CRISIL Research-Online-retail Pr 240214
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Transcript of CRISIL Research-Online-retail Pr 240214
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February 24, 2014 www.crisil.com1
February 24, 2014Mumbai
Online retailing will triple to Rs 500 billion in 3 years
CRISIL Research, Indias largest independent and integrated research house, estimates that onlineretailing -- both direct and through marketplaces* -- will become a Rs 500 billion industry by 2016,growing at a whopping 50-55% annually over the next three years.
That would be over 30 times the size at the end of fiscal 2008.
The segment has been growing like gangbusters in India, with revenues surging from around Rs 15billion in 2007-08 to an estimated Rs 139 billion in 2012-13or a compounded annual growth rate of56%.
Yet it remains a nascent portion of the overall e-commerce segment in India where the travel
business dominates with about two-thirds share. But the equation is changing fast enough to pose athreat to brick-and-mortar retailers -- not just of books, music and electronics, but also apparel andgrocery.
Says Rahul Prithiani, Director Industry Research, From around 8% share of the organisedretai l market in India now, onl ine retai l ing wi l l zoom to around 18% by 2016. But as a
propo r t ion of overal l retail - - including the massive un organised segm ent -- i t wi l l be just over
1% at the end of th at year. Yet the potent ial is hu ge. For example, in th e US, wh ich is the
bigg est market for o nl ine retai l , and the UK, the share of on l ine retail is around 9-10%. Even in
a developing m arket such as China, i t is 4-5%.
Over the past 4-5 years, competition from online retailers such as Flipkart (in books, music andelectronics) and Myntra and Jabong (in apparel) has hurt physical retailers, forcing many to also goonline -- even as their net store additions have declined.
Similarly, in the perishables market, e-commerce companies such as BigBasket and Localbanya areposing a strong challenge with their call-order-deliver model.
On the other hand, companies focused on books and music are closing down many stores or evenshutting down completely because they are unable to compete with the huge discounts offered byonline retailers. Online retailers also play the volume game through shopping festivals several times ayear to spur sales, which is difficult for the physical retailer because of realty and inventory costs.
What is also working for online retailers is the growing satisfaction with the transaction experiencethey afford: customers dont have to physically travel to stores, get a fairly good idea about theproducts browsing in the comfort of their homes and office, pay on delivery, and also get their moneybackno questions askedin case of dissatisfaction.
Says Prasad Koparkar, Senior Director Industry and Customised Research, Eventually, justthe way i t happ ened in the US, ph ysic al retai lers wi l l have to establ ish a presence on l ine. An d,
with th e right strategies, they can even comp ete effect ively. For instanc e, to tackle the queue
problem at i ts stores, Wal-Mart al lows cu stom ers to shop onl ine and opt for ei ther home
del ivery or sto re picku p. Tod ay, Wal-Mart is among th e top onl in e retai lers in the US. This
shows how it can be done.
*Marketplace refers to platforms like eBay, where various retailers sell their ware
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February 24, 2014 www.crisil.com2
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Manasi ApteManagerCommunications and Brand ManagementCRISIL LimitedPhone: +91 22 3342 1812Mobile: +91 98 205 51347
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Jyoti Parmar
Communications and Brand Management
CRISIL Limited
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Email:[email protected]
Prasad KoparkarSenior DirectorIndustry and Customised ResearchCRISIL ResearchPhone: +91 22 3342 3137Email:[email protected]
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About CRISIL ResearchCRISIL Research is India's largest independent and integrated research house. We provide insights, opinions, and analysison the Indian economy, industries, capital markets and companies. We are India's most credible provider of economy andindustry research. Our industry research covers 70 sectors and is known for its rich insights and perspectives. Our analysisis supported by inputs from our network of more than 4,500 primary sources, including industry experts, industryassociations, and trade channels. We play a key role in India's fixed income markets. We are India's largest provider ofvaluations of fixed income securities, serving the mutual fund, insurance, and banking industries. We are the sole providerof debt and hybrid indices to India's mutual fund and life insurance industries. We pioneered independent equity research inIndia, and are today India's largest independent equity research house. Our defining trait is the ability to convert informationand data into expert judgements and forecasts with complete objectivity. We leverage our deep understanding of themacroeconomy and our extensive sector coverage to provide unique insights on micro-macro and cross-sectoral linkages.We deliver our research through an innovative web-based research platform. Our talent pool comprises economists, sectorexperts, company analysts, and information management specialists.
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