Merchants hit goldmine with online shops

Online business transactions are catching up in a big way in India. The numbers tell the story.

Jawad Ayaz had started an outdoor sporting gear shopping portal, www.20north.com, three years ago, and has seen a growth of 10-15% month on month since then. “I believe e-commerce has finally arrived in India today,” he said. The site gets some 6,800 visitors per day and from 2009-11, the growth has doubled to more than 110% per year.

Another Bangalore-based online destination for mother-care, baby and kid products, hoopos.com, which started its online operations in September 2011, has registered a repeat purchase rate of close to 35% since its inception. CEO and co-founder, Vijay Jumani clearly sees a need to reach out to a larger domestic market. “We clearly saw a need for people to be served online, as this platform offers a lot of convenience to customers and is a much faster medium for us to reach out to them as well, since setting up physical retail stores at a national level takes much longer,” he said. While Jumani anticipated a growth of 40-50% per year for his retail business, hoopos.com is growing at 30% per month, which he expects to sustain over the next few months.

Tirath Kamdar, marketing head and co-founder, craftsvilla.com, India’s first online portal selling hand-made goods, said the website has already reached a milestone of 1 lakh since its launch in April 2011, and has sales margins of 25-50%.

A recent report by First Data, one of the world’s largest providers of merchant processing services, and ICICI Merchant Services only confirms the trend, which says India’s e-commerce market is estimated to grow to `50,000 crore by the end of December 2011.
Dig deeper into the data, and you will find that while metros are seeing a growth of 30-35% year-on-year, it’s the tier II and III cities that are catching up with an annual 30% rise in electronic spends.

This spells good news for entrepreneurs looking to invest in an e-commerce model, especially when India’s retail footfall is losing out. An internet user base of 50 million, a broadband growth of 35% month-on-month, a higher mobile penetration, lower costs compared to physical stores and rising real estate prices are creating a conducive atmosphere for online shopping to thrive.

The popularity of these websites is growing with each passing day. Sample this. Flipkart.com’s annual revenues shot up to Rs25 crore in 2010 from Rs2.5 crore in 2009. The company whose revenues for FY11 touched the Rs50-crore mark, expects its revenues to reach the Rs 500 crore mark, by the end of this financial year (2011-2012).

B Amrish Rau, General Manager, First Data India and ICICI Merchant Services, offers some insights. He said: “While the point of sales for e-commerce is set to grow by about 35% year on year, net banking transactions are almost double the credit card and debit card transactions... The opportunities for merchants are plenty.”

Online shopping provides merchants not only the advantage of being open to their business

24 x7, but also the opportunity to widen their reach. What is acting as a catalyst here is social media networks like Facebook and its ilk.  Experts say a few challenges are ensuring quickness of delivery, constant quality of service and a having a sound logistics system in place.

There is a flip side to all of this. More retailers going online means local kirana stores are at a greater risk than ever before.