INDIAN ONLINE RETAIL MARKET POTENTIAL The market size of online retail industry in India is likely to touch Rs 7,000 Crore by 2015 due to increasing internet penetration across the country, a survey today said. Currently, the online retail market stands at Rs 2,000 Crore and is growing at an annual rate of 35 per cent "India is set to become the third largest nation of internet users in the next two years...Leading companies have gauged the potential of online retail industry and are gearing up fast to cash in,"
DIFFERENT BUSINESS MODELS IN ONLINE RETAIL Four main types of online retail business models: 1.Virtual merchant Single channel Web firms that generate almost all revenues from online sales e.g. Amazon 2. Bricks-and-clicks Companies with physical stores as primary retail channel, but also online offerings 3.Catalog merchant Established companies that have national offline catalog operation as largest retail channel, but also have online capabilities have online capabilities e.g. Victoria’s Secret 4. Manufacturer-direct Single or multi-channel manufacturers who sell directly online to consumers without intervention of directly online to consumers without intervention of retailers e.g. Dell
DIFFERENT SEGMENTS IN ONLINE RETAIL(PRODUCT BASIS) Furniture & Home Furnishings Stores Building Material & Garden Equipment & Supplies Dealers Food & Beverage Stores Health & Personal Care Stores Clothing & Clothing Accessories Stores Recreation & Leisure Activities Stores General Merchandise Stores Electronics & Appliance Stores Other Specialty Retail Stores Motor Vehicles & Parts Dealers Non-Store Retailers
In India Four consumer segments should be considered in the internet channel, each with a specific capacity to buy online and a specific interest for online shopping. Each of these segments should be targeted using a different approach. The two non-buyer segments, window shoppers and casual surfers, are the biggest and represent an opportunity for retailers to increase the size of their buyer base. Window shoppers are the 33 million internet users that have not yet purchased despite a high interest in online shopping. They should be reached by firms through a focus on price, since their level of income tends to be lower relative to the buyer segment. To succeed profitably in this segment, e-retailers must adopt new models based on tailored pricing instead of the current heavy discount and group buying models that do not provide a path to economic viability. The 41.2 million casual surfers are neither interested nor capable of purchasing in volume online. They can, however, be turned into window shoppers by companies focusing their efforts on increasing their interest for online shopping through the most effective means yet proven: Social media. The two buyer segments, travel buyers and product buyers, are currently small but their volume and average sales per customer can be dramatically increased. Travel buyers currently number 8.5 million, and they only purchase intangible goods related to travelling, mostly transportation tickets. To overcome their concerns about product delivery and turn them into product buyers, retailers should enhance their logistics capability. Finally, another 8.5 million product buyers purchase a variety of tangible and intangible goods online. They are the current base of online consumers and should be made loyal by firms through improved customer communication and relationship management
LEGAL IMPLICATIONS FOR INDIA MARKET ENTRY Entry Options For Foreign Players prior to FDI Policy1. Franchise AgreementsIt is an easiest track to come in the Indian market. In franchising and commission agents’ services, FDI (unless otherwise prohibited) is allowed with the approval of the Reserve Bank of India (RBI) under the Foreign Exchange Management Act. This is a most usual mode for entrance of quick food bondage opposite a world. Apart from quick food bondage identical to Pizza Hut, players such as Lacoste, Mango, Nike as good as Marks as good as Spencer, have entered Indian marketplace by this route.2. Cash And Carry Wholesale Trading100% FDI is allowed in wholesale trading which involves building of a large distribution infrastructure to assist local manufacturers. The wholesaler deals only with smaller retailers and not Consumers. Metro AG of Germany was the first significant global player to enter India through this route.3. Strategic Licensing AgreementsSome foreign brands give exclusive licenses and distribution rights to Indian companies. Through these rights, Indian companies can either sell it through their own stores, or enter into shop-in-shop arrangements or distribute the brands to franchisees. Mango, the Spanish apparel brand has entered India through this route with an agreement with Piramyd, Mumbai, SPAR entered into a similar agreement with Radhakrishna Foodlands Pvt. Ltd
