Last updated: November 12, 2013 4:54 pm

India still wary about shopping online

For largely bricks and mortar retailers such as Marks and Spencer India presents a big challenge, with an acute shortage of suitable physical space for modern shops, sky-high rents and a geographically diffuse potential customer base, spread across megacities and scores of smaller cities and towns.

Yet the very obstacles that make India so tough for traditional retailers make it a fertile field for ecommerce. India has a profusion of new eretailers, many with foreign backing, and hoping to cash in on customers’ desire for better access to a wider array of goods, often at better prices.

“The cost of doing physical retail is rising very, very substantially,” said Arvind Singhal, head of Technopak, a New Delhi-based retail consultancy. “At the same time, consumers in India are getting more discretionary [and] looking for value. Ecommerce gives you an extra margin of 5-7 per cent to pass on to the consumers.”

Ecommerce, especially the selling of physical merchandise, is still in its early days in India, where finicky customers like to study items closely – and often haggle over prices – before making purchases.

Indian bought $10bn worth of goods and services over the internet last year, though the majority of sales were services, such as airline, railway and bus tickets, and hotel bookings. Sales of merchandise – including books, baby nappies, electronics and clothes – accounted for just $600m.

But Technopak estimates internet sales of merchandise could grow a hundredfold in the next nine years to be a $76bn market by 2021.

India’s biggest eretailer is Flipkart, which was started by two former employees of Amazon, and offers products in a wide range of categories. Sites promoting products for babies and children are popular, while sites such as Myntra and Jabong target Indian fashion fans.

Yet profiting from India’s potential market remains a challenge. Many Indians are still averse to credit card payments online. Indian eretailers overcome this barrier through cash-on-delivery payments. But this method – which still accounts for 60 per cent of all sales – raises costs.

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