PROF.V.V.

GOPAL

SUBMITTED BY
GROUP 7
SAHUL RIZVI
S.MANOJ
UMA
RASHMI
HIMANSHU KAUL
RAKESH SINGH
Contents
Chapter 1-Methodology..............................................................................................................................5
Chapter 2-Introduction of the research.......................................................................................................6
Background of the research.....................................................................................................................7
Scope of research...................................................................................................................................11
Chapter 3-Theoretical framework of the research....................................................................................12
Types of internet retailing:......................................................................................................................13
Major players in internet retail sector:....................................................................................................14
Various sites for internet retailing in India:.............................................................................................14
Recent trends in online retail in India:...................................................................................................16
Future Trends in Internet marketing:.....................................................................................................16
Chapter 4-Analysis Based On Theoretical Framework...............................................................................20
Challenges of internet retailing in India....................................................................................................20
ECONOMICS OF ELECTRONIC COMMERCE................................................................................................22
Chapter 5-Cluster Analysis: Target segment..............................................................................................25
5.1 Analysis of cluster 1 for online shopping consumers...........................................................................27
5.2 Analysis of cluster 2 for online shoppers.............................................................................................28
5.3 Analysis of cluster no 3 for online shopping customers:......................................................................29
Chapter 6- Factor Analysis.........................................................................................................................30
6.1 Analysis of factor influencing customers online shopping...................................................................36
Chapter 7- Analysis of the Type of Products and Its Affects......................................................................37
7.1 Analysis of the questionnaire survey...................................................................................................37
7.2 Analysis of types of product categories, prefer by online customers..................................................38
Chapter 8 - Analysis Factors affecting internet retailing............................................................................46
CHAPTER 9- Challenges..............................................................................................................................49
9.2 Opportunities......................................................................................................................................50
CHAPTER 10-Retail strategies and business models..................................................................................52
10.1 Managerial aspects of internet retailing............................................................................................54
CHAPTER 11-Comparison between Global retailers’ vs. Indian Retailers in Internet Retailing..................57
11.1 Causes of Slow Growth of online shopping in India:..........................................................................59

2|Page
CHAPTER 12- Recommendations...............................................................................................................64
CHAPTER 13- Future of E-retailing in India................................................................................................65
13.1 Enablers for Internet Industry in future.............................................................................................69
Attachments..............................................................................................................................................72
CHAPTER 14-References............................................................................................................................74

3|Page
 Executive Summary
E-commerce and E-retailing, from a business perspective offer an opportunity to cater to
consumers across geographies, with no operational timings, providing unlimited shelf space –
and all this with miniscule quantity of infrastructure. E-retailing provides multiple benefits to the
consumers in form of availability of goods at lower cost, wider choice and saves time. Thus for a
developing country like India, this business model is a good way of growing the consumption
driven economy.

In India changing demographics, changing lifestyles and exposure to the developed markets are
increasing the business in fledgling e- retailing industry. The soaring real estate costs in India
have certainly inspired many an online venture. Also E-retailers have developed many
innovative promotions to lure customers and there by growing the market.

Our project is on “Indian internet retail industry”. This project study was conducted for the
purpose of understanding and criticality examining the current scenario & future prospects of
internet retail in Indian market & also studied the various factors influencing customer’s
perception, expectation & there online purchase decision for internet shopping. Project also
included finding out the target customers of internet retailers, contributing & inhibiting factors,
opportunities & challenges ahead in E-retailing in general as well in Indian context.

The information required for the project was collected both from primary and secondary data.
Primary data was collected by means of questionnaires and focus group & secondary data was
collected through marketing journals, books, company & various websites. Factor analysis was
used to study the factors affecting customers online purchase behavior and cluster analysis tools
was used to found out the target segment for online retailers through demographic profiling of
online customers. Collected data was also analyzed mathematically and represented through pie
charts for studying the different product categories which consumers are willing to buy online. In
this survey sampled was taken from Hyderabad city, sample size of 50 respondents with random
sampling is adopted.

From study we inferred that though E-retailing has captured a huge market share in developed
countries but it is still an emerging concept in India market. There are few Indian players in the
E-retail business which are trying to understand the psychology of Indian consumers. Certain
legal factors like online payment security, credit card fraud, privacy issues & technological
aspects like internet penetration, fewer internet portals as well poor product attributes & web
designs influence customer’s online shopping behavior.

4|Page
Political factors like limited entry of FII’s and inhibition of multiband players are another factors
which are restricting well verse foreign players to enter Indian market. India still has a huge
untapped potential E-retail market which can contribute to growing Indian economy.

Chapter 1-Methodology

We have divided our project in four phases:

Phase 1: It includes introduction, background and scope of the project.

Phase 2: It includes the theoretical framework of the research.

Phase 3: Analyzing the various parameters internet retailing.

Phase 4: In this, we will discuss about the findings, conclusions and recommendations

Objectives
Primary objective

 To study the current scenario & future prospects of internet retail in Indian market

Secondary objective

 To study various factors influencing customer’s perception & buying decision for
internet retailing.
 To know the target customers of internet retailers
 To understand customers expectation from internet retailers.
 To study the opportunities and challenges in E-retailing

Research design

 Data: Data used in project is both Primary as well secondary data. Primary data was
collected through questionnaire as well as through focus group interview to collect the
information about consumer’s perception about online shopping & online retailers.

5|Page
  Sample size & location: sample size of 50 respondents was used for questionnaire
survey & 2 groups of 6 respondents each was used for focus group interview. Sample
location is Hyderabad city.
 Analysis & Interpretation: data collected was analyzed by using SPSS tool. Tool used
are Factor &Cluster analysis. Pie-charts was used for interpretation

Chapter 2-Introduction of the research

Retailing in India:

Indian retail industry is the fifth largest in the world. India has been rated 2nd in global
development index of 30 developing countries (ref:by the US-based global management
consulting firm A T Kearney in its eighth annual Global Retail Development Index (GRDI) 2009
published in June 2009). According to it, India retail industry is the most promising emerging
market for investment. In 2007, the retail trade in India had a share of 8-10% in the GDP (Gross
Domestic Product) of the country. In 2009, it rose to 12%. It is also expected to reach 22% by
2010.

Indian Retail sector is highly fragmented and organized retail in the country is at very nascent
stage. With changing taste and preferences of consumers, demographics, Economic growth,
urbanization and credit availability, the industry is getting more organized and popular in Indian
market. With growing market demand, industry is expected to grow at pace of 25-30% annually.
The Indian retail industry is expected to grow from Rs. 35,000 crore in 2004-05 to Rs.
109,000crore by the year 2010.
According to a report by Northbridge Capita, the India retail industry is expected to grow to US$
700 billion by 2010. The share of organized sector in 2007 was 7.5% of the total retail market
and it is estimated that by 2010, the organized sector will be 20% of the total market share.
(Source: www.ibef.org/industry/retail.aspx)

6|Page
 OrganisedOthers
Retail pie % contribution
23%

Textile and apparel

39%
Pharma
2%
Books, music and gifts
3%

Jwellery and watches

6%
Home solutions
7%
Consumer durables Food and beverages
9% 11%

Background of the research

INTERNET USAGE STATISTICS

World Internet Users and Population Stats

 
WORLD INTERNET USAGE AND POPULATION STATISTICS
Internet Internet Penetration
Population Growth Users %
World Regions Users Users (%
( 2010 Est.) 2000-2010 of Table
Dec. 31, 2000 Latest Data Population)
Africa 1,013,779,050 4,514,400 110,931,700 10.9 % 2,357.3 % 5.6 %
Asia 3,834,792,852 114,304,000 825,094,396 21.5 % 621.8 % 42.0 %
Europe 813,319,511 105,096,093 475,069,448 58.4 % 352.0 % 24.2 %
Middle East 212,336,924 3,284,800 63,240,946 29.8 % 1,825.3 % 3.2 %
North America 344,124,450 108,096,800 266,224,500 77.4 % 146.3 % 13.5 %
Latin
592,556,972 18,068,919 204,689,836 34.5 % 1,032.8 % 10.4 %
America/Caribbean
Oceania / Australia 34,700,201 7,620,480 21,263,990 61.3 % 179.0 % 1.1 %
WORLD TOTAL 6,845,609,960 360,985,492 1,966,514,816 28.7 % 444.8 % 100.0 %
Source http://www.internetworldstats.com/stats.htm

According to these statistics,

7|Page
The developed countries including Europe, North America, and Australia have higher
penetration in terms of internet user in comparison to its population where as African,
Middle East and Asians countries though have high population but internet penetration is less.

In terms of users, Asians constitute 42% where as Europe & North America constitutes 24.2% &
13.5%.

8|Page
Estimated internet users are 1.9 billion on June 31, 2010

From above statistics, we can infer that Asians are the maximum internet users with 825.1%
followed by European 475.1% & other countries. Developed nation’s i.e. western countries
are already saturated with internet retailing therefore we can conclude that Asian markets have
huge potential for growth in internet & internet retailers can target them.

