Author: Eric Fergusson, Director of Retail Services, eCommera
Although only 3.14% of retail sales in India are made online currently, this is growing rapidly – at a rate of 113% between 2014 and 2015. This is down to a combination of government initiatives to grow the eCommerce space, increased internet penetration, huge growth in smartphone ownership, and the evolution of new payment methods.
As a result, India is set to become the fifth-largest consumer market by 2025, making it an attractive option for international expansion, but one that is not without challenges.
So, what do retailers need to consider in order to maximise their chances of success in India?
1) Work with a local partner
Most international retailers enter the Indian market by establishing a physical presence, as well as through one or more of the popular marketplaces, the biggest of which are Flipkart, Amazon, Snapdeal and Paytm. It is vital to note that international multi-brand retailers can only establish an eCommerce presence in India in conjunction with a local partner – through either a franchising arrangement or a joint-venture – due to the foreign direct investment regulation. Without a partner, they can only set up a non-transactional site for brand-awareness purposes.
2) Prioritise mobile
39% of Indian households own a smartphone, compared with only 4% who own a laptop. As a result, m-commerce is particularly popular, and it’s vital to offer a mobile app in order to succeed with Indian consumers. The majority of online sales are made through a mobile app, with the most popular being Amazon and Flipkart – almost every Indian smartphone-owner has these two apps their phone.
3) Carefully consider which payment methods to offer
Traditionally, cash-on-delivery is the most popular payment method in India, with around half of all payments still being made in cash. Indian shoppers are used to being able to try on items before committing to the purchase, and cash-on-delivery means they can return items immediately without having to wait for a refund. Card-swipe on delivery is also gaining traction, and new payment methods such as Paytm and mobile wallets are slowly gaining popularity, due by the explosive growth of mobile internet.
4) Offer free delivery
In India, delivery is generally free and can take up to ten days, although most retailers deliver within four to seven days. Some shoppers may be willing to pay up to 100 rupees (£1.20) for 24-hour delivery for exclusive products, but most consumers will prioritise free over fast delivery. The majority of large retailers have their own logistics companies, but third-party logistics service providers such as Blue Dart Logistics are slowly starting to enter the eCommerce space.
5) Don’t treat India like a European market
Remember that the Indian market is very different from any European market, so it requires a tailored approach. This is why working with a local partner to understand the market, its regulations and consumer expectations is vital. In particular, Indian consumers are extremely cost-conscious, favouring price over the latest trends, so offering carefully considered promotions and discounts is key to success.