the credibility of a shopping portal
- Delays in product delivery
- Lack in the variety of products
- Social networking is restricted
- Preference to real-time shopping for get-togethers

The above mentioned reasons clearly indicate that apart from online activities like travel
ticket booking and online broking, e-commerce still has a long way to go before earning the
faith of the consumers. More innovative and tangible options are still awaited before the
shopaholic appetite of the quintessential Indian is satisfied by these virtual stores.

5 Some recommendations for booming e-tail industry

• Customer care should be a top priority as with leading online companies. Online
customer is more aware, more sensitive and therefore, more difficult to retain
• The industry should ensure that customer has the right information, right mechanism
& feels safe and secure while transacting online
• E-stores should capitalize on bullish trend & try new concepts to retain the customer
base. “Try & Buy’ concept would be a killer proposition,” says Nag of Store Guru
• Focus on backend inventory & fulfillment systems to compare with world-class ones

6 Role of E-community in E-Tailing:

More often than not, it's being argued that online shopping is convenient but yet an
isolated activity. This format of easy to order and deliver has been catching up with the
technology oriented buyers but it has always been looked upon as option out of necessity and
not pleasure. In order to break this, the concept of e- socializing was introduced to the online
buying experience.

Apart from a few established online stores, most of new entrants and the upcoming e-
retail ventures are banking heavily on the rising popularity of social networking within the
online shopping domain. There are a number of major international e-stores who initiated the
coupling of online shopping with social networking. Online giants like e-bay started their
buyers' "Community" which was then followed by arch-rival Amazon's popular "Daily Blog"
section.

The e-community trend has now moved-in to the Indian shopping terrain as well. Most of
the upcoming Indian online stores and the Indian counterparts of the already established inter-
nation e-retail brands are reaping in the benefits of shoppers' community and the latest Web 2.0
technology to create a loyal consumer base out of their readily generated user traffic on the
sites.

6.1 Some of the popular community-based Indian shopping portals for your reference
include:

• ebay India (ebay.in) :

The global retail giant's Indian venture has a shoppers' community dedicated to registered
users willing to chat, discuss, ask questions, leave messages and even leave feedback for the
portal.

• Retailsdirect (retailsdirect.com):

This site is arguable India's first interactive store ever. If you have anything to share,
discuss, ask or answer on any issue/subject including shopping, this site has it. It also has video
conferencing facility and is based on Web 2.0 technology.

• Hindustanlink (hindustanlink.com):

A site where you can do a lot more than shopping, including activities like Forum
discussions, Blogging, Free Classifieds, Baby Names and Questions-Answers section as well.
6.2 E-Store strategies:

The big players in the online retail scene in India are trying their different ideas to
convert online users into traffic and then converting it into visitors, then into buyers and finally,
into a loyal consumer base. For this, the focus has shifted from merely providing products
online to social communities and special offers which can only be availed at these virtual
stores.

With the prospects of becoming a long-term successful industry, major e-stores like
Indiamart, Futurebazaar, Retailsdirect and Indiaplaza are relying heavily on the online retail
boom. They are leaving no stone unturned in accelerating the conversion rate of its user traffic.
The most valuablee factor for drawing in consumers from the offline domain is the
'convenience' factor of online shopping.

• Indiamart:

IndiaMART.com is a leading B2B marketplace that assists buyers and sellers to trade
with each other at a common, reliable & transparent platform i.e., a B2B marketplace.
Highlights - Upcoming trade shows, divergent industry updates, international trade leads,
tender notice via emails etc.

• Futurebazaar:

Future Bazaar is an Online Shopping Site selling various products like Mobile Phones,
MP3 players with lowest prices and the best deals online in India.

