David Fuller's view -
There was a time a few years back when telecoms chiefs rubbed their hands at India’s ability to leapfrog fixed landline connections with a jump straight to mobile phones. Now online retailers are doing the same, with India set to bypass the western bricks-and-mortar retail model altogether.
This is not a surprise. India is perfect e-commerce territory. Think of its expertise in IT, which has prompted a flood of online retailers. Then there is that oh-so-cheap Indian labour, making the cost of delivering products door-to-door lucratively low. Then there are India’s consumers, well used to taking delivery of goods at home for a nominal fee — a service offered by many local grocery stores.
In contrast, the cost and complexity of acquiring large plots of land and associated permits makes western-style superstore retail a la Walmart or Ikea excruciatingly slow and expensive. Three years after Delhi threw open the doors to foreign retailers such as Tesco, none has seriously taken the plunge into the nation’s $500 billion retail market, 90 per cent of which is still controlled by roadside shacks and shops.
Even the dismal state of India’s roads and transport infrastructure offer a big edge for e-commerce. Why spend hours dodging cows, rubbish and potholes on India’s congested roads trying to reach an out-of-town superstore when you can shop in air-conditioned comfort from your own home or office?
As well as lower prices, adding to the attraction of online retail is the fact that many Indian e-retailers provide same-day delivery, while customers can opt for paying cash on their doorstep.
So, while Tesco and Walmart grind their teeth in frustration as they puzzle over how to tackle India, the country’s e-commerce market is exploding, propelled by rapid growth in internet access. India reported a 53 per cent growth in online transactions last year. The country’s e-commerce market is expected to hit $16 billion this year, up from $4.4 billion in 2010.
Such figures are attracting huge investments from Amazon and homegrown rivals such as Flipkart and Snapdeal. Between January and March, investors poured more than $1 billion into e-commerce and Technology investments. And that growth is being driven by smartphones, with more than 235 million of India’s 300 million web users accessing the net via their phones.
Once again, Technology makes the difference, enabling India to have first world e-commerce, despite third world infrastructure. Of course India also needs to redevelop its infrastructure, which this fast growing economy led by capable Narendra Modi intends to do, but it takes time and money.
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