Hoping to tap the growing potential in India for online commerce, the world’s largest online retailer, Amazon has launched its first shopping website in India.
The amazon website in India
offers seven million books and 12,000 movies and TV shows. In the coming weeks, it will add more products such as mobile phones and cameras.
The U.S. online retailer will not sell its own products in India, because Indian laws prohibit companies that carry goods from more than one brand from selling directly to consumers on the web. Instead the website serves as a marketplace, selling goods of local retailers.
Last year, Amazon launched a site in India which allowed customers to compare prices online, but not purchase items.
The company enters a market where digital shopping is still in its nascent stages, but is expected to grow rapidly, said Shabori Das at market research firm Euromonitor.
“Internet retailing is expected to witness a year of year of year growth of nearly 17 percent in the next five years, and this makes India among the top 20 fastest growing Internet retailing markets in the world," said Das. "These will be driven by various products such as apparel, footwear and consumer electronics.”
Online retailers are eyeing India’s huge young, urban population as potential customers. Only about 12 percent of Indians have access to the Internet -- much less than in countries like China.
But at about 150 million, the total number of Internet users in India is still the third largest in the world. And this will grow exponentially as more people get connected to the web.
These growing numbers have made entrepreneurs confident that online shopping in India will grab a larger slice of total retail.
Among them is Kunal Bahl, co-founder of Snapdeal
which sells an array of retail products. “Right now, in India about point two to point five percent is basically happening digitally. However in developed markets like the U.S. that number is 10 percent. So we have head room to grow from point two to going up to at least 10 percent and even further because India does not have the kind of offline retail penetration that a country like America would have,” stated Bahl.
Bahl points out that in India infrastructure issues can make it challenging to shop in large cities, and many products are just not available in smaller towns.
“Given the traffic and the size of Indian cities, Indian cities don’t have like one downtown, which is the case in most Western cities. We have maybe 25 downtowns in New Delhi, explained Bahl. "These cities are large and cumbersome to traverse for shoppers. In Tier one cities hence people see online shopping as being convenient, whereas in Tier 2 cities and beyond it is just giving them access to their aspiration.. to own good things in life but do not have access through offline retail.”
However the path to big profits may not be easy for online retailers. Online retail adds up to to $10 billion at present, but a large chunk is air tickets.
Das at Euromonitor said that most online stores are struggling to make money. To win customers, many companies have to offer facilities such as cash on delivery. And persuading people to shop online is a challenge.
“Most of the online retailing companies, despite the fact that their volume sales are high, their net profit is still in losses. If you see the cost of the item, along with its packaging, free shipping, together will be higher than the price the consumer is paying to the retailer. Finally, there is this reluctance among consumers whether the product being bought is in good condition, whether they money they are paying is worth it or not,” said Das.
With the entry of companies like Amazon, the competition to win new customers is only going to get tougher.