9|Page
 Internet Usage and Population Statistics: India

YEAR Users Population % Pen. Usage Source

1998 1,400,000 1,094,870,677 0.1 % ITU
1999 2,800,000 1,094,870,677 0.3 % ITU
2000 5,500,000 1,094,870,677 0.5 % ITU
2001 7,000,000 1,094,870,677 0.7 % ITU
2002 16,500,000 1,094,870,677 1.6 % ITU
2003 22,500,000 1,094,870,677 2.1 % ITU
2004 39,200,000 1,094,870,677 3.6 % C.I. Almanac
2005 50,600,000 1,112,225,812 4.5 % C.I. Almanac
2006 40,000,000 1,112,225,812 3.6 % IAMAI
2007 42,000,000 1,129,667,528 3.7 % IWS
2009 81,000,000 1,156,897,766 7.0 % ITU
2010 81,000,000 1,173,108,018 6.9 % ITU
Source: www.internetworldstats.com/asia/in.htm

From 1998 to 2010, internet user penetration has increase among India consumers from 0.1% to
6.9%.

Therefore there is huge potential for retail internet industry to grow and there is untapped
segment to capture on.

Scope of research
Project will include statistical data on value, volume and segmentation of internet retailers &
consumers and will give important inputs on textual analysis of the industry's recent performance
and future prospects.

 Studying the key macroeconomic and demographic data affecting the world and the
Indian retail market particularly.

10 | P a g e
 Chapter 3-Theoretical framework of the research

What is internet marketing?

Internet marketing also referred to as i- marketing, web marketing, online marketing or e-

marketing. It involves the marketing of products or services over the internet.

The Internet has brought media to a global audience. The interactive nature of Internet marketing
in terms of providing instant responses and eliciting responses are the unique qualities which can
leverage sales in retail industry. It includes marketing done via e-mail and wireless media.
Management of digital customer data and electronic customer relationship management (ECRM)
systems are also often grouped together under internet marketing.

Internet marketing ties together creative and technical aspects of the Internet, including: design,
development, advertising, and sales

Internet marketing also refers to the placement of media along many different stages of the
customer engagement cycle through search engine marketing(SEM), search engine
optimization(SEO), banner aids on specific websites, e-mail marketing, and web 2.0 strategies.

Brief History of E-Commerce:

Although the invention of the internet technology lays back in the 1950s and 60s, the
breakthrough for commercial usage started in the 90s. At that point retailers discovered the
possibilities & opportunities of internet business and were able to apply them to their purchasing
needs. The new technology allowed companies to enter the new market easily at a relatively low
cost investment. The prospects promised extraordinary rates of growth of the e-market. The
profit expectations were high. Companies invested billions of dollars in internet retailing firms.

11 | P a g e
Many internet based e-business companies like Amazon, Napster, e-toys etc. were found in that
period. But at the end of the 90s the prospects of them did not come up to one's expectations and
a lot of the New Economy companies had to close down with tremendous loss for investors at
the stock market.

Growth of Internet retailing:

Since the last two decades Internet Retailing is the most challenging innovation for the retail
industry. It offers a new kind of distribution channel and options of collecting customer data and
analyzing buying patterns. Online retailing has seen remarkable growth rates and begins to gain
a significant share of total retail sales which results in a fundamental change of the overall sector
thus explaining the importance for development and expansion of the internet retail sector.

Due to the increased penetration of credit cards and availability of computing facilities to a wider
population, Internet retailing is witnessing a stellar growth. Internet retailers offer products at
discounted prices to consumers compared with store-based retailers and thus consumers have
wider options & better bargaining power. This has become even more pronounced in light of the
economic downturn as consumers have become increasingly sensitive to price.

Types of internet retailing:

Online/internet retailers are those who use the tools of internet whether e-mail based or web
based, for any or all aspects of sales i.e. negotiation, confirmation, authorization and conclusion
of sale of tangible, physical goods etc. The various categories include online retailers:

1. Pure play: The business purely through the internet; they have no physical store where
customers can shop. Examples of large pure play companies include Amazon.com and
Netflix.com. With a much lower barrier to entry, the Internet affords smaller companies the
ability to compete with much larger brands due to typically lower overhead and marketing
costs
2. Bricks-and-clicks: It is a business model by which a company integrates both offline
(bricks) and online (clicks) presences. It is also known as click-and-mortar or clicks-and-
bricks, as well as bricks, clicks and flips, flips referring to catalogs. One example of the

12 | P a g e
 bricks-and-clicks model is when a chain of stores allows the user to order products online,
but lets them pick up their order at a local store.
3. Traditional store-based retailers
4. Catalog retailers/merchants (Including both mail- and telephone-order companies): They
are typical merchant who sell a wide variety of household and personal products, with many
emphasizing jewelry. Unlike a self-serve retail store, most of the items are not displayed;
customers select the products from printed catalogs in the store and filled out an order form.
The order is brought to the sales counter, where a clerk retrieves the items from the
warehouse area to a payment and checkout station.
5. Combination retailers who have traditionally used both stores and catalogs
6. Wholesale suppliers/manufacturer direct
7. Internet Retailing: The term ‘internet retailing’ describes the internet based purchase of
material and digitized products and goods via the World Wide Web (www) to consumers.
The focus lies on the “Business-to-Consumer” (B2C) as well as “business to business” (B2B)
relation.

Major players in internet retail sector:

 Reliance Rmoneymall
 Pantaloon’s Futurebazaar.com
 Videocon’s eDigiworld.com
 Vishalmart’s Vishalmegamart.com
 Tata coming up with its own e-mall.

Various sites for internet retailing in India:

(ref: http://www.economywatch.com/business-and-economy/e-retailing-india.html)

 EBay: is doing great in India too. Backed by a powerful brand, loyal customers, and
experience in online retail it has generated good traction in India. It came to the Indian
scene with a bang by acquiring Baazee.com in June 2004 for Rs 230 cr.

13 | P a g e
  Flipkart.com: It is like the Indian amazon.com; and according to their linkedin page”it
was launched in sept 2007 by employees of Amazon.com”.
 Infibeam.com: They were in news recently when they acquired picsquare. Infybeam’s
Car retail section is also a unique in this space which is helping them to gain a lot of
eyeballs.

 Shopping.rediff.com: Full with Simple and elegant web 2.0 features and the website is
seamless. They could probably increase their inventory.

 Naaptol.com: Positioned as a comparison website, they actually do sell online too. They
have multiple revenue sources like advertising, selling online and passing on leads for
local stores. The site is very rich on content and the design seems to be flawless. Refined
web 2.0 features are also present in the website

 Shopping.indiatimes.com: Give the Times brand and the popularity of the Indiatimes
website I personally feel that they can do better. Their homepage is cluttered with a lot of
links. They are trying to sell too many things but unfortunately they only have a single
homepage. A redesign in the lines of shopping.rediff.com can do wonders to their traffic
and profitability.

 Indianplaza.in: Amazingly Indiaplaza which looks so Indian is a company based in US.

They were acquired by Fabmall.com and retained the name Indiaplaza.

 Homeshop18.com: Like all other network 18 websites, it has also taken India by storm.
Very professionally designed and promoted the website is gaining traction fast. Running
on Network 18’s Information network they are a possible player to be watched out in the
future.

 Futurebazaar.com: A future groups venture though elegantly designed and professionally

managed I see declining trends for the website in alexia and compete.com.

14 | P a g e
Recent trends in online retail in India:

 Social networking sites: usage of social networking sites like twitter, face book, orkut to
promote and advertise products
 E-Mail marketing: The low cost isn't the only reason to send e-mail, however. Most
consumers still consider e-mail to be their primary form of communication, even though
there are several alternative ways for consumers to subscribe to periodic content from small
businesses.

Future Trends in Internet marketing:

(ref: http://ezinearticles.com/?Future-Trends-of-Internet-Marketing&id=3910213 )

Today, over 75% of website traffic comes through organic search results and 85% of people trust
search engines for fulfilling their primary business needs. Even though people are inclining
towards social networking websites, but Social networking websites are more or less served as
taking second opinion, feedback for the products. Search engines still rule the internet industry in
terms of finding products and services to satisfy their business and personal needs.

15 | P a g e
Search engine optimization:

Websites with fresh content and relevant links will still rule the internet but the search results
will get more personalized and area specific. Already search engines algorithms have started
paying attention to the geo-location, publication-date, past behavior, mobile device browsers and
media content. Google has already launched innovations like real-time search and Social Search.
So publishers and brands are expected to deliver more personalized, most comprehensive, fresh
and relevant content to get indexed in search engines.

So testing keywords, content and links in mobile websites, local content and social media is a
wise move to generate leads in the internet marketing industry.

PPC / Paid search:

The motive behind paid search advertising is to get instant traffic to the website and first page
visibility for selected keywords. As Search engines will remain primary mean of getting
information people will click on the relevant ads. And the PPC costs will remain reasonable.
Mobile technology could be used in PPC platforms as a massive advantage. Big players don’t
mind paying money for running PPC campaign if they’ll get good returns, PPC investment is
also a good decision but be wise while choosing your keywords since your money is directly
involved in that.

Email marketing

The future of E-mail marketing is also bright as now email providers have started integrating
social media along with email. Google buzz, which integrates videos, photos, link with real time
communication, is already introduced. Google buzz which is an addition to social features in
Gmail is creating buzz everywhere. Buzz brings this network to the surface by automatically
setting you up to follow the people you email and chat with the most. It builds easy to use
sharing experience that richly integrates photos, videos and links, and makes it easy to share
publicly or privately.

