Retailers' revenue rises as they switch online: Study

The e-commerce segment is gaining ground in India, with a study pointing out that retailers are increasingly opting to sell their products online to boost revenue.

The study by market research consultancy Spire Research and Consulting showed that 54 per cent of businesses reported more than 20 per cent increase in revenues after establishing their online presence.

The study titled 'India's E-Tailing Industry - Seller's Perspective' 2014 was unveiled in New Delhi on Wednesday.

It focuses on the trend of online shopping and its impact on sellers. The survey had a sample size of 300 retailers, of which 100 each were from apparel, consumer electronics and food sectors across 13 states.

Japnit Singh, Senior Director, Spire Research and Consulting, Singapore and India, said, "The country is one of the fastest-growing markets for e-commerce globally. The research clearly shows sellers in India have a positive sentiment towards e-commerce with maximum traction seen in apparel and food businesses. This study indicates a growing trend towards adoption of online channels. Over 50 per cent of businesses currently account for significant revenue share from online sales with revenue shares set to rise significantly over the next five years."

The study also revealed that a majority of businesses have accepted online platforms as an extension of their brands.

Businesses in the apparel (82 per cent) and food (80 per cent) sectors seem to have an advantage by going online as compared to consumer electronics (72 per cent). Moreover, consumer electronics seem to have a lower potential as consumers are inclined to be more involved in the purchasing process.

The study indicated the share of online revenue is set to grow. Currently, a majority of business are attributing 20 per cent to 50 per cent of their revenue by online sales.

Saurabh Sharma, Country Manager for Spire Research & Consulting India, said, "Sellers will follow a dual strategy combining both offline and online channels with significant sales still coming from the familiar offline channels. A majority of the sellers surveyed perceive physical stores as a more profitable channel of sales compared to online marketplaces."

The report also said 91 per cent sellers have been associated with online marketplaces for less than three years across all categories, and 60 per cent for one year only.

Key findings:

1. Over 54 per cent of businesses have reported a growth of more than 20 per cent since establishing an online presence.

2. Apparel and food businesses saw a larger benefit of going online.

3. Other industries with a fragmented structure and low barriers to entry will also see growth in the industry. Baby products, books, home dcor and jewellery may also benefit from e-tailing.

4. Consumer durables (such as electronics) may see a lower potential as customer may prefer to be more involved in the purchasing process.    

5. Most businesses use a combination strategy with 31 per cent businesses reporting between 20 and 50 per cent of their sales coming via online. This trend is expected to continue, but the proportion may grow to 45 per cent.

6. Apparel business may also see a larger opportunity to increase share of online business, while food may continue to be offline.

7. Tier-2 and tier-3 cities may see a faster adoption and greater share coming from online channels.

8. The key challenge remaining are payment mechanisms and the risk of cash on delivery, challenges in logistics and order fulfillment.