Online shopping soars to new heights in 2012; revenues touch $14 bn

New Delhi: People turned to the Internet to buy everything from diapers to books, houses and even groceries this year, pushing e-commerce revenues in the country to $14 billion with the possibility of even higher earnings in 2013.

Factors like spiralling inflation and slower economic growth failed to dampen the online shopping frenzy as more and more companies opted for selling wares through the internet route, offering innumerable options and discounts to buyers.

[caption id=“attachment_574008” align=“alignleft” width=“380”]  While travel still comprises a significant portion of the e-commerce market, other segments are catching up . Reuters[/caption]

“Increasing Internet penetration and availability of more payment options boosted the e-commerce industry in 2012. Besides electronics, customer traction grew considerably in categories like fashion and jewellery, home and kitchen and lifestyle accessories like watches and perfumes,” Snapdeal Vice President (Marketing) Sandeep Komaravelly said.

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While travel still comprises a significant portion of the e-commerce market, other segments are catching up fast. “Apparel, books and lifestyle categories (beauty, footwear and health) will drive e-commerce,” HomeShop18.com Founder and CEO Sundeep Malhotra said, adding that relatively stable and growing domestic economy will also be major growth drivers.

“The coming year looks promising for the industry.” According to Peppercloset.com owner Sumeet Arora, e-commerce segment has doubled to $14 billon this year from $6.3 billion in 2011. This figure is likely to reach 38 million by 2015.

So, what can one expect in 2013 from the thousands of e-commerce websites. “More personalised offers, loyalty programmes and better customer care is what most e-commerce companies would focus on to offer customers a richer, more relevant online experience,” an industry analyst said.

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According to HomeShop18.com, an innovation that will “revolutionise” e-commerce in India is cost optimisation through warehouse and logistics management that will enable companies to do profitable business.

While players like eBay and IndiatimesShopping have been around for a while, one saw many more portals mushrooming in 2012. An important entry in the Indian market was that of one of the world’s largest online retailer -Amazon.com. The website launched the desi version as ‘Junglee.com’. India also got its own version of ‘Cyber Monday’ on December 12 this year as ’e-tailers’ like Flipkart, Snapdeal, Homeshop18 and Makemytrip, partnered Google India to offer discounts for online shoppers.

Celebrated on the Monday after Thanksgiving, the term ‘Cyber Monday’ was first coined in 2005 as a marketing term and has grown as a phenomenon over the years in the US.

According to analysts, factors like growing Internet penetration, increasing spending power, availability of multiple payment methods like credit/debit cards, cash on delivery, combined with faster adoption of smartphones and tablets are contributing to the growth of the sector.

“Mobility most likely will be the trend to look forward to the next year. Mobile commerce would be huge as more and more people access Internet through tablets and smartphones. Most companies are looking at enhancing their mobile presence,” Malhotra said.

According to a study by IMRB International and IAMAI, there were an estimated 137 million Internet users in the country as of June 2012. Of this, while 99 million were from urban parts of the country, the remaining 38 million were from rural India.

The next year is expected to see increased participation from tier 2 and tier 3 cities.“With a gap of demand and supply in physical retail category, online shopping is set to grow in tier 2 and tier 3 cities. The introduction of cash on delivery has helped gain the trust of consumers in these markets and get rid of the apprehension of using credit cards online,” he said.

According to him, there is a rising demand for books and health and beauty products from these cities, but tier 2 markets score highest on kids and baby items and home appliances.The year also saw acquisitions and consolidation activities picking up pace as dozens of online shopping portals set up shop.

Among major deals, Snapdeal acquired Esportsbuy.com, Flipkart acquired letsbuy.com, Madeinhealth was acquired by Healthkart, Yatra.com acquired Travelguru from Travelocity Global, Fashionandyou acquired UrbanTouch and Myntra.com bought SherSingh.com

“Acquisitions and consolidations will continue…its just the begining and will continue happening over the next few years. Bigger players will acquire smaller players and more investments will flow into the segment,” Arora said.

Despite the fact that most of these e-commerce companies are yet to start making money, growth prospects for these companies remain high and there seems no dearth of investors.According to experts, in 2012, the e-commerce companies in India raised over $500 million (about Rs 2,743.3 crore).

In one of the biggest fund raising by an Indian e-commerce firm, Flipkart in August this year raised $150 million (about Rs 822 crore) from four investors.Entertainment ticketing website BookMyShow.com also saw Rs 100 crore investment by Accel Partners, while Yebhi.com raised funding from Fidelity Growth Partners India and Qualcomm Ventures.

While “one will not see obscene valuations”, investors would continue to make small investments and 2013 will be a year of growth and consolidation, Arora said.Online retail has also seen an heavy overlap with social networking due to aggressive marketing on such platforms.

“As smartphones and tablets continue to proliferate, companies will need to embrace multi-channel commerce strategy in 2013,” Purehomedecor.com owner Sandeep Jaglan said.While consumers will be spoilt due to choice, players will have to sweat it out to differentiate themselves from the competitors.

Komaravelly of Snapdeal believes that personalisation would emerge as a key focus area in 2013. “The ability to customise and personalise shopping experience for customers will become a critical differentiator. Social and mobile platforms will see increased customer adoption in the coming year,” he said.

Elitify.com Founder and CEO Amit Rawal agrees. “The market is overcrowded with companies that are competing for the same pie and have very little differentiation in their product offering,” he said.

Differentiation is centered around beating the other in marketing and competing on prices, both of which are not sustainable trends for any industry, he added.“So the only way forward is consolidation of players that can create synergies both in terms of operations and product offerings,” Rawal said.

Marketing campaigns by major players like Flipkart and Jabong have also made e-commerce a household phenomenon, especially in the big cities, say experts.Social media would also become crucial as more brands use social data to not just popularise their brands but also personalise experience for customers on their websites.

Some experts are of opinion that cash on delivery, which is at present the predominant payment mechanism, will become less popular and give way to usage of debit/credit cards.“Given the various disadvantages like longer cash cycles for retailers, collection challenges etc, cash on delivery will become less popular and cards will start becoming more ubiquitous,” Malhotra said.

With more lucrative deals, loyalty plans and newer products hitting the online shelf, netizens can shop to their heart’s content. 2013 surely promises to make customer the king for e-commerce companies.

Disclosure: Homeshop 18 is owned by Network 18 group which also owns Firstpost

PTI