January 27, 2016
The retail market in India is going through a very interesting phase. Online retailers are flush with funds and spending aggressively on acquiring customers and building infrastructure, while organized retailers are trying to come out of their “wait and see” mode before online sales start hurting them in categories other than music, books, and mobile phones. The Indian online retail market is the fastest-growing market in Asia Pacific, although it is still very small compared to China and Japan. According to the recently published Forrester Research Online Retail Forecast, 2015 To 2020 (Asia Pacific), we expect it to grow at a CAGR of 44% from 2015 to 2020 to reach $75 billion. We also predict that:
- The influence of the Web on retail sales will increase. Less than 2% of total retail sales in India are online, but the Web’s influence is much bigger. Customers are using the Internet to research products (even when they are shopping in physical stores); to compare prices with online retailers; to check specifications; and to read user reviews. This is making the Web a powerful medium, one that organized retailers can’t ignore. As such, we expect to see organized retailers undertaking more online activities in 2016.
- Customer experience will be the focus of 2016. With the top online retailers’ focus moving away from discounts, customer experience is going to be key in 2016. Flipkart and Snapdeal hired customer experience officers in 2015; their focus will be to improve the overall customer experience and thus generate repeat purchases and more frequent purchases without offering too many discounts.
- It’s early days for online grocery. Online grocery companies raised around $300 million in venture capital funding in 2015 and are expanding at both the category and geographical level. They are also experimenting with new business models, including the pure-play online model (where they deliver from warehouses) and the hyperlocal model (where the delivery comes from local stores). Traditional grocery retailers are also looking to tap the online channel: However, most of the models are yet to be tested for operational profitability, so the availability of funds will have an impact on sales in this category for next two to three years.
- Organized retailers will go omnichannel. Organized retailers’ “wait and see” period is now over; they have lost a significant number of existing and incremental customers during it. They now need to measure and invest in growing their online sales and influence. As more and more customers are buying and researching on mobile, they are demanding a consistent experience across all channels, so organized retailers need to increase their omnichannel presence to prevent the loss of sales to online retailers. We expect to see more activity from organized retailers in 2016 to retain customers and improve the overall in-store customer experience.
For more on the Indian online retail market, ForecastView clients can download the Forrester Research Online Retail Forecast, 2015 To 2020 (Asia Pacific).