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How ecommerce is nudging out physical retail

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The ecommerce revolution has changed the way India is buying, and mobility has added an edge to it, driving new trends. E-commerce as a retail channel has seen phenomenal growth over the last couple of years. How are Indian shoppers reacting to this change and how are marketers using it to their advantage. This became the topic of an interesting session on the occasion of the BW Marketing Whitebook launch in the national capital region. The ecommerce revolution is driven by factors such as substantial rise in internet penetration, increasing speed of broadband connections, and an increasing use of smartphones.

According to Alok Bajpai, founder of iXigo, a travel search engine and aggregator of travel websites, it was the travel industry that introduced ecommerce to the country. Booking a railway ticket was the most painful experience one had to go through some years back. One of the main things that helped travel to be the starting point was the absence of logistics, considering it was a service which could be delivered in the electronic format. So the company did not have to solve any logistical problems, making the whole process simpler. Along with this, it enabled the company to introduce innovation in the supply side with more tech enabled forms of travel such as airlines.

What is becoming interesting is the impact mobile is having on the traveller in today’s world. This is shaping his needs in a way that he is always expecting personalized hands on experience. The difference between ecommerce and travel depends on how much instant gratification one seeks from it, because the end result of travel is to land in your destination with minimum transportation cost but with growing ecommerce you expect the products to be delivered at your doorstep. It is interesting to notice how this will influence the expectation of the traveller and the travel industry. It is already happening with cabs where you are expecting cabs to come to your doorstep within fifteen minutes or else you can just switch the app on your mobile phone and book another cab within seconds. Instant customization has become the need of the hour.

The most important factor affecting ecommerce and retail space is the convenience of customers. Convenience has reached such a point that customers want everything delivered instantly, in their homes.

The whole mobile revolution has undoubtedly affected ecommerce and the Indian retail space proportionally. Every company has to look for innovations especially in technologies that are customer centric and the whole buying and selling process does not end there. The companies have to follow up with customer benefits and services even after the product is sold so that the customer base increases. This in turn completes the whole circle of the buying and selling process. Food industry has also been massively influenced by ecommerce in the past one year. According to Sahil Jain, Co- Founder of DineOut (a restaurant table booking service and application), with the on -demand platforms where people were ordering products to be delivered to their doorsteps, there was an explosion in the food tech industry too. Convenience is commanding everything today. When DineOut started in 2011, 80% of the business was coming through their website whereas currently, 80% of the business is coming through their application. More people are booking on the go, right before they reach the restaurant. This trend and behavior pattern is affecting travel, ecommerce, food and so there is a change in all these sectors.

When the company started back in 2011, the main task was to convince people to reserve tables using DineOut. Starting from there, with 500 diners a month the startup has reached 35000 diners a month today. This growth has exploded post 2014 when the mobile revolution began.

DineOut is looking to start the mobile wallet facility also which would help the customers pay online along with discounts and offers without waiting for the waiter to come with the bill. They are looking for more restaurants to come on board so that the whole process becomes more evolved and the customer experience is vastly improved within a couple of years.

Another interesting change in the Indian buying behavior has been the increase in business for the ecommerce companies from smaller cities. It is no longer just the people living in Tier-1 cities who are more involved in buying through ecommerce platforms. Traffic from Tier-2 and Tier-3 cities has increased considerably in the last couple of years.

The other convenience for consumers in smaller cities where penetration of debit and credit cards is still low, is e- wallet facility, which is gaining traction. Bipin Preet Singh, CEO & Founder of Mobikwik said, “SMEs and consumers operate through e- wallets, which are fast growing in cities like Surat, Ahmedabad and Lucknow. Incidentally, 10% of the users are above the age of 50 years.” Alok Bajpai, founder, iXigo, agreed that the main challenge was in getting the SMEs and vendors online in tier 2 and 3 cities.

India has about one million online traders, who sell their products through e-commerce portals. The online retail industry was worth around 32 billion rupees in 2012, and is expected to witness 45-48 percent CAGR in the next few years thus crossing the 100 billion rupees mark in very quick succession.

Nitish Kapoor, Regional Director, Reckitt Benckiser South Asia stated that he believed ecommerce was in a phase of incredible growth. According to him,“There are many players at this stage who are chasing several ideas. Eventually, stronger business models will emerge and there would be a shakeout but ecommerce is not a bubble.”

Considering the impact of e-commerce, the requirement for brick-and-mortar organized retail is projected to increase from 70.3 million sq.ft. in 2014 to 92.1 million sq.ft. in 2019, resulting in a moderate annual growth rate of 5.6% in modern retail space. As such, the top seven cities of India will require an incremental modern retail space of 4.3 million sq.ft. per annum during 2015-19.

Currently, The national capital region (NCR) has the highest penetration of brick-and-mortar organized retail, at 23%, followed by 21% in Bengaluru. Mumbai has only a 12% penetration of physical, modern retail.

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