16 | P a g e
Social media networking:

Lots of eyeballs are fixed on social media networking nowadays, so investing wisely in social
media would be a good decision. Google has already started paying attention to social
networking websites like twitter, facebook, linkedin etc. by indexing them in search results.
Social media networking is in its initial stage, it has yet to evolve, and many a things are yet to
come like Social networking websites will give more importance to interactivity and features like
(RSS,Wiki,...) to the users, with the help of Web2.0. So future of internet marketing is going to
be effected mostly by social media networking. Brand your websites with the help of these social
networking websites. In short the future of social media networking is very bright, it is up to you
how you use them in the interest of your business.

Mobile Marketing

According to Wikipedia Mobile Marketing is a set of practices that enables organizations to

communicate and engage with their audience in an interactive and relevant manner through any
mobile device or network. Nowadays many people are carry handsets like iPhone and the Google
Android phone capable of rich, mobile commerce providing a rich environment for the
convergence of mobility and the Web. So the latest trend in internet marketing is shifted towards
providing low-cost mobile marketing solutions like mobile websites, mobile email marketing,
mobile text messaging, mobile application development and area specific marketing. These
smart phones are opening new channels like SMS, mobile pages, online sales collateral, and
virtual couponing or money mobile technology, which will simplify the reach to the targeted
audience/ customer.

Blogging:

Blogging will remain there as a good investment in the internet industry for the new bloggers as
well as for the established bloggers. As search engines loves fresh content and blogging is a way
to update your website periodically with fresh and unique content so blogging will help driving
visitors to your website in the upcoming years also. So try to convert prospects into customers by
writing quality content for your website. Even many good article submitting directories are
encouraging their members to submit quality articles to their directories and in return they are

17 | P a g e
rewarding the customer with increased traffic, improved credibility and additional sales, which is
a great reward to bloggers.

Corporate Video:

It is said that a picture is worth than thousand words, now you can imagine the impact which a
video creates as compared to simple text. The main advantage of using online video is that it is
interactive, so creates more impact on the viewer and makes it easily memorable. It can be easily
shared with anyone and it is not expensive also to create. All these features of corporate video
make it widely accessible.

Source: http://socialagain.com/online-marketing-trends-2010

Chapter 4-Analysis Based On Theoretical

Framework
Internet Marketing (Electronic Commerce)

Online marketing can serve several purposes:

18 | P a g e
  Actual sales of products—e.g., Amazon.com.
 Promotion/advertising:  Customers can be quite effectively targeted in many situations
because of the context that they, themselves, have sought out.  For example, when a
consumer searches for a specific term in a search engine, a “banner” or link to a firm selling
products in that area can be displayed.  Print and television advertisements can also feature
the firm’s web address, thus inexpensively drawing in those who would like additional
information.
 Customer service:  The site may contain information for those who no longer have their
manuals handy and, for electronic products, provide updated drivers and software patches.
 Market research:  Data can be collected relatively inexpensively on the Net.  However, the
response rates are likely to be very unrepresentative and recent research shows that it is very
difficult to get consumers to read instructions.  This is one of the reasons why the quality of
data collected online is often suspected.

Challenges of internet retailing in India

 Less number of Internet user; Mostly concentrated in metros.

 Availability of Brick n mortar shops at every nook and corner thereby making it easy for
customers.
 Easy availability of domestic goods at affordable wages.
 Aversion to use credit-cards this owing to low penetration and popularity of debit and
credit cards in the country
 Logistics management

CHALLENGES IN RUNNING WEB SITES

There are a number of problems in running and developing web sites.

 The desired domain name may not be available

 Question having your site identified to potential users: Research has found that most
search engines have a great deal of “false hits” (sites irrelevant that are identified in a

19 | P a g e
 search) and “misses” (sites that would have been relevant but are not identified engines with
repeated usage of terms and “meta tags.”)
 Compatibility: The fact that many computer users employ different web browsers .

ISSUES IN WEB SITE DESIGN

Web site design:  The web designer must make various issues into consideration:

 Speed vs. aesthetics:  Some of the fancier sites have serious problems functioning
practically.  Consumers may be impressed by a fancy site, or may lack confidence in a firm that
offers a simple one.  Yet, fancier sites with extensive graphics take time to download—
particularly for users dialing in with a modem as opposed to being “hard” wired—and may result
in site crashes.
 Keeping users on the site:  A large number of “baskets” are abandoned online as
consumers fail to complete the “check-out” process for the products they have selected.  One
problem here is that many consumers are drawn away from a site and then are unlikely to come
back.  A large number of links may be desirable to consumers, but they tend to draw people
away.  Taking banner advertisers on your site from other sites may be profitable, but it may
result in customers lost.
 Information collection:  An increasing number of consumers resist collection of
information about them, and a number of consumers have set up their browsers to disallow
“cookies,” files that contain information about their computers and shopping habits.

 
Cyber-consumer behavior:  In principle, it is fairly easy to search and compare online, and it
was feared that this might wipe out all margins online.  More recent research suggests that
consumers in fact do not tend to search very intently and that large price differences between
sites persist.  We saw above the problem of keeping consumers from prematurely departing from
one’s site.

20 | P a g e
 ECONOMICS OF ELECTRONIC COMMERCE

SELLING ONLINE IS USUALLY MORE EXPENSIVE

(Ref: http://www.consumerpsychologist.com/Electronic_Commerce.html)

 Some people have suggested that the Internet may be a less expensive way to distribute products
than traditional “brick-and-mortar” stores.  However, in most cases, selling online will probably
be more costly than selling in traditional stores due to the high costs of processing orders and
direct shipping to the customer.   Some products may, however, be economically marketed
online.  Some factors that are relevant in assessing the potential for e-commerce to be an
effective way to sell specific products are:

 “Value-to-bulk” ratio.  Products that have a lot of value squeezed into a small volume
(e.g., high end jewelry and certain electronic products) are often more cost-effective to ship to
end-customers than are bulkier products with less value (e.g., low end furniture).
 Absolute margins.  Some products may have a rather high percentage margin—e.g., a
scarf bought at wholesale at $10 and marked up 100% to be sold at $20.  However, the absolute
margin is only $20-$10=$10.  In contrast, a laptop computer may be bought at $1,000 and be
marked up by only 15%, or $150, for a total price of $1,150.  Here, however, the absolute margin
will be larger--$150.  This allows the merchant to spend money on processing, packaging, and
shipping the order.  Ten dollars, in contrast, can only cover a small amount of employee time and
very limited packaging and shipping.  Some online merchants do charge for shipping, but doing
so will ultimately make the online merchant less competitive.
 Extent of customization needed.  Some products need to be customized—e.g., checks
have to be personalized and airline tickets have to be issued for a specific departure site,
destination time, and travel time.  Here, online processing may be useful because the customer
can do much of the work.
 Willingness of customers to pay for convenience.  Some consumers may be willing to pay
for the convenience of having products delivered to their door.  For example, delivering high
bulk, generally low value groceries is generally not efficient.  However, for some customers, it
may be worthwhile to pay to avoid an inconvenient trip to the grocery store.

21 | P a g e
 Geographic dispersal of customers.  Electronic commerce, when value-to-bulk ratios and
absolute margins are not favorable, is often not viable when customers are located conveniently
close to a retail outlet.  However, for some products—e.g., bee keeping equipment—customers
are widely geographically dispersed and thus, a centralized distribution center may be more
economically viable.  Specialty books—e.g., for collectors of vintage automobiles—may not be
worthwhile for bookstores to stock, and these may thus be economically sold online.
 Vulnerability of inventory to loss of value.  Some products—especially high tech products
—have a very high effective carrying costs.  It has been estimated that because of the rapid
technological progress made in the computer field, computer parts may lose as much as 1.5% of
their value per week.  If shipping directly to the customer can reduce the channel time by five
weeks, this potentially “rescues” as much as 7.5% of the product value.  In such a situation, then,
trying to reach the customer directly may make sense, even if the direct costs of distribution are
higher, because of the inventory value issue.

There are a number of economic realities of online competition:

 As discussed, costs of handling online orders are often higher than that of distributing
through traditional stores.
 Even if online selling is more cost effective in some situations, a firm selling online will,
in the long run, be competing with other online merchants—not just against traditional “brick-
and-mortar” stores.  By the forces of supply and demand, online prices will then be driven down
so that the profit from selling online will be no greater than that from traditional retailing.  Any
reduced costs would then be expected to go to customers.
 Competition will be greater for products that have large markets than for those where
markets are smaller and more specialized.  Amazon.com, for example, has found it necessary to
discount best selling books deeply.  Higher prices—closer to the list price—can be charged for
specialty books, but for a large part of the market, competition will be intense.
 A new online merchant will face competition from established traditional merchants. 
These will often have the cash reserves to stay in business for a long time even with temporary
competition.  The online merchant, if it has no cash reserves other than stockholders’ investment,
may run out of cash before it can become profitable.

