Etail No Match for Mom & Pop
Stores
REALITY CHECK Poor connectivity, high cost, low
profitability, and a dearth of skilled manpower hampering growth
Online retailers such as Flipkart and Snapdeal,
despite their multi-billion dollar valuations, will not be able to challenge
traditional retailers that will continue to dominate the domestic market, audit
and consultancy firm PricewaterhouseCoopers (PwC) said in a new report.
Online stores are projected to account for only
3% of India's total retail market by 2020, PwC said in its report titled
`eCommerce in India Accelerating growth'.
“While the share of online shopping in total
retail has increased at a fast pace in the last few years, it is still
minuscule compared to the figure in China, where the share is 8-10%,“ PwC said.
In 2014, online retail accounted for a mere 0.4% of India's overall retail
market.
Issues such as poor last-mile connectivity ,
high payment cost, low profitability , regulatory barriers and a dearth of
skilled manpower are weighing on online retailers in are weighing on online
retail India, PwC said. Cash on delivery (CoD) services impose substantial
financial cost for online retailers, as unlike in developed markets, this
continues to be a preferred mode of payment in India.PwC said profitability for
online retailers in the country was affected by free shipping offered to
customers and a high rejection rate on CoD orders. Moreover, customer
acquisition costs are rising due to competition by companies with more funds,
it said. Low Internet pene tration in the country is also a huge hurdle. Only
16% of India's 1.2 billion people had access to the Internet in 2013, and of
them only 14% (28 million) made purchases online, according to Forrester
Research. India, therefore, was still in a nascent stage of evolution in terms
of online retail spending.China was in an ascending stage at 50%, whereas South
Korea (70%), Japan (69%) and Australia (57%) were in a mature stage, according
to the Forrester study . PwC in its lat est report said online travel bookings
comprised 70% of India's overall ecommerce market. Online retailers and
marketplaces are the fastest-growing ecommerce segment, however, having grown
at a compounded annual growth rate of around 56% from 2009 to 2014.
Books, apparel and accessories and electronics
are the largest-selling products online, accounting for about 80% of product
distribution.India's overall ecommerce sector grew at a CAGR of 34% since 2009
to $16.4 billion in size in 2014, and will grow to $22 billion in 2015, PwC
estimated. According to research firm Ecommerce Europe, the US, the UK and
China together accounted for 57% of the world's total business-to-consumer
ecommerce sales in 2013.
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Varun Aggarwal
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ET17FEB15
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