Wednesday, June 18, 2008

Virtually @ Shopping

Online shopping is the next big thing as small and big retailers rush to set up portals with discounts and schemes now just a click away
IT'S late afternoon on a Sunday. and you are in the middle of IPL's final match between Rajasthan Royals and King's Punjab XI, and the wife reminds you that you have to go shopping. However bored you are, you know that it's month end and you are left with no choice but to go shopping. You switch on your laptop, visit at least three retail outlets' online shopping portals, shop for the best prices, and all this without missing even a single Shane Warne delivery to Yuvraj Singh.
Online retailing or e-tailing has been a distant concept in India, except in the travel and ticketing sector. The Future Group has been an early mover while others such as Reliance Retail, RPG Cellcom, and Tata Woolworths are gearing up to launch their own online shopping portals. Importantly, smaller players such as Vishal Retail, Subhiksha and Spinach too are seriously looking at e-tailing as a future revenue generator.
Says R Subramanian, MD, Subhiksha, "We are investing Rs 12 crore into this venture and expect 3-4% of total business coming from online. We'll deliver across 400 towns we are present in." Other than shopping the website will be designed to provide buyers with information such as new store opening, offers and promotions and so on. Vishal Retail is also looking at internet shopping, confirms its MD Ramesh Chandra Agarwal, "We plan to launch our online shopping portal in the next 4-5 months, and have already appointed a person to head the new venture." He says prices on the portal will be 5-15% lower than what a consumer pays in their stores. Figures released by the Internet and Mobile Association of India (IAMAI) state that the ecommerce market is expected to reach the Rs 9,210 crore mark by the end of 2007-08, a growth of 30% over the current year. Online is the largest contributor to the B2C e-commerce industry at Rs 5,500 crore for the year 2006-07 and is expected to rise to Rs 7,000 crore by the end of 2007-08. Etailing stands at Rs 850 crore in the year 2006-07 and contributes maximum to the on-line nontravel industry. It is expected to be Rs 1,105 crore by end 2007-08.
Reliance Retail is on the verge of rolling out its integrated e-tailing website that will include Reliance Fresh, Digital, Trendz and other verticals. The company will set up its own call centre and a separate team for it, says Ajay Baijal, president, Reliance Digital: "Cities like Bangalore, Hyderabad and Pune are going Wi-Fi and we see a massive opportunity here for online shopping." Speciality mobile retail store chain RPG Cellcom too is making its on-line foray soon. Its marketing head Bishwajeet Pandey says, "The prices on-line will be no different from our store price, and we plan to charge a little extra for home delivery."
The challenges in replicating the success of physical stores online are very different, and retailers are eyeing a different set of value adds and experience to hook customers. Some are planning to introduce virtual shopping, where the customer can get a feel of moving around in a mall, and can click on the items he/she wants to buy. Mumbai-based Spinach is among those looking at virtual shopping. Says its CEO Pushpamitra Das, "There's big business in on-line retailing and it's still untapped in India. We're planning a virtual shopping experience which will be launched very soon."
Retailers have begun viewing IT as one of the areas, which could strengthen their market position, and market share thereby. Most of the spending would be in supply chain management, point of sale systems, strategic merchandising and facilitating customer relationships. It is estimated that India, China and Russia would be spending over $1.57 billion in 2010 on software, says a research report by AMR. The report mentions that retailers would hike their IT budget by 25% by 2010. Says Rob Garf, vice president and general manager of retail strategies at AMR Research, "To support growth initiatives, retailers in India, China and Russia are focusing on building a technology architecture."
Says Ajit Joshi, CEO, Tata Woolworths, "We'll either partner with TCS or IBM or a combination of both for our e-commerce venture. We are conducting a detailed study since an online business should be supported by excellent delivery systems."
Online retail is also expected to benefit the credit cards business. According to credit card companies, retail has been instrumental in boosting average consumer spending per card at stores. According to an AT Kearney report credit card transaction value in organised retail has been is growing at 35% in India. So card issuers have been tying up with retail chains with an eye on larger prospects when online shopping opens up in a big way by 2010. "Retail features among top five destinations where our customers wish to spend. With retail booming and malls opening in small cities and towns we expect a surge in buying by our existing customers," says Sachin Khandelwal, head, card products, ICICI Bank. Of the total 25 million credit card holders in India, ICICI Bank leads with 8.5 million customers followed by SBI and Citibank.
Says Kishore Biyani, CEO, Future Group, which was one of the first retailers in India to go online, "The use of credit cards (in retail) has increased substantially, and most spends through credit cards are by employed professionals. Credit cards are swiped mostly to buy fashion accessories."
Globally online shopping has become crucial to the organised retail business. For instance, UK-based Tesco earns $1.2 billion from its online business. Whether Indian retailers can make a similar success in the virtual world is anybody's guess. Vishal Retail's Agarwal admits this will be a very different ball game compared to physical store operations: "Success in this medium will depend on the facilities and value that one can provide to customers, and the consistency of service delivery."

MOUSE TRAP

Prices on the Vishal Retail portal to be 5-15% lower than what consumers pay at stores

Subhiksha will invest Rs 12 crore and expects 3-4% of total business coming from online
AT Kearney reports credit card transaction value in organised retail has been growing at 35% in India

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