22 | P a g e
Economies of Online Shopping in India:

 The size of e-commerce market in India is worth around Rs 9,500 crore which is just
about 0.47% of the total retail market in India, out of which the pure play online shopping
market is worth Rs 1,300 crore. While online shopping globally is growing at around 8-
10%, in India the growth rate is upwards of 30%. - Economic Times
 (ref:http://economictimes.indiatimes.com/infotech/internet/eBay-India-plans-marketplace-
platform-for-mobile-phones/articleshow/5348924.cms)
 The online travel industry in India is expected to grow to $6 billion (over Rs 28,000
crore) in 2010 in terms of revenues (the value of transactions as opposed to the earnings
of travel firms). More than 75-80% of this market is constituted by these portals like
Makemytrip.com, Yatra.com etc. - Business Standard
 (Ref:http://www.business-standard.com/india/news/travelocity-accuses-cleartrip-
ceodata-theft/380481/)

Online advertising in India

(Ref: http://www.dnaindia.com/money/report_digitally-speaking_1326499)

 Online advertising is expected to account for Rs1,800 crore in revenues by 2015 - DNA
 online video advertising industry is currently generating revenues of Rs 40-60 crore, and
is expected to touch Rs 200 crore by 2012 - DNA
 Education and Print media ad spent on Online Display Advertisements are expected to
grow at the rate of 76%, followed by automobile sector which is expected to show the
second highest growth rate (46%) with increase in the product launches and emergence of
Internet as the effective medium to target youth. - IAMAI
 The online display advertising industry in India grew to INR 3250 Million in FY 2008-09
with the growth rate of 38%.. Based on the primary research conducted in this study, it is
expected that the industry will grow at a lower rate at 32% and will grow to INR 4300
Million FY 2009-10.- IAMAI

Chapter 5-Cluster Analysis: Target segment

We have taken a sample of 50 respondents. Based on the questionnaire, we asked them to rate
their preferences for certain attributes. The attributes were run through the mathematical analysis
through the use of SPSS. Based on the analysis following results are shown as below:

23 | P a g e
 Final Cluster Centers
Cluster
1 2 3
Gender 1 1 1
Occupation 2 2 3
Education 2 2 2
Age 2 2 2
Shopping 1 1 1
Fraud 2 2 2
Frequency Of Use 3 4 1

From the results of the SPSS output we can see that out of all the variables used in the cluster
analysis for the segmentation of the respondents, the three variables are most important as per
there significance levels in the SPSS output. They are the age, occupation and frequency of use.
So we will concentrate on these factors

Distances between Final Cluster Centers

Cluster 1 2 3
1 1.663 2.073
2 1.663 2.762
3 2.073 2.762

Based on the above table we can see that there is a significant distance or separation between all
the three clusters which gives us an indication that there exist a clear mark of differentiation
between the cluster responds based on the attributes which we are trying to analyze.

24 | P a g e
 Number of Cases in each Cluster
Cluster 1 17.000
2 26.000
3 7.000
Valid 50.000
Missing .000

In the above table we can see that the cluster 2 has maximum number of people which is 26,
while the cluster 1 has a size of 17, the cluster 1 and 2 specifies for the 85 % approx of the
respondents. Hence cluster three can be termed as the niche which is different in terms of its
characteristics and can be targeted differently.

For analysis, the major points are:

Gender: 1-male, 2- female

Occupation: business: 1, service: 2, others: 3

Education: Undergraduate: 1, grad: 2, post grad: 3

Age: a. 15-25 (1) b. 26-30 (2) c. 31-40 (3) d. 41 & above (4)

Q How frequent you use internet services?

a. I don’t use (1)

b. Once in a month (2)
c. once in a week(3)
d. twice a week (4)
e. Three-four times in a week (5)
f. Daily(6)

25 | P a g e
5.1 Analysis of cluster 1 for online shopping consumers

gender occupation education age shopping fraud freq of

site use
1 1 3 3 1 2 3
2 1 3 2 1 2 3
1 2 3 2 1 2 3
1 2 3 2 1 2 3
1 2 3 2 1 2 3
2 1 1 3 2 2 3
1 1 3 3 1 2 1
2 1 2 2 1 1 2
1 3 2 3 1 1 3
2 2 1 3 1 2 4
1 1 2 2 2 2 2
2 1 2 2 1 2 3
2 2 3 3 1 2 3
1 1 2 2 1 2 3
2 1 2 2 1 2 4
2 2 3 2 1 1 5
1 3 2 3 1 2 3
2 1 3 2 1 2 3

These all consumers belong to cluster 1. We can analyze that the cluster basically contains
consumers who are either in the business or are in service (job). Further these consumers are
generally post-graduate or graduate that clearly specifies the education (literacy level) among
these responds is quite good. The age of these consumers are between 25 to 40 years that means
generally these people are settled and have family (generally). Also we can find that most of
them are well averse with the internet online shopping website as they have visited the website at
least once. These consumers use the internet sites often, minimum once in a week. They are the
consumers who are the prospects and can be targeted to increase the use among them.

5.2 Analysis of cluster 2 for online shoppers

26 | P a g e
 Consumer Gender Occupation Education Age shopping
site
3 1 3 2 1 1
4 2 3 2 1 1
5 1 3 2 1 1
6 1 2 3 2 1
10 1 3 2 1 1
12 2 2 3 2 1
13 2 3 3 1 1
14 2 3 2 1 1
15 1 3 2 1 1
16 2 2 3 2 1
21 2 1 1 2 1
22 2 2 2 2 1
23 1 2 3 2 1
25 2 3 2 2 1
26 2 3 2 1 1
27 2 2 2 2 1
28 1 1 2 2 1
30 1 1 2 2 1
31 1 3 2 1 1
34 1 3 2 1 1
40 1 3 1 1 1
43 2 2 3 2 1
44 1 2 2 2 1
45 1 2 3 2 1
46 1 2 3 2 1
50 2 3 2 1 1

This group of clusters is generally group of consumers who use the internet services quite often
say twice in a week or much more than that. The general age of these consumers is between 15
years to 30 years. This can be attributed to IT professionals and the students as we have seen
from the occupation data. This is the group which is most favorable to the use of the internet
service.

These customers also uses only twice in a week hence the penetration is quite low in these cases
and they should be the primary targets to further pump them to use online shopping services.

27 | P a g e
5.3 Analysis of cluster no 3 for online shopping customers:

custome gender occupatio educatio age shoppin fraud freq of

r n n g site use
8 1 3 2 2 1 2 2
11 1 2 3 2 1 2 1
29 1 2 3 2 1 1 1
37 2 3 2 1 1 2 1
38 2 2 3 1 1 1 1
39 1 2 2 3 2 2 1
48 2 3 2 1 1 2 1

The size of the cluster is less in this case; the size is just 7 and presents a niche segment of online
customers in this case. These are generally students or people in job who are educated and they
have visited the online websites but they don’t use it. These are the customers who should be less
targeted as we can not change their perception and behavior in short run, we should not look at
them in their present scenario of targeting.

On a whole from the whole cluster analysis data of 50 respondents, we can say that broadly there
are three categories of people/customers which feel differently and thus behave differently
towards the internet marketing or online shopping as explained by the data in the different
clusters. However from this data we can say that the population which is having more favorable
attitude towards purchase through the online channel is increasing at a decent pace. The future
prospects are quite good and the major target of the internet marketers should be the first two
groups as profiled by the cluster analysis.

Chapter 6- Factor Analysis

28 | P a g e
Factor analysis is used for data reduction and summarization. It is used in the project in order to
identify major factors among all the different variables for online shopping purchasing behavior.
We have in all 13 independent variables for online shopping

Principal component analysis is being done to determine the minimum number of variables that
will account for maximum variance in the data. From the descriptive Statistics table we can
analyze that, the standard deviation and number of observations of each variable.
Descriptive Statistics

Mean Std. Deviation Analysis N

Privacy Issues 4.4600 .50346 50
Transaction Issues 4.7000 .46291 50
Order Delivery Issues 2.5400 .50346 50
Internet Access 3.1400 .35051 50
Technical Knowledge 3.1400 .35051 50
Site utility, Aesthetics 1.6000 .49487 50
Site products Attributes 3.1200 .65900 50
Transparency 4.4600 .50346 50
Perceived risks,Credit card
fraud 4.7000 .46291 50
Credibility_Trustworthiness
4.0200 .55291 50
Brandname_Recog 2.4200 .73095 50
Mkt_Adv 2.8600 .63920 50
Customer_Service 3.3200 .71257 50

The standard deviation values of most of the variable are in the range 0.3-0.8 and the highest
being 0.71257 for political scenarios. On seeing the observation column we can identify that no
missing values are found (all 50 have been used).

29 | P a g e
 a. Determinant = .000
b. This matrix is not positive definite

30 | P a g e
Communalities:

Communalities is the squared multiple correlation for the variable as dependent using the factors
as predictors. The communality measures the percent of variance in a given variable explained
by all the factors jointly and may be interpreted as the reliability of the indicator.

The "extracted" communality is the percent of variance in a given variable explained by the
factors which are extracted.

Values above 0.5 are fit for analysis here all the variable are highly correlated

. Communalities

Initial Extraction
Privacy_Issues 1.000 .989
Transaction_Issues 1.000 .978
Order_Del_Issues 1.000 .988
Internet_Acess 1.000 1.000
Technical_Knowledge 1.000 1.000
Siteutility_Aesthetics 1.000 .987
Siteproducts_Attributes 1.000 1.000
Transparency 1.000 .988
Perceivedrisks_Creditcrdfraud
1.000 .993
Credibility_Trustworthiness
1.000 .952
Brandname_Recog 1.000 .907
Mkt_Adv 1.000 .970
Customer_Service 1.000 .946
Extraction Method: Principal Component Analysis.

