India a topper in average e-com deals

A recent study by ACNielsen has revealed that more and more Indians are taking to shopping online, and importantly, the frequency of the country's online purchases is beating the global average.

"The study clearly showed an upward trend in global online shopping," said NS Muthukumaran, director and head of Internet research at ACNielsen in India. "But compared to their global counterparts, Indians have claimed a relatively high (5.2) number of purchases in their most recent month of online purchases. This is higher than the global average of 4.9 purchases."

The study, which ACNielsen claims to be the largest of its kind, polled over 21,100 respondents in 38 markets from Europe, Asia Pacific, North America, Latin America and South Africa. "India's online population may be a small proportion of its population but it represents a set of consumers that offer marketers a winning combination -- greater affluence and the willingness to adopt technology faster," it added.

Indeed, considering that online commerce is not really new to the country -- the country first brush with online shopping came with the dot-com boom of 2000 and soon went bust -- but few indulged in it even until two years back, this study is a revelation. After all, it is a known fact that Indians have always been more wary than online shoppers globally because tangibility -- the feel of what a consumer is going to buy -- plays an important role in an Indian's shopping experience.

However, it is also a fact that in line with global trends, Indians have finally started shopping online with gusto these days. For instance, according to a yet another e-commerce study conducted by the Internet & Mobile Association of India (IAMAI), a trade association representing the e-commerce, mobile content and advertising industry, the online shopping market in India has risen from about $11 million in 1999-2000 to about $58 million in 2003-04 and is slated to grow to more than $522 million by end of March 2007.

There are many drivers for online shopping in India, like access to information and communication, rising PC penetration and the proliferation of cybercafes -- more than 126,000 and growing rapidly -- across the country, but, say sources, a key driver is the fact that Indians are now looking for the variety and ease that is only possible through online shopping.

"Firstly, the obvious advantage is that of convenience in terms of shopping and the ability to compare offers across providers and select the best possible deal," said Muthukumaran. "Secondly, the ability to purchase items that may not be readily available or accessible within close proximity and quickly. For instance, book titles or entertainment such as music and games or even personal durables such as cameras, etc., where having the latest versions may matter to people who belong to the early-adopter segment of a given market."

Small wonder then that the rapid adoption of online shopping is spurring the brick-and-mortar -- local as well as foreign -- vendors to increasingly adopt business strategies around the Internet. Already, leading brands including Nike, Reebok, Samsung, LG, Motorola, Onida, Kodak, Nokia, Titan, Tanishq, Casio, Arrow, Lee, Wranglers, Allen Solly and Raymond have a full-fledged online presence. "Moreover, online shopping is now prevalent in even the Tier-II and III cities (about 2000 of them) in India," said Desai.

Still, online shopping has many issues to contend with. According to Ajit Balakrishnan, chairman and chief executive officer of the Nasdaq-listed Rediff.com, one of India's first e-commerce ventures, the growth of the overall Internet user base and quality of Internet access -- like broadband and above all the security and legal infrastructure -- are issues that if not addressed could stall the growth of e-commerce in the country.

And according to Pavan Duggal, Supreme Court advocate and president, Cyberlaws.Net, even as India has all the e-commerce laws in place, "the country's legal infrastructure is not ready to cope with the projected growth." For instance, many Indian states are still unwilling to accept online trading as a part of IT-enabled services (a sector that enjoys exemptions from local taxes) and try to apply tax applicable for physical trading.

Others add that the country's supply chain is weak as well.

"Take the instance of jewelry. Even as some online jeweler vendors claim that they deliver anywhere, the fact is it is not possible to deliver jewelry everywhere in India," said Desai. Admittedly unreliable shipping services (like couriers and postal services) pose logistical problems.

Yet, "with their willingness to shop online, Indians will increasingly be too tempting to ignore," says Muthukumaran of ACNielsen ORG-MARG. And it is easy to see why he feels that way. India's middle-class population with spending power is burgeoning; the country has about 200 million citizens with fast-growing per capita earning (and spending) capabilities and at the same time with little time spare for shopping, many are increasingly depending on the Internet to vent their spending urge.

"An interesting aspect of the trend is that consumers are actually using various touch points, like office, home and cybercafes," said Desai.

Copyright 2006 by United Press International