The rise of e-commerce and its subsequent impact on the Indian retail market

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Online shopping has been gaining widespread popularity not only in India, but in most parts of the world. And as such, it becomes inevitable for merchants and traders to predict this sudden surge in growth rate.

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International Journal of Management (IJM) Volume 7, Issue 7, November–December 2016, pp.271–275, Article ID: IJM_07_07_029 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=7&IType=7 Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication THE RISE OF E-COMMERCE AND ITS SUBSEQUENT IMPACT ON THE INDIAN RETAIL MARKET Sijoy Syriac B. Tech, ECE, VIT University, Vellore, India Dr. Raghuram J Associate Professor, VIT University, Vellore, India ABSTRACT Online shopping has been gaining widespread popularity not only in India, but in most parts of the world. And as such, it becomes inevitable for merchants and traders to predict this sudden surge in growth rate. With various e-commerce giants investing in the Indian market and MNCs recognizing this potential, it is safe to say that the online revolution has already begun. But what are the various elements that play a part in shaping the future of online shopping? Through this research, we bring to light the various factors that have affected the online market in other countries (mainly U.K., Turkey and Pakistan) as well as India and the measures taken and bills (mainly, GST bill) passed by the Govt. of India that would invariably affect the future of online shopping in India. Key words: GST, Retailing, Technology Cite this Article: Sijoy Syriac and Dr. Raghuram J, The Rise of E-Commerce and its Subsequent Impact on the Indian Retail Market. International Journal of Management, 7(7), 2016, pp. 271– 275. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=7 1. INTRODUCTION The potential for growth in online shopping in India is enormous. There are many factors that can substantiate this. India has the second largest number of internet users in the world just after China [1]. The Govt. of India’s concept of ‘Make in India’ has only fueled this spurge in growth. With 3,100 startups in 2014 to a projection of more than 11,500 by 2020, India boasts of the world’s fastest growing startup ecosystem [2]. The country’s population pyramid is expected to ‘bulge’ across the 15-34 age bracket over the next decade, increasing the working age population from approx. 761 million to 864 million during 2011-2020[3]. Electronic payment is also steadily growing with a number of startups facilitating this, like PayPal and Paytm. Another factor is the collaboration of the Govt. of India with MNC’s such as Google and Microsoft to set up free Wi-fi’s at railway stations across the country. They also intend to extend internet services to rural areas. In order to tap this predicted growth in online market, sellers need to understand the nature and the factors affecting the consumer behavior. Thus it becomes increasingly important for companies to shift their marketing focus from the traditional four P’s of marketing to the four C’s of social mainly content, connecting, community and curating. This paper will help in better understanding of the nature of the Indian online market. http://www.iaeme.com/IJM/index.asp 271 editor@iaeme.com
Sijoy Syriac and Dr. Raghuram J 2. PURPOSE OF STUDY It is quite obvious that online shopping has become a trend among the Indian consumers. But how long can it sustain? In the long run, what are the factors that would affect the buying behavior of a consumer? How should a seller keep up with the growing trends in the market? Through this research, we intend to bridge the gap between the present and the future of online shopping in India. 3. LITERATURE REVIEW The internet has always been a fountain of infinite opportunities and growth potentials. Online shopping is one such product that has emerged from the ever growing need for innovation. An unprecedented growth has been recorded in online marketing since 1991. Globally, the number of websites increased from 23,000 in 1995 to just around 1 billion in 2016 (Amalesh Sharma, 2011) [6]. Online shopping is a relatively new concept to the Indian mass but has been hugely successful in penetrating right into the roots of the Indian market. In the UK, the internet has penetrated to 84.1% of its total population. So the opportunities and growth of online shopping is undoubtedly huge. Moreover, the e-commerce in UK takes 10% of the total sales, forcing companies to take e-commerce seriously. In Turkey, 44.4% of the total populations use the internet on a regular basis. According to the Turkish Statistical Institute, 21.8% of the internet users bought products and services over the internet in 2012. This percentage has since only been increasing at a steady rate. The main purpose being convenience, price advantage and access to a wide range of products. (Seda Yoldas, 2011) [10] In the Indian context, various factors come into play that affects the