Total Variance Explained:

Here, the Eigen values for a factor indicate the total variance attributed to that factor. Cumulative
variance shows the percentage of variance shown by the variables whose Eigen value is greater than
1. We specified the Eigen value to be greater than 1 while performing the test

The Total Variance Explained table shows how the variance is divided among the 13 possible
variables.

We found four factors have Eigen values (a measure of explained variance) greater than 1.0 which is
a common criterion for a factor to be useful. When the Eigen value is less than 1.0, this means that
the factor explains less information than a single item would have explained.

Here the first factor shows the highest variance i.e. it explained 41.010 % of the total variance
explained. If we sum up the first three factors it basically explained 97.669% of the total variance.

31 | P a g e
The computer would have looked for the best four-factor solution by "rotating" four factors. For
this, Varimax rotation was used. This means that the final factors will be as uncorrelated as
possible with each other. As a result, we can conclude that the information explained by one
factor is independent of the information in the other factors.
Total Variance Explained

Extraction Sums of Squared Rotation Sums of Squared

Component Initial Eigenvalues Loadings Loadings
% of
Cumulati % of Cumulat Varian
Total % of Variance ve % Total Variance ive % Total ce Cumulative %
1 5.331 41.010 41.010 5.331 41.010 41.010 5.028 38.678 38.678
2 3.745 28.805 69.815 3.745 28.805 69.815 3.281 25.239 63.917
3 2.198 16.908 86.723 2.198 16.908 86.723 2.881 22.162 86.079
4 1.423 10.946 97.670 1.423 10.946 97.670 1.507 11.590 97.670
5 .303 2.330 100.000
6 7.63E-016 5.87E-015 100.000
7 1.12E-016 8.64E-016 100.000
8 1.11E-016 8.54E-016 100.000
9 1.57E-017 1.21E-016 100.000
10 -3.51E-
-2.70E-016 100.000
017
11 -2.05E-
-1.57E-015 100.000
016
12 -7.14E-
-5.49E-015 100.000
016
13 -9.67E-
-7.44E-015 100.000
016
Extraction Method: Principal Component Analysis.

Scree Plot

Scree Plot is a plot of the Eigen values against the number of factors in the order of extraction.
The shape of the plot is used to determine the number of factors. A good graph shows the
intersection of two lines

32 | P a g e
 Scree Plot

6
E ig e n v a lu e

-2

1 2 3 4 5 6 7 8 9 10 11 12 13

Component Number

Rotated component matrix:

Here, the software has sorted the 13 variables into four factors wherein each factor consists of
those variables which have a loading of 0.50 and higher. The values have been compressed using
Varimax to get above 0.5

From the results the get factors under these four headings are analyzed

Rotated Component Matrix (a)

Component
1 2 3 4
Privacy_Issues .772 .531
Transaction_Issues -.715
Order_Del_Issues -.666 .701
Internet_Acess .906
Technical_Knowledge .906
Siteutility_Aesthetics .578 .604
Siteproducts_Attributes .976
Transparency .966
Perceivedrisks_Creditcrdfra
ud .889 .689
Credibility_Trustworthiness
-.708 -.628
Brandname_Recog .831
Mkt_Adv .602 -.658 .701
Customer_Service .644 .703
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.
a Rotation converged in 7 iterations.

33 | P a g e
Final result of factor analysis is that we have four major factor categories out of 13 different
variables taken to understand the major factors influencing costumer’s online shopping behavior.

Factor 1 Factor 2 Factor 3 Factor 4

Legal Technical Product Website
1. Privacy issues 5. Internet 8. Site product attributes 11. Site
2. Transaction access prob 9. Brand recognition utility &
issues 6. Technical 10. Marketing & advertising aesthetics
3. Transparency knowledge online 12. Order
4. Perceived 7. Credibility
& trust &delivery
risks of credit
issue
card fraud
13. Customer
service

6.1 Analysis of factor influencing customers online shopping

respondents- 50
Websities
14%
Product attributes Legal factor
6% 44%

Techinal factor
36%

Out of 50 respondents, 44% customer’s feel that legal factors like payment security, credit card
frauds, privacy issues are the factors which restrict them in online shopping. Indian government
can play major role here by implementing some strict cyber laws & regulations.

Around 36% respondents said that technical factors like slow internet speed, few internet portals
and poor logistic software like lack of order & delivery information influence there decision
while making an online purchase. Government & players in telecommunication sectors are

34 | P a g e
increasingly providing better internet facilities & development in software sector also
contributing in facility E-commerce. Retailers by implementing good logistic software’s can
capture these segment of customers

14% said poor websites influence there online purchase decision. Lack of proper visual aspects&
aesthetic affects, poor customer’s services & lack of authenticity influence there decision to shop
online. E- Retailers can capture these segment by developing better websites by focusing on
there visual merchandising &by providing good customer services.

6% said lack of product attributes influencing there online purchase decision. Product attributes
include variable like lack of brand knowledge, detailed information about product attributes &
less availability of products to compare influence there decision. E- Retailers can capture these
potential customers by ensuring they have variety in merchandizing & product attributes are
mentioned as per customers demand.

35 | P a g e
 Chapter 7- Analysis of the Type of Products and Its Affects
Will never may May or May Will
buy never may not buy always
buy buy buy
Clothing (apparel) 32 4 8 6 0
Purchase books, music, videos, 4 7 8 26 5
Software, consumer electronics 10 7 18 12 3
(TV, radio, cameras)
Research investments online 39 4 5 1 1
Research or purchase 22 17 6 4 1
automotive information
Grocery & food 26 13 7 2 2
Sports/outdoor 8 12 21 6 3
Online medicines/ pharma 29 11 5 5 0
Perfumes 10 11 9 15 5
Jewellery 22 10 12 5 1

7.1 Analysis of the questionnaire survey

1. In this we have tried to find out the people who want to shop online to those who don’t
prefer to shop online .The results are as given below:

18
no. of responses favourable
no. of unfavourable
responses
32

This can be seen that around 64 % of customers don’t prefer to purchase online and only around
36 % of the customers prefer to buy the products online. However in discussion with these
customers we were able to find out that though few people don’t prefer to buy products online

36 | P a g e
but still they do it because certain products are not available in market or the penetration is not
too much for these products.

7.2 Analysis of types of product categories, prefer by online customers

a. Search products/ services

Purchase books, music, videos,

5 4

7
Will never buy
may never buy
May or may not buy
May buy
8 Will always buy

26

Respondents: 50

In this we can see that more than 50% people are interested in buying the products online. The
person who shares the extreme negation about buying is quite less in this case. Hence we can say
that these are the services/product whose relevant attribute information can be easily obtained,
prior to the use or purchase. Customers are confident of making the purchase decision without
using or sampling the product/service prior to its use or purchase.

37 | P a g e
 b. Experience -2 products / services

Software, consumer electronics (TV, radio, cameras)

3
10
Will never buy
12 may never buy
May or may not buy
May buy
7 Will always buy

18

These are those products & services for which it may be more difficult or costly to get the
relevant attribute information than actual product/service direct experience prior to its
purchase. Consumers may not be confident of making the purchase decision without
using/sampling the product/service prior to its purchase.

Out of 50 respondents, majority of consumers that is 12 % said they are willing to buy &
28% said they may or may not buy. We can see that there is a divergent view on this hence
we can infer that consumers in this phase can be targeted by giving consumers more
information & building there trust by emphasis on brand image. This type of products can
be said to be Experience -2 products / services.

38 | P a g e
 c. Experience -2 products / services

Research or purchase automotive information

1
4

6 Will never buy

may never buy
May or may not buy
22
May buy
Will always buy

17

Purchase automotive are also the experience-2 products/ services type for which it may be
difficult or costly to get the relevant attribute information than actual product/service direct
experience prior to its purchase. Consumers may not be confident of making the purchase
decision without using/sampling the product/service prior to its purchase & want to experience
the product while making a purchase decision.

Out of 50 respondents, 22% strongly felt that they will never buy automotive in online shopping,
17% said there will may never buy & only 4% said they will may buy. Therefore we can infer
that for products like automotive, consumers may like to get more detail information about the
product but will prefer buy after test drive or physically in contract with product. But online
retailers can target these set of consumers with accessories related to products & by providing
additional information on after sale services.

39 | P a g e
 d. Experience product

Clothing (apparel)
6

Will never buy

may never buy
8
May or may not buy
May buy
Will always buy

4 32

Out of 50 respondents, majority consumers are not willing to buy apparel online that is 32% said
will never buy. Reason may because that apparel is those categories of products/ services whose
relevant attribute information could not be known until the direct use of the product.

Consumers may not be confident of making the purchase decision without using or sampling the
product/service prior to its purchase. They may be willing to take the time and effort to see, test
and feel the products in retail stores. Such products are experience 1 products.

40 | P a g e
 e. Experience product

Grocery & food

2 2

7 Will never buy

may never buy
May or may not buy
May buy
26 Will always buy

13

Out of 50% respondent 26% said that they will never buy grocery online, 13 % said may never
buy & only 2% said they may buy. The reason can be that Indians prefer to touch & see the food
& grocery prior to the purchase in order to read the instruction given on the packages. Other
reason can be that Indian’s prefer to buy the food products like vegetables & fruits fresh from the
market on regular or weekly basis.

