Online Buying In India: Recent Trends

Online Buying

Online buying is a huge industry the world over, generating billions of dollars in revenue and profits every year for retailers. Indeed, some exclusively online retailers like Amazon and EBay are already competing in sales with the brick and mortar variety. The online model has been so successful that even traditional stores such as Wall Mart and Target have ventured into it, with very profitable results. The reasons are not far to seek – you get more customers; even in places you cannot open stores. Plus, the warehousing and overheads costs are minimized, thus boosting margins.

In India too, our buying consumers have started taking baby steps in online buying. With increasing internet penetration, more and more buyers are becoming aware of the option of online buying – and accepting it. A recent study by industry body ASSOCHAM and consultancy Forrester revealed some interesting numbers – the overall e-commerce revenue in India is around 1.6 billion dollars (around 8800 crores INR) at present (2012), and slated to increase fivefold to 8.8 billion dollars (approximately INR 50,000 crores) by 2016. That is a very respectable growth!

There have been a number of efforts that have analyzed online buying patterns of Indian buyers. In 2010, a Nielsen report pointed out some interesting points. I say interesting, because it is a reflection of unique Indian mindset and buying habits – such as peer recommendation and value-for-money.

For example, more than 50% of online buyers look for product and service recommendation on social media sites – such as Facebook. This is quite similar to asking friends and relatives about a good product choice, or a place to shop. Another telling fact was that most of such buyers (about 80%) will trust the recommendation of a friend, rather than simply trusting an online product review (only 30% of users trusted online reviews more).

Online reservations and ticket purchasing remain the biggest items of online spending, with consumer electronics – even high ticket items like Smart TVs and refrigerators, books and software (including games) also constituting a large share. Another very significant fact was how online buyers share their post buying experience. If a customer has had a bad experience, he is much more likely to go back and share his experience or a negative review; a satisfied customer is less likely to share his experience.

Online Buying Options in India

The profile of online buyers is seriously skewed in favor of males – who constitute about 80% of overall buyers, the remaining 20% being accounted by females.

The number of online stores is also expanding, with some international players also jumping in the fray. The most notable of Indian online buying sites are Indiatimes Shopping (promoted by the Times Group), Flipkart, Naaptol etc. EBay is another online selling powerhouse, with Amazon also making an entry through its acquisition of the popular portal Junglee. Also, a number of smaller online players such as Jabong, Zovi etc have recently started operations.

Online buying faces a number of significant challenges that will bear heavily on the future of online buying in India. The availability of reliable internet connectivity and its penetration – which is still very low in India - remain the most significant hurdle in wider acceptance of online buying. Wider availability of trusted payment options – credit card penetration is also very low – will also have a significant effect. This problem is already being addressed by adopting alternatives such as net banking payments, and cash on delivery – a method rarely tried in other markets.

With a market the size of India, and an ever increasing affluent class, with a buying capability to match, are rays of hope for the online buying industry in India. A little initiative in terms of policy pushes by authorities, and new products and service improvements by online retailers will definitely help the industry to achieve the promised heights. And of course, more buying options are always good for the consumers!