mentality of the customers before purchasing online. A recent study showed that the product warranties and certification of the websites are key determinants. Many researchers have agreed on the fact that cognitive abilities differ in cultures like India that are still developing. These abilities are likely to expand over time, making the marketplace more elaborate and diverse. (Arun, Xavier, 2012) [7] Factors in work life that affects the behavior of consumers have been identified by Smith and Rupp (2003) [8]. Some of these are marketing effort, socio- cultural influence, emotional factor, psychological and privacy factors, the purchase and post decisions. According to a survey in Pakistan online shopping is getting popular in the young generation such as students and professionals. Students usually prefer to buy goods from its original source and they mostly prefer online shopping. (SajjadNazir et. All, 2012) [8] Vijay, Sai T and Balaji, M.S. (May 2009) [13], revealed that in spite of the convenience offered, online shopping is still far from being most preferred form of shopping in India. Their results suggested that convenience and saving of time drive Indian consumers to shop online; while security and privacy concerns dissuade them from doing so. 4. RESEARCH METHODOLOGY Data Collection: The reviews of surveys on customers from varied geographical backgrounds were performed and analyzed; particularly from U.K., Pakistan and Turkey. Each of these countries varies in their socio-economic conditions, cultural backgrounds, political scenarios etc. And as such, the factors that affect the buying behavior of these customers from online sources vary drastically. Data Analysis: These factors are then compared to the surveys done on the Indian market. We then analyze which of these factors would affect the Indian mass in the long run. Research is done on the existing surveys on the Indian markets and the future of online shopping in India is predicted. 5. ANALYSIS With online shopping gaining widespread popularity, the impact has been seen on the traditional markets. Vivek Bajpai (2012) [11] explains just this. He stresses upon how online platforms such as Facebook, http://www.iaeme.com/IJM/index.asp 272 editor@iaeme.com
The Rise of E-Commerce and its Subsequent Impact on the Indian Retail Market Twitter, YouTube, Blogs etc. have been hugely successful in promoting online shopping. While traditional sellers do advertise their shops online, surveys have revealed that customers prefer to immediately shop for an item when they look at an advertisement; which is thus facilitated by online shopping. Thus we see how customers are increasingly leaning towards online shopping rather than physically visiting a store. But this impact has varied in different countries. In this research review, we take a close look of the markets in Pakistan, United Kingdom and Turkey and compare them to the Indian market. We now list a few of the various factors that have had varied effects in these countries. 5.1. Time Factor The consumers in Pakistan, U.K. and Turkey all have a positive attitude on time consumption. In Pakistan, people prefer online as time is saved as they don’t have to leave the place. With the traffic, lack of adequate roads and parking spaces, consumers find it difficult to physically go to a store. As this is the exact same situation in India and taking into account the large population, Indian consumers too will have a positive attitude on time consumption. This attitude is likely to remain same in the foreseeable future as well. 5.2. Trust and Security factor There has been mixed responses when it comes to trust and security. In the U.K., which has the 5th largest economy in the world [4], the majority of the consumers are used to online payment and have little concern over their security as they have trust and confidence over the payment methods. And as such a majority of the customers use their credit cards while shopping. But in Pakistan, a large percentage is still skeptical over their security. People also expressed concerns when their entire customer details were asked. Turkey too, like Pakistan, is a more traditional country that prefers cash on delivery. Also the average incomes in these two countries are lesser than that in U.K. And as such, people are more cautious over buying expensive products online. In India too, a majority of the customers prefer cash on delivery. But this scenario, as the economy develops, is likely to change. As the average incomes increases and more and more people are gaining trust towards online payments, customers will soon use their credit cards for purchase rather than cash on delivery. 