41 | P a g e
 f. Experience product

Perfumes
5
10

Will never buy

may never buy
May or may not buy
May buy
15
Will always buy

11

out of 50 respondents, 11% said they may never buy products like perfumes online, 10% said
will never buy & only 5% said will always buy online. This can be explained by the fact that for
such products consumers may not be confident of making the purchase decision without using
or sampling the product prior to its purchase. They may be willing to experience & feel the smell
& test it before purchase. Such products are also known as experience1 products.

42 | P a g e
 g. Jewellery

Jewellery
1
5

Will never buy

may never buy
May or may not buy
22
12 May buy
Will always buy

10

Out of 50 respondents, 22% strongly felt that they will never buy jewellery online fellowed by
10% who said will may never buy it online. Reason can be attributed to the fact that jwellery
been costly products require deatiled information, gaurantee, personal satisfaction & verification
prior to their purchase decision. Such products involve some uncertainty and risk & known as
credence products. Online retailers may provide consumer with more brand reputation &
discount schemes to attract these segments of customers.

43 | P a g e
 h. Sports & outdoors products

Sports/outdoor
3
8
6
Will never buy
may never buy
May or may not buy
May buy
Will always buy
12

21

Out of 50 respondents 21% said they may or may not buy sports or outdoor products online & 12
% said will never buy. There is mix response for such product category. Therefore this is the
products category where online retailers can target the customers by provided them with price
discounts as well as various product bundling schemes. Giving more information about the brand
reputation & brand endorsement they can attract the customers.

For online medicines & pharma products, only certain segment of customers are interested to
buy online. Certain prescribed medicines & pharma products are not widely available in market;
therefore online retailers can target these segments of customers. But Indian customers are still
not risk averse on quality of medicines & pharma product provided online.

44 | P a g e
 Chapter 8 – Analysis Factors affecting internet retailing

In general

 Consumer’s willingness for shopping online may be influenced by their shopping

orientation for certain type of products. For example shopping orientation such as price
consciousness, risk-aversion, innovations, and brand consciousness, importance of
convenience, variety seeking inclination, recreational aspects and impulsiveness may
determine their preference for internet shopping.

 Different types of products may also influence consumer’s online shopping

orientation. They are
a. Search product: purchase of such products require detail information & customer may
after searching like to buy it. For example online reservations for hotels, car rental,
railways, airlines or may be online book or article purchase.
b. Experience product: The type of products for which consumers may like to spend some
time while purchasing or may like to feel, test it before buying it. Such products involve
experience & influence the purchase decision. For example apparel, jewelry, expensive
purchase like automobiles or perfumes.
c. Credence product: products for which customers are not sure about the product attributes
in spite of all the information available or even after using the products. Foe examples
water purifiers or vitamins or medicines.

 Search cost
In internet shopping, search cost to acquire information about product prices and product
offerings is lower and it also reduce inefficiencies caused by buyers search cost. For the
price conscious consumer Internet provides rapid access to the information of products &
services. In general, the price & product information in print catalogs go out of date in a
short period of time whereas in online retailing, it is updated on regular basis.

From consumer’s side- in India

(Ref: www.squidoo.com/internet-india)

1. Penetration of internet connection and internet literacy in India in India:

45 | P a g e
According to ITU (International Telecommunication Union), the internet penetration in India ha
increased from a meager 0.1% of the total population in 1998 to around 6.9% in 2010. This
figure would account to around 80 million users. Rapidly increasing internet connections and
increase in the internet literacy will certainly provide a platform for e-retailing in India. This will
have a positive effect on e-retailing.

2. Increase in the numbers of working youth and women in India:

The new generation of working youth and increase in the number of working women would act
as a positive factor for e-retailing in India. The new generation would prefer fast, tech-savvy and
convenient way of shopping as compared to the older generation. Women have always played a
major role in deciding the shopping errands of a family. Increase in the number of working
women would pave a way for e-retailing as it provides a way to facilitate the purchase with ease,
convenience and most importantly within a short period of time.

3. Perceived risk of online transactions:

People in India still consider online transactions as a risky avenue. There is still a lot of
apprehension regarding the safety of online transactions. Also, during online purchases many
details have to be furnished like account details, address, name etc which completely removes
the anonymity associated with traditional shopping. This will act as a deterring factor for e-
retailing in India.

4. Reputation of the retailing firm:

Due to the perceived risk associated with online transactions as described above, the reputation
of the retailing firm plays a major role in adoption of e-retailing by the consumers. Consumers
will tend to trust already established retailing firms as compared to new entrants in the online
retailing segment.

From the retailer’s side

1. Cost Effectiveness:

46 | P a g e
Internet retailers can avoid expensive stores, sales force and large inventories. The capital and
lab our thus saved can thus be used in other productive applications like promotional activities.
This greatly reduces the cost from the company’s side.

2. Increased Penetration:

E-retailing can reach out to a larger audience as it can be used by anyone with an access to
internet. Nowadays with advancement in mobile internet technology, the segment of people who
can use e-retailing has certainly been increased. Building a national presence is much easier as
compared to conventional retailing as one does not have to build physical stores.

3. Inventory management, logistics and delivery system:

The inventory management in e-retailing will be totally different from the traditional offline
retailing. Since the purchased products have to be delivered to the customer, an altogether
different logistics and delivery system with wider reach will have to be initiated for setting up an
e-retailing firm. This might increase the initial set-up cost of an e-retailing firm. Hence, it might
act negatively for retailers to adopt e-retailing.

47 | P a g e
 CHAPTER 9- Challenges

1. Lack of Stable customer base:

The customers of e-retailing at the moment are primarily those who fill in their shopping errands
online due to lack of time on their part. They might still prefer the brick and mortar system
owing to many of the physical advantages of the former format. Thus, online retailing in India
still lacks a stable customer base. Also, there is a necessity to have an access to the internet to
carry out the shopping process.

2. High shipping and handling cost:

48 | P a g e
Since the products bought online has to be physically delivered to the customers by the retailers
without significantly affecting the overall price offering, the shipping cost and handling cost of
online retailing tends to be high.

3. Lack of privacy and security:

Customers have to fill in details of their accounts and credit cards for shopping online which in
many cases reduces or removes the privacy of the personal details of the customers. Many
customers might not want to divulge their private financial details online. Also, there is a
perceived risk associated with online transactions and a sense of lack of security on the
customer’s side.

4. Lower customer service:

It is extremely difficult to provide and substitute for the in-store experience that the consumers
feel and crave for in many cases. Customers mostly have to satisfy themselves with the pictures
of their products online. The touch and feel factor which plays an important role in forming the
final purchase decision of the customer cannot be given in online retailing. There is also a lack of
human factor which can reduce the trust on online portals to a significant extent.

5. Lack of experience:

Internet retailing itself is a new phenomenon in India. Thus, firms entering into this business
have no or minimum experience in online retailing. This might inhibit many firms from deciding
to start online retailing.

6. Lack of instant gratification and trial:

There is a certain gap of time between the actual purchasing and the delivery of the product
which makes it practically impossible to provide instant gratification to the customers. The
customers have to wait for the products to be delivered to actually touch and feel the product.
Also, facilities of trial and demonstration which can be provided in a physical format cannot be
given in an online format.

49 | P a g e
 9.2 Opportunities

1. Convenience:

Purchasing online is highly convenient. A customer doesn’t have to go down to a physical store
to actually buy the product. Financial transactions are carried out through the internet. It is highly
attractive for those consumers who have a hectic lifestyle and doesn’t have the time and
motivation to go down to a store and buy the products. The whole shopping process can be
carried out through a click on the computer.

2. Mushrooming Indian middle class:

Indian middle class is growing with higher purchasing power and limited personal time. Also,
the use of credit cards and debit cards coupled with increase in the number of working young
population and women are driving consumers to go for online purchases.

3. Easy access to information:

Any information about any product in any category can be accessed almost instantly with a click
of the mouse. Also, the amount of information that can be accessed is also significantly higher
than the information that can be provided by a salesman in a physical store.

4. Increased reach and audience:

It is comparatively easier for a retailer to reach out to a larger number of audiences as they don’t
have to open physical stores in each and every part of the area to reach out to the customers of
that area. Also, expansion on a national and even international scale becomes less costly as you
don’t have to build physical stores.

50 | P a g e
5. Inventory management:

Online retailing provides flexibility in inventory management to a significant extent as they

don’t have to stock products in a certain quantity as in retail stores to be able to serve all the
customers. As long as the operations are able to deliver the products on time to the customer,
online retailers enjoy a greater flexibility in stock and inventory management. Drop shopping
strategy can be used to further reduce the inventory which will be discussed later.

6. Product category:

A larger number of product categories can be offered online as there is no constraints space for
displaying newer categories and products. The online portal has virtually unlimited space which
can showcase as many products as possible. Therefore, higher number of product categories can
be offered.

CHAPTER 10-Retail strategies and business

models
There are certain things that have to be addressed before starting an online retail business. The
first of all is off course on deciding what to sell. Whether the products you are going to sell are
self manufactured or it is a purchase and resells deal. Some of the important things that have to
be kept in mind while deciding on the product are –

1. Margins: Online retailing business has to provide certain services like delivery which
might certainly increase the cost to a certain extent. Thus, products with a higher margin should
be generally preferred so as to maximize the profit in the online model.

