Reliance Retail and Future Group (Pantaloon) have decided to build up significant online channel to run parallel to their physical formats, adopting the highly successful online model of Wal-Mart reports Business Standard. Online sales of Wal-Mart has been growing faster than sales of eBay and Amazon. This, therefore, is a clear warning signal to fledging online retailers in India.
Given the muscle of Reliance and the hunger for growth of the Future Group, these players are aggresively setting up online channel to tap the fast growing e-commerce pie.
Currently this market is worth around US$240 million (Rs 11 bn.) and is expected to touch US$ 500 million (Rs 23 bn.) in the one year. Though a majority of this is accounted for travel and ticketing, the retail sale through these channels is doubling.
While the Future Group is putting its weight behind futurebazaar, Reliance Retail is understood to have already set up a separate team to put in place the nuts and bolts for its e-commerce platform.
However, one critical element that the physical retail chains have to grapple with is how to establish the brand recall in the virtual world.
“Online retail chains have gone through this exercise over the past 5-6 years and they have a good recall. Reliance and Future need to figure this out and earlier the better for them,” notes an industry analyst, adding that making a customer buy online is the most difficult part that these players have to face.
Fabmall‘s CEO K Vaitheeswaran is not unduly worried over these plans. “More than competing with each other, we should figure out how to grow this pie. The internet penetration has to be first increased which is expected to reach 100 million in two years time. The industry is growing at 30-40 per cent year-on-year and there is huge potential for all of us.”
One more aspect that is fuelling this growth is that the attitude of citizens have changed over the past five years. “Indians are now ready to pay a premium for the convenience of online commerce.
They are now accepting the various services offered on the Internet and the increasing penetration of broadband at homes also promises to bring in more revenues. We are sitting on a pure gold mine,” said an industry player.