• Retailsdirect:

Read reviews, compare and Buy wide range of products online. Shop online and earn
points at Retails Direct India. It has some highlights like Group Bargains (Savings of upto 33%
on products by creating groups to bargain), Cafe Retail (Earn redeemable RD coins, upload
videos and photos)

• Indiaplaza:

US based one-stop shopping mall; including handicrafts, jewelry, clothes, electronics,


gifts, books and newspapers. Pricing in US dollars meant for trading and shipping to India and
worldwide. Highlights - gift certificates, Gifts to India. It is one of the largest book store
selling over 3 Million titles. In 2003, 25% of their sales were for books and 15% for
electronics. In 2007 there was a drastic drift from books & music to gadgets & electronic
items. Today with E-commerce, their market for books is intact with @60% of their
revenue from gadgets with market for electronics increasing significantly

• Sify:

Sify technologies ke pt pace with the market & witnessed more than 70% growth
year on year. Gadgets account for much of their sales, says Head – Ecommerce, Sify
technologies, adding that lot of purchase h a p p e n around events. Books bought online
increased by 7% in past 2 years & clothing, accessories, shoes increased from 20% to
36% to witness the largest growth.

7. E-tailing Success Factors

E-commerce system can be measured in four dimensions: system quality, content quality,
trust and support & services. Findings from researchers such as Chiger, Nielsen (Nielsen, J.
1998)and Lohse and Spiller (Lohse, G.L. and Spiller, P. 1998) point out that poor e-commerce
system quality of websites will have a negative influence on the customers’ online shopping
experience and their satisfaction with the sites. Due to the nature of the virtual environment,
customers cannot physically touch the products before purchasing from websites. The
website is the only channel to understand a product. As a result the content on the site should
be functional and attractive. Some researchers Von Dran(Von Dran, G.M., Zhang, P. and
Small, R. 1999) argue that content quality may be more important than system quality. As
well as content quality and system quality, research findings have suggested that trust including
attributes of security, privacy, and product quality has an important effect on the use of e-
commerce and user satisfaction, due to the high uncertainty of the online environment(Urban,
G., Sultan, F. and Qualls, W. 2000). Another important factor of website quality is support &
services including FAQs section on the website, online customer services facilities, search
function within the site, online feedback & review facilities, online payment and delivery
services, online customization tools, escrow & insurance services, etc provided by a website.
Always service quality is increasingly recognized as an important aspect of e-commerce. In the
meantime, many previous researches (Gibbs, J., Kraemer, K.L. & Dedrik, J. 2002,) also has
investigated the factors affecting the adoption of e-commerce from different perspectives,
including senior management factor, organizational factor, e-commerce strategy, consumer
factor, and external factor.

8 Best retailing model for Indian circumstances:

o The most important cost advantage of e-tailing comes from whittled down shop
front costs and elimination of intermediaries and economical distribution. For example,
book e-tailing means giving out with big shops replete with slow-moving stock. Consider
the case of Amazon.Com, where the orders go straight to the wholesaler. That means the
working capital costs are cut down drastically. Not just that, an e-tailer is paid before he
pays his distributor. The implication: need for lower working capital.

o Collaborative commerce (e-commerce): An e-tailer may collaborate with some


manufacturers and suppliers. Something that Easybuymusic.com has done. It has hooked
up with warehouses of music companies and their distributors. So every time an order is
placed with easybuymusic.com, it scans the warehouse closest to the customer. In most
cases the distribution costs are substantially lower since fulfillment is done locally

o Create economic value: E-tailers should create economic value for the customer
rather than a curiosity value. They should find out reasons, as to why customers should
buy from a web site rather than a brick and mortar store and try to communicate this
reason effectively.

o According to the KSA annual consumer outlook, the consumers are more
comfortable buying certain items. An illustrative list with a percentage of the consumers
are: books and music 47 per cent, home furnishing 29 per cent, sports apparel 25 per cent,
casual clothes 21 per cent, shoes 14 per cent, groceries 9 per cent and tailored clothes 9
per cent.

So e-tailing in India can be a success if the e-tailers change their business models
and understand their customers more.

9. Conclusion

As the famous saying goes, "There is nothing permanent in this world except change", it
can be easily applied to the ever-changing trends in the retail industry. The whole 'sale and
purchase' idea got a new meaning with the advent of online version of shopping.

Though much is yet to be achieved in e-tailing, with broadband internet access still accessible to
entire population, this industry may see an explosive growth. Most growth drivers are in India’s
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!

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