2. Product size and shipping: If the products to be sold are very huge in size or heavy, it
might create a problem in the shipping process and also significantly increase the cost on the

51 | P a g e
firm’s part. Therefore, the size of the products has to be kept in mind. Generally small or
medium size products are preferred for the online business.

3. Costs of the products: The cost of the products and merchandise the firm is going to
offer online determines the amount of capital needed to start and maintain an online retailing
business.

Business models:

1. Virtual malls (Portals): These are the websites that functions as an autonomous portal where
people can select compare and purchase a variety of or a type of product. The firm website acts
as a separate retail entity and not as a platform for accessing other retail firms. The portal acts as
a virtual representation of an actual physical mall or store where a customer can browse and pick
up items in the process.

Various software like shopping cart software is used to facilitate the shopping process by the
consumers. The customer browse though the website and selects the products and by using the
software a list of the selected products is made and the payment is made through an online
transaction by using a credit or a debit card.

2. Bricks and Clicks: It is a business model in which a firm incorporate both online and offline
presence. It involves both the traditional stores as well as company dedicated websites. The
bricks and clicks model is used by traditional retailers who have extensive logistics and supply
chain which might be because of the reason that it is easier for a traditional retailer to establish
an online presence.

A traditional retail firm with many stores can set up a website where the customers can place the
order and even make the payment and later picks up the products at a local store. Another form
could be a store where the customer can visit and selects the products. The order is then placed
online and the product is then delivered to the customer.

3. Virtual Merchants: Virtual merchants are a type of website that offers goods and services to
the general public. A virtual merchant can function as an online business only or an online
presence of a traditional brick and mortar business. The point of difference here is that it can
represent more than a single retail firm. It provides a platform to the customers to compare the

52 | P a g e
offering of more than a single retail firm which provides their services online and make their
purchase.

4. Online forum model: It is a type of website where buyers and sellers meet. The forum model
doesn’t really involve selling anything, products or advertising, but rather creating a place where
buyers and sellers can interact. It is a business model used by arguably, the two most successful
online businesses of all time; eBay and Google.

5. Drop Shipping of Merchandise: As in any retail business, a firm has to buy the products
beforehand and stock it in order to maintain the availability of products. This might need a
significant amount of investment on the company’s part.

With drop shipping the retail firm never really purchases the product. Instead, an
agreement is made with a wholesaler or a distributor that whenever a customer buys a product
from the website, the information is forwarded to them and they actually ship the products to the
customers often with a packaging slip customized to the firm’s store or brand. The customer
directly pays the firm through the internet and it gives the firm a certain time to even pay off the
drop shipper.

Some other strategies to be kept in mind while operating and online retailing business are
discussed below-

a) Keep the website simple - Shoppers should be able to easily navigate through the website with
minimal investment of time and energy. Once the customers learn how to use the website, care
should be taken while bringing changes in the website or else it could turn away shoppers.

b) Be unique: Develop a website design or format that is easy to adopt but difficult to imitate for
the competitors. It would give the firm an edge over the other competitors.

c) Build an information bank: Create information buffers for customers so they can keep history
of their past purchases. A wish list or future purchase queue can also be made on the website. It
also gives an excellent way to find out the tastes and preferences of the consumers.

d) Motivate the next visit: Add value to the next visit on the firm’s website by offering special
free shipping to for the next purchase or discounts to regular customers.

53 | P a g e
10.1 Managerial aspects of internet retailing
Electronic commerce (e-commerce) involves the automation of commercial transactions using
computer and communications technologies such as the Internet and World Wide Web. It has
brought about a fundamental change in the way individuals and businesses access data,
information, and services without the limitations of time or distance. The numerous advantages
that accompany e-commerce such as lower product promotion costs, lower transaction costs, and
an expanded customer base, have prompted even the smallest businesses to deploy e-commerce.
However, after implementing an e-commerce site, many companies often discover that, although
their business was intended to remain purely domestic, they soon receive international
recognition and may even get orders for their products or services from abroad. Domestic
companies frequently find that they are incapable or ill prepared for handling these global orders.

The issues involved in adapting an e-commerce site to suit an international audience are
complex, and this paper concentrates on four of them. While these issues are important to all
companies, they are especially relevant for small- to medium-sized firms that may lack the
internal resources and expertise to adequately address them.

The issues include:

1) Internationalization issues, the standardization of content and appearance.

2) Financial issues, the acceptance of foreign payments, exchange rates, and common financial
transfer schemes.

3) Transportation issues, the logistics of moving products abroad together with customs, tariffs,
import/export restrictions, and documentation.

4) Legal issues, national and regional laws businesses should be aware of when engaging in
global-e-commerce following the decision to include global buyers as part of the target market

54 | P a g e
for a business's Web site; adjustments must be made to the site to encourage global visitors to
buy products. Internationalizing the Web site will aid in the attraction and retention of foreign
users by allowing them easier access to the information and functions it presents in a
standardized, more simplified manner

Developing Your Marketing Strategies

The marketing strategy includes both short-term and long-term strategies in order to succeed.

Short term marketing strategies are those that bring you a temporary boost in traffic. Although
these techniques are very important to the over-all plan, they are only a temporary traffic source
and must not be solely relied upon.

Short term marketing strategies include:

  • Purchasing Advertising
  • Participating in Forums
  • Search Engines

Long term marketing strategies are those that bring a steady stream of targeted traffic over time.
These strategies will continue to produce results even years down the road.

Long term marketing strategies include:

  • Opt-in Lists
  • Blogging
  • Social Networking Sites
  • Social Bookmarking Sites
  • Giving Away Freebies
  • Article Marketing

55 | P a g e
By creating and implementing a balanced marketing strategy, using both short-term and long-
term strategies, one will drive a steady stream of targeted traffic to the web site.

CHAPTER 11-Comparison between Global

retailers’ vs. Indian Retailers in Internet Retailing
In the more mature retail markets of the world the websites of most of the retailers enable
business to be conducted online. The reason for the emergence of e-retail as viable source of
business stems from the fact that it can offer a larger basket to the consumer. For example, the
largest brick and mortar book store chain Barnes and Noble offers 20,000 books at any point of
time. Amazon.com on the other hand offers 4 million books. It is also one of the few businesses
that allow the consumer to shop at any time and day as suited to him. He can shop 365 days a
year, 24 hours a day and 7 days a week. Electronic retailing may also be looked upon as a
case of reverse marketing where the consumers seek our products.

According to the Data monitor(Ref: http://www.citeman.com/9999-internet-retailing/), Global

Internet Retail report, the global Internet retail sector grew by 28.1% in 2004 to reach a
value of $ 544.6 billion, representing a compound annual growth rate (CAGR) of 46.3%
56 | P a g e
over the 2000-2004 periods. The same report forecasts this market in 2009; the global internet
retail sector is forecast to have a value of $1130.6 billion, an increase of 107.6% since 2004.

Drugs and health & beauty aids form the largest segment of the Internet retail sector, yielding
total revenues of $ 127.8 billion, representing 23.5% of global sales. In terms of value, Europe
generates 44.4% of the global internet retail sector. Amazon generates the largest revenues
within the global Internet retail sector and accounts for 1.3% of the global value.

(Ref: http://www.citeman.com/9999-internet-retailing/),

The Scene in India:

The e-commerce market in India saw frenzied activity a few years ago, with just about
everybody getting into the act. However, after the dot com bust, the Business to commerce
(B2C) market in India is now showing signs of revival.

According to the Internet in India [I cube]Report(Ref: www.iamai.in/PRelease_Detail.aspx?

nid=1562&NMonth...2007), 2007 published jointly by the Internet and Mobile Association of
India and IMRB International, the number of internet users in India in the ever user or claimed
user category has touched 46 million in September from 23.2 millions in September 2006.
During the same period, the number of active Internet users has reached 32 million.

According to the report the growth of Internet users is primarily driven by the fact that:

(Report(Ref: www.iamai.in/PRelease_Detail.aspx?nid=1562&NMonth... 2007)

1) The number of people who know how to use a computer unaided has grown to 65 million up
from 15.8 million on 2000.
2) 70 per cent of the PC literates have used the internet time or the other in their lives.

As can be seen from figure the number of internet ever user has doubled since 2004. The number
of PC literates is growing steadily over the years and has grown by 270% over the year 2000.
The growth of ever users and the active users i.e. those who have used the internet once in

57 | P a g e
the past one month, has been even more impressive, with 540% and 950% growth
respectively over 2000.

Internet trials are increasing in the small cities and non-metros as more users become a part of
the global community.

The usage of the Internet is increasing in the small towns and non metros. From 27% in the year
2001, the change has been significant wherein the non metros and the small towns account for
39% of the total Internet users in India.

The three current e-commerce leaders – India times, Rediff and eBay – focus on Internet
friendly categories like apparel, electronics and jewelry. There are some categories where
Internet players can’t compete with traditional channels. If a mattress is sold online, the cost of
shipping might outweigh the price itself. This understanding of what works and what doesn’t is a
primary reason for e-commerce to envisage a growth.

Across the world, e-tailing is the fastest growing segment in e-Commerce today. While various
business models exist, typical sites of retailers who look at the e-tail option start with being an
information portal and in the second stage, becoming e-tail sites. A major key to the success of
an internet portal which conducts business is its ability to deliver at the right time, to the
consumer connectivity with the consumer, communication and factors like the warehouse and
the speed delivery.

