Is Retail Being Nailed Down by E-Commerce?

E-commerce has grown rapidly in the last 10 years. With giant ecommerce websites like Flipkart, Myntra, Amazon and Jabong, the e-commerce business has emerged as the fastest growing sector in India. Despite the economic slowdown in the country, these e-commerce websites have managed to create a boom by giving heavy discounts on practically everything – apparels, footwear, household items etc. This great force has even shook the brick and mortar retail stores and compelled them to go online.

However, despite huge discounts and shopping festivals, it is interesting to know that these e-commerce websites account for only 1% of the total retail market, standing at USD 2.3 billion. But keeping the numbers aside, what is making the e-commerce business a talking point even among the retailers is the hype that has been created. The e-commerce scenario in China and US is very different, thanks to the government taking active role in the growth of the ecommerce. In India, e-commerce websites do not have any involvement of the government. It is handled by private sector and involves high IT, warehousing and logistics costs. Additional costs such as marketing and promotion actually make these e-commerce businesses at par, if not at higher rank, to the retail stores.

Due to these costs involved, the e-commerce websites are relying highly on mobiles, consumer electronics and music to give them a boom, which they actually did. However, these categories failed to generate profitable margins, which led the ecommerce business to concentrate on apparels, footwear, and other high margin categories to get profitable growth.

However, e-commerce websites provide the comfort to shop from the comfort of your place without going out in the heat or facing transport hassles, many products are expensive when compared to retail stores. A thorough research between online product prices and that of retail stores is essential before making any purchase. For example, a kid’s chair might be priced between INR 400-500 online while in the retail market you might avail the same chair within INR 200. Though shopping do save you time and hassle and delivers the product at your doorstep, often these websites charge a shipping or delivery charge if the shopping amount is less than the specified free home delivery amount. Thus makes customers spend more than they actually would have spent when shopping at a retail store.

Retailers can also seem to be making the most of this online business by going online with their products. Many of them have adopted multi-channel strategy whereby they sell through online stores as well as their brick and mortar store. This makes the e-commerce business a profitable proposition for them too. Thus to say that the e-commerce business is the death nail for retailers is not fair in the present scenario.

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