Local knowledge is key to success
Apr 30, 2015
Its population of 1.6 billion is embracing technology, albeit hesitantly when it comes to online purchasing. Whilst internet penetration is a low 19%, and only 2% of its total population purchase online, e-tail sales in 2014 were approximately $5.3 billion, with average orders increasing in value from $17- $30 between 2012-13. This figure is projected to rise to around $50 billion by 2020.Online currently accounts for 0.4% of India's total retail market, by 2020 this is expected to go up to 3%. Accounting for 3% of eCommerce, m-commerce amounts to approximately $450 million.
Amazon India sold goods worth over $1 billion, with fashion one of the fastest growing categories. With 40% of this traffic coming from mobile devices and 150% year on year mobile penetration, it is little wonder that retailers are giddy.
Certain barriers remain, however. Indians are loathe to make payments online, and though 35% have credit cards, they are wary of using them online. This has encouraged retailers to innovate. Alternative payment methods include e-wallets (offered by PayPal, ITZ Card, OxiCash) whereby one can transfer spending money to the wallet for use on or offline. Prepaid cards allow consumers to spend a pre-loaded amount of money. Not tied to a debit card, this makes it safe and easy to use. Other options include cash on delivery and direct carrier billing, where purchases through a mobile device can be added to the bill. All these mechanisms exist to encourage online purchasing. Apart from utilitizing existing neighbourhood stores, gas stations and the post system with its wide reach into the country's rural heartland, innovators are co-opting India's traditional dabbawallah. Using a low tech, paper-based colour-coded system, these men deliver hot lunches from home to office. Generally error-free, companies such as Flipkart, India's largest e-tailer, are using the dabbawallahs as couriers. Why reinvent the wheel after all?
Once Indians learn to shop online, and grow accustomed to the plethora of options which exist outside their local bazaar, they may also begin to be more comfortable with using credit cards. Understanding the local market is key to success. At wnDirect, we believe in tailoring our services to fit local needs. To the outsider, India may seem chaotic, but as evidenced by the dabbahwallahs and their functional, if apparently antiquated, system, there is order within. Co-opting local delivery mechanisms such as the dabbahwallahs, petrol stations, and neighbourhood stores makes all the difference in reaching a far flung demographic (about 70% of India's populace is rural). Offering alternate payment methods to customers without credit or those uncomfortable with sharing details online will further drive growth in this market.
Vasco deGama heralded the arrival of the Europeans in India, but it was the British who spent the better part of a century understanding the economic drivers of the land. The Indian e-tail landscape is a blue ocean, while large format players are making forays, history has shown that it is the nimble who thrive in India.