5.3. Familiarity with Website Language and Interface Customers prefer buying from websites that are user-friendly and with a familiar language. If a consumer is dissatisfied with this, he/she might prefer to shop physically. In Pakistan 52% of the consumers had either a neutral or negative perspective [8]. A major factor for this could be the literacy rate which is only 58% as of 2015 [14]. But when it comes to U.K., where the literacy rate is higher, more number of people are comfortable with the website interface. In India, the urban population is quite familiar with website languages whereas when it comes to the rural mass that is mostly uneducated, they find it a lot more difficult to understand the products and the offers. But as the literacy rate is growing at a rapid rate (73% in 2013 when compared to 64.8% in 2001)[15] and technological advancements reaching the corners of rural areas, it is safe to say that the familiarity and the comfort level of the Indian mass with the websites is only going to increase and soon this will no longer be a problem for online marketing. 5.4. Incomes Surveys done by Seda Yoldas have shown that the majority of customers shopping online around the globe are students [10]. Thus invariably it becomes important for sellers to target the students. In U.K., the students have part time jobs and as such are more likely to buy items online. Whereas in Turkey, the students are dependent on their parents. This can be a constraint to some extent as they cannot independently decide while purchasing an item. http://www.iaeme.com/IJM/index.asp 273 editor@iaeme.com
Sijoy Syriac and Dr. Raghuram J In India too, the percentage of working students is negligible. Further it’s going to take a very long time before this mentality changes. Thus the dependency of income on parents affects the purchasing tendency in India and it will continue to remain the same for some time. 5.5. Product Promotions and Discount Deals Shopping sites go to great lengths to promote their products. They offer various discounts and attractive offers which might not be available while purchasing from a physical store. Most consumers in Pakistan have agreed to this and there is nothing short of offers in India as well. Flipkart and Amazon’s ‘Big Billion Day’ and ‘Great Shopping Festival’ have already broken the sales records of the country. But many of the rural population still believe in the power of bargaining, which is not possible online. This is one minor setback in India but in the long term and for the majority of the customers, the offers and discounts are a boon which is readily available in online shopping. 5.6. Other factors According to the surveys conducted by Sajjad Nazir [8], the factors affecting buying behavior in Pakistan were social factors, psychological factors, emotional and private factors. As the social and religious cultures of Pakistan and India are quite similar, these factors affect the Indian market as well. The customers of U.K are found to be more brands conscious. As average income is higher in Britain, people tend to prefer more branded and expensive items. Whereas in India, the brand orientation is comparatively less when compared to the rest of the world. But with the increasing number of advertisements and marketing strategies, more number of people is willing to spend more on branded goods. As time passes the local goods will soon run out of the market. Previously, if one wanted to shop online, a computer was required. But with smartphones and tablets gaining widespread popularity, customers can now purchase items on the go. All these factors indicate that online shopping is here to stay and is going to dominate the markets for a long time. Also, with the Goods and Services Tax bill being passed recently in India, the dream of ‘One Nation, One Tax’ is finally being realized. GST will be a game changing reform for the Indian economy as the cost of goods and services will be reduced, thus leading to a complete overhaul of the current indirect tax system [16]. Online retailers will now be able to reduce their prices as the levied taxes on them have been cut down. Previously, retailers had to set up various warehouses in different states in order to cut down the transportation taxes. But now, with a common tax for the entire country they can set up a centralized hub from where they could catapult their products to various parts of the country and thus saving on numerous fronts. 6. CONCLUSION Online shopping in India is growing at a rapid pace but it is yet to reach global standards. The shopping trends and factors affecting consumer’s behavior is somewhat similar to Pakistan and Turkey. But the popularity and market penetration is far lesser than that of the United Kingdom. With the GST bill being passed, we can now expect a sharp rise in the growth of online shopping and more and more retailers would now prefer to market their products online. As per the observed trends and analysis done, we can predict that the Indian online shopping market will reach that of U.K. in 6-7 years. REFERENCE [1] http://www.internetworldstats.com/top20.htm [2] http://economictimes.indiatimes.com/small-biz/startups/11500-startups-to-come-up-in-india-by-2020- report/articleshow/44972644.cms [3] http://articles.economictimes.indiatimes.com/2014-07-09/news/51248148_1_national-skill- development-corporation-India-October-economic-survey http://www.iaeme.com/IJM/index.asp 274 editor@iaeme.com
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