MUMBAI: Online retail currently accounts for around 8% of the organised retail sector in India but it is growing at over 50% a year and is forecast to be a Rs 50,000 crore industry by 2016.
A new report from credit ratings business Crisil, E-tail Eats Into Retail, said the speed of change posed a threat to bricks and mortar retailers, and not just those selling books, music and electronics which have already started to close stores. Apparel and grocery are next in the firing line.
"From around 8% share of the organised retail market in India now, online retailing will zoom to around 18% by 2016," Rahul Prithiani, Director of Industry Research at Crisil Research, told the Economic Times
"But as a proportion of overall retail, including the massive unorganised segment, it will be just over 1 per cent at the end of that year," he added.
His colleague Prasad Koparkar, Senior Director - Industry and Customised Research, expected the Indian market's development to mirror that of the US where physical retailers had effectively been forced to establish an online presence.
"And," he said, "with the right strategies, they can even compete effectively." He pointed to Walmart as an example – allowing customers to shop online and opt for either home delivery or store pick up.
Some traditional Indian retailers have taken the plunge, with department store chain Shoppers Stop, electronics outlet Croma and apparel store Aditya Birla Nuvo having opened e-commerce portals and ore expected to follow their example.
A spokesman for Madura Lifestyle & Fashion, part of Aditya Birla Nuvo, highlighted the increased distribution online retail made possible, with the outlet now able to reach 800 towns rather than 100.
Livemint noted that bricks-and-mortar retailers were starting to ask manufacturers why they should carry their products at all
, given that these were being sold online more cheaply by e-tailers willing to operate on slim or non-existent margins.
In a concession to these views, Lenovo, the computer and phone maker, has said it will no longer honour warranties on products sold online.
Data sourced from Livemint, Economic Times; additional content by Warc staff