4. Manufacturing and Wholly Owned Subsidiaries.The foreign brands such as Nike, Reebok, Adidas, etc. that have wholly-owned subsidiaries in manufacturing are treated as Indian companies and are, therefore, allowed to do retail. These companies have been authorized to sell products to Indian consumers by franchising, internal distributors, existent Indian retailers, own outlets, etc. For instance, Nike entered through an exclusive licensing agreement with Sierra Enterprises but now has a wholly owned subsidiary, Nike India Private Limited.5. FDI in Single Brand RetailIn single-brand retail, FDI up to 100 per cent is allowed, subject to Foreign Investment Promotion Board (FIPB)it implies that foreign companies would be allowed to sell goods sold internationally under a ‘single brand’, viz., Reebok, Nokia, Adidas. Retailing of goods of multiple brands, even if such products were produced by the same manufacturer, would not be allowed.6. FDI in multi brand retail-51% allowed
HOW TO SET UP A COMPETITIVE DELIVERY NETWORK The process of adding value Raw material suppliers, processors, manufacturers, wholesalers, distributors and retailers are all actively involved in the process of converting raw- materials into finished goods, and through the process of converting inputs into outputs each participant adds actual or perceived value to each unit of goods sold
Steps of competitive delivery network set up Extracting a significant commercial benefit from your customers by using competitive advantages that are external to your organization through partnering with aligned value delivery partners. Increasing the intensity of integration within a value-chain, often leads to the lowering of the unit cost of production through the incremental recovery of overhead costs, often generating free cash flows (FCF’s) available for research (to generate innovation) and technology (to adapt automation) – core sources of competitive advantage. Alliances between value-chain participants often lead to reduced transaction costs, through eliminating intermediary margins and increasing pricing transparency, providing your organization with powerful leverage in supply negotiations. Provides your organization with real time information to be able to enhance inventory management and employ JIT- manufacturing practices to better match your production (supply) with demand
HOW THE MARKETING BUDGET SHOULD BE SPENT In todays CRM landscape the old analogy comparing the rifle and shotgun approaches to message and / or offer delivery is perhaps more appropriate than ever, as more retail organizations struggle to achieve one-to-one marketing-communications with customers and prospects. Targeting allows a retail enterprise to channel its marketing budget where there is the greatest (and fastest) possibility of Return On Investment (ROI Despite the uncertain outlook some argue that it is more important than ever to advertise your business The industry average is 9% to 11% with a slight bias towards more spending by smaller firms.
If Rs100 is marketing budget then Rs 45 Rs to multimedia marketing(ad etc) Rs 25 to paper marketing(magazine , news paper) Rs 25 to sponsorship Rs 5 to awareness programs like seminars, open shows
WHAT DO YOU ANTICIPATE BUYONLINEINDIA.COMWILL DO TO THWART COMPETITIONI would suggest some measures for Buyonlineindia.com1.efficient and effective operation management2.efficient delivery network3.use of CRM and SCM4.Increase range and reach5.Enter into a JV with another player and use their competitiveness in business
HOW BUYGLOBAL.COM CAN PREEMPT THESEMEASURESTo occupy1.Strong and efficient Supply chain management2.Strong and efficient CRM3.Incrase in range and reachthese business models buyglobal.com needs to spend on operation management and try to enter to different world markets and attract other customer bases by JV or M&A
ANALYZE AND SUGGEST IF IT IS WISE FORBUYGLOBAL.COM TO ENTER INDIAN MARKET OR NOT? India has witnessed an impressive boom in retail, registering an annual growth in value of 9.3 per cent. Estimated at Rs 18,72,000 crore in 2010, this market has been attracting substantial investments from organized companies wishing to grab their share of the pie, as shown in Exhibit 1.
As per exhibit 1,2 and 3With this growth and demand Indian market is very much attractive to business in. I would suggest Buyglobal.com to enter into a JV with buyindiaonline.com and use their customer base for their different products and utilize their strong presence in segments.
REFERENCES India Retail Survey Legal laws India Online Marketing Magazine Retailers India
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