Booming Internet Retailing in India, with Some Expected Challenges
The Indian Government recently eased the restriction for foreign e-commerce in India so that global online retailers such as Amazon and E-bay, as well as other foreign manufacturers, are encouraged to sell their own products online as long as the products are sourced and produced within the country. This will definitely be beneficial to consumer appliance manufacturers in India. Manufacturers such as Samsung Corp, LG Corp and Panasonic Corp have opened e-stores in India to gain further revenue. However, internet retailing of appliances in India faces some challenges, such as inefficient infrastructures and cannibalising sales between store-based and online retailers.
Technology and Societal Trends Drive Growth
According to Euromonitor International, internet users in India increased from 51 million users in 2008 to 176 million users in 2013 – growth of 248%. Moreover, volume sales of smart phones in India rose by a CAGR of 69% over the same period. The increasing rate of internet and smartphone usage has fuelled internet retailing in India. Not only that, the so-called “showrooming” trend has become extremely popular. Consumers can visit a store-based retail outlet to see, touch and feel the products they are considering purchasing before returning home to purchase them online at the lowest possible price, according to Euromonitor International’s Category Briefing on Internet Retailing in India.
Internet Users and Smartphones in India: 2008-2018
Source: Euromonitor International
Internet Retailing: Beneficial to Consumer Appliances Manufacturers and Consumers
Internet retailing allows Indian consumers to get lower-priced consumer appliances. The online retailing prices are typically lower than those of store-based retailers. Apart from lower prices, consumers can have a wider choice of products through internet retailing, since space constraints are not a problem compared to conventional store retailing.
Also, foreign manufacturers can get another channel to sell to consumers. Following the easing of restrictions for foreign e-commerce in India, Panasonic Corp recently announced that it would set up an e-store for consumer appliances, mainly to showcase the products on the website. Despite some restrictions from the government regarding foreign internet retailing, LG Corp and Samsung Corp managed to set up their e-stores in India in 2012, but only some popular products have been available on the websites, such as washing machines, fridge freezers and air conditioners.
The growth of consumer appliances’ internet retailing in India is still lower than other categories such as media products, including CDs and books, apparel and footwear, and consumer electronics. This is because these items are smaller and can be delivered to almost all cities in India.
Top Six Categories for Internet Retailing in India: Absolute Volume Growth and % CAGR 2013-2018
Source: Euromonitor International
Transportation and Price Conflict Remain Problems
Despite a 14% CAGR expected for consumer appliances’ internet retailing in India from 2013-2018, there are a few obstacles manufacturers currently face. Due to the large size of major appliances such as fridge freezers and washing machines, manufacturers can only sell online to consumers in cities where infrastructure and transportation is adequate. Currently, LG’s e-store is available to only 27 major cities, including Delhi, Bangalore, Mumbai and Pune, while hundreds of cities remain inaccessible.
In addition to infrastructure constraints, the lower prices that consumer appliance internet retailers offer are cannibalising sales to store retailers, affecting their sales volumes. The owners of store retailers have already given feedback to manufacturers such as LG and Samsung to either consider lowering down the prices or reducing their volumes of online sales. Otherwise, store retailers will face declining volume sales and even business closure. For example, Lakshmi Electronics, a large-sized consumer electronics store in Delhi, was hit hard by online competition, to the extent that the owner has to consider employee redundancies or moving to a smaller store.