2. 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,"
3. 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
4. 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
5. 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
6. LEGAL IMPLICATIONS FOR INDIA MARKET ENTRY
Entry Options For Foreign Players prior to FDI Policy
1. Franchise Agreements
It 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 Trading
100% 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 Agreements
Some 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
7. 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 Retail
In 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
8. 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
9. 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
10. HOW THE MARKETING BUDGET SHOULD BE SPENT
In today's 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.
11. 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
12. WHAT DO YOU ANTICIPATE BUYONLINEINDIA.COM
WILL DO TO THWART COMPETITION
I would suggest some measures for Buyonlineindia.com
1.efficient and effective operation management
2.efficient delivery network
3.use of CRM and SCM
4.Increase range and reach
5.Enter into a JV with another player and use their
competitiveness in business
13. HOW BUYGLOBAL.COM CAN PREEMPT THESE
MEASURES
To occupy
1.Strong and efficient Supply chain management
2.Strong and efficient CRM
3.Incrase in range and reach
these 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
14. ANALYZE AND SUGGEST IF IT IS WISE FOR
BUYGLOBAL.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.
15.
16.
17.
18. As per exhibit 1,2 and 3
With 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.