Efficiency in dealing wit the customer right from the time, he /she logs on to the website to the
time the order is actually fulfilled is an important aspect of what one may call the e-marketing
mix

The global online population will grow to 2.32 billion by 2014, up 42% from 1.63 billion in
2009, according to projections from Forrester Research Inc(Ref:
http://www.internetretailer.com/2010/08/23/global-online-population-will-increase-43-
2014). 

58 | P a g e
The Middle East and Africa will grow the fastest during that time, an increase of 78%, but still
account for the fewest total number of Internet users, 241 million. For e-commerce purposes, the
report says areas that are set to have the most growth include Southern, Central and Eastern
Europe, and such countries as Poland, Ukraine, Russia and Turkey. In the Asia Pacific, online
spending by Chinese consumers will outpace India. Brazil will continue to lead e-commerce
spending in Latin America.

11.1 Causes of Slow Growth of online shopping in

India:

 Sale of the products: Most of the product sold in stores is sold online nowadays in a
convenient way. But there are products which cannot be sold online but only physical
sales of them is possible, these mainly are few perishable goods etc

 Problems with Shipping: The customers using the online shopping channel should be
assured that the products that they have ordered would reach them in due time. For this the
retail companies have resorted to private guaranteed courier services as compared to postal
services.

 Communication/Language Problem: Most internet retail shops use English as their

mode of communication. English may not be comprehensible to the majority of the
Indian population. To increase the customer base, content in the online retail shops
should be provided in local language.

 Physical presence while shopping: Another reason why the concept of online retailing
hasn’t failed prominence in India is because Indians prefer to touch the products
physically before buying. This facility is provided through the multi-brand outlets, not
available online. Hence the retailer online should first make it a point to spot the potential
customers and accordingly plan out the product. If the customers are more open to online
shopping, then nothing can be more beneficial.

59 | P a g e
  Overpriced Internet and Low Speeds Prevent Broadband Growth In
India 
In the area of broadband, India has a lot of catching up to do. According to Point Topic,
(Ref: http://search-marketing.co.in/ )India have fewer broadband connections than Hong
Kong, a region it out-populates by nearly a billion people. Broadband penetration is
estimated to be at 3% in India. By February 2008, India has only 3.47 million broadband
subscribers, far short of the target of 9 million by 2007 set by the broadband policy.

Internet subscribers stood at 9.22 million for the quarter ending 30th June 2007 as
compared to 9.27 million during the preceding quarter registering a decrease of approx
0.50%, according to TRAI. The growth is negative as compared to a positive growth of
8.03% during last quarter. Broadband penetration is estimated to be at 3% in India, and
the country added only 750,000 broadband connections between October 2006 and
September 2007. By February 2008, India has only 3.47 million broadband subscribers,
far short of the target of 9 million by 2007 set by the broadband policy.

Besides this, several neighboring countries including China, South Korea and Malaysia
are far ahead of India in the broadband penetration. India has 0.3 broadband connections
per 100 persons, while South Korea and even China have much better penetration
numbers with 29.9 and 5.0 respectively.
 Causes for These Discouraging Figures: 
 (Ref:http://seoforinternetmarketing.com/seo-tactics/overpriced-internet-and-low-
speeds-prevent-broadband-growth-in-india/127/)
Despite the 19% jump in urban domestic Internet usage, home access is still a novelty in
India. This is true especially in the case of broadband. The two biggest barriers for the
growth of the broadband in India are affordability and the quality. Broadband in India is
very expensive when compared to Western Europe and USA.

A 3 MBPS speed unlimited download broadband connection in US is available from a

60 | P a g e
 premier ISP like Verizon at $29.99 or Rs.1200 per month. A 512 KBPS speed, unlimited
download Internet connection from VSNL or Airtel or Reliance is available from Rs.
1499 or $37.5 to Rs.1799 or $45 per month. This is 6 times slower and 25 to 50 percent
costlier than in US. In India, the monthly charge for a broadband connection accounts to
47 to 56 percent of the per capita income*, while it is less than 1 percent in the USA.

There should be no reason for such overpricing in India. Especially, when the wages are a
fraction of costs in the US - the minimum wage in US is approximately Rs.232 per hour,
where as in India, it is only around Rs.25. Most Internet service providers in the USA
built their infrastructure when the telecom equipment prices were at their peak several
years back. Right now, Indian ISPs are able to purchase equipment at far lesser prices.
Unlike earlier, the last few years saw an abundance of capital for Indian companies with
booming equity markets and hundreds of FII's and Private Equity companies actively
investing in India. It is also unlikely that Indian ISPs are paying higher costs for high
speed Internet links to connect to the Internet worldwide.

Essentially the ISPs have not passed the benefits of lower operating costs in India to the
customers. Until such profiteering is indulged by ISPs, Internet prices will be beyond the
reach of most Indian and Internet usage will not become common. You have to remember
that mobile usage became viable for the common man only after both the mobile
equipment prices and the mobile usage charges became one of the cheapest in the world.
That led to the rapid growth of mobile users.

The worrying aspect of the disappointing Internet growth in India is that it will result in
lagging of e-Commerce in India. This would also lead to loss of job opportunities in the
new age industries in a country aggressively looking to create jobs. Further, it would
make the Indian e-Commerce market lag not only against developed countries but also
against the Asian ones. There are also other factors leading to the slow growth of Internet
and E-commerce in India that we will discuss in the next article.

61 | P a g e
  Online shopping has had a rather slow and tumultuous journey in India, it has not picked
up as much as it should have primarily due to the fact that internet penetration itself is
quite low and  secondly (and importantly) the online shopping experience has been bad to
say the least.

 Traditionally, Indians are conservative in their approach to shopping. They want to touch
and feel the products and test its features before buying anything.

In fact, selected price-savvy customers would also like to squeeze in an economical deal for
themselves with appropriate price negotiation with the vendor. They are not the ones to accept
the price at the face value. Well, nothing wrong in that as well ;)

Most of us are also a witness to the recent mall culture where all the products are available under
a single roof and at competitive price points. Little needs to be analyzed about it over here as
most of you might have visited a mall at least for once as a past time on a weekend, if not for
shopping precisely.

Increased frequency, decreased value

During Q4 of 2008 average frequency of Indian online purchases increased to 2.9, up from 2.6
twelve months previous (see Chart 1). However, the value of these transactions declined, US$
552 versus US$ 625 during Q4, 2007 (see Chart 2).

62 | P a g e
(Ref: http://www.india-insights.co.uk/blog/online-shopping-beats-india-retail-slow-down)

Other reasons:
 Low penetration of internet
 Education level (Literacy)
 Huge requirement of initial infrastructure
 Consumer buying behavior
 Demographic factors
 Attitude
 Social factors
 Etc

63 | P a g e
64 | P a g e
 CHAPTER 12- Recommendations
Problems with the Payment System

People in India are not used to the online shopping system and moreover the online payment
system through the credit card is also totally alien to them. Most of them do not avail of the
transaction facilities offered by the credit cards. They are also dubious regarding the online
payment system through the credit cards. Hence different payment options should be made
available to them like the credit card, cash on delivery and net banking to give them further
assurance.

Problems with Shipping

The customers using the online shopping channel should be assured that the products that they
have ordered would reach them in due time. For this the retail companies have resorted to private
guaranteed courier services as compared to postal services.

Offline presence

The customers should be assured that the online retailers are not only available online but offline
as well. This gives them the psychological comfort that these companies can be relied upon.

Products offered at discounted rates

The online retailers save on the cost of building and employee salaries. Some part of this benefit
should also be enjoyed by the online customers by a reduction in the price of the product. The
customers should be conveyed this message that they are getting the products at a discounted
price.

Another problem is that the retail industry is standing on its point of inflexion and considering its
infant stage, it would take time for the new concept of e-retailing to take off.

65 | P a g e
 CHAPTER 13- Future of E-retailing in India
(Ref: http://www.economywatch.com/business-and-economy/e-retailing-india.html)

There are divergent views on the future of e-retailing in India. Some experts are of the opinion
that the giant, big brand retailers would dominate the small ones due to their wider investment
capacities. It would be next to impossible for the small retailers and the kiranas to prove their
existence in the battlefield of online retailing. Another viewpoint is that there would be an
exponential growth in the online retailing business in India.

The relevant mass of Internet Users in India

Looking at the Indian population from the perspective of Internet usage, urban population forms
the relevant mass.

As most of the content available over the Internet is in English, familiarity with English acts as a
major factor driving Internet usage.

India being a home for 22 odd regional languages, Internet is largely limited to those familiar
with English. This opens an opportunity for vernacular content to increase and thus tap the non
English speaking literate people.

Exposure to PC usage acts as another factor limiting the growth of Internet users in India. A
significant increase is expected in Internet penetration due to increasing focus on literacy, PC
education and vernacular content in the coming years.

Internet trials show a 40% growth over last year

(Ref: http://www.economywatch.com/business-and-economy/e-retailing-india.html)
PC literacy in India has shown a steady year on year growth since 2004. Various initiatives taken
by GOI and other private players along with the growth of IT/ITES industry in India have
contributed to a rocketing 300% growth over 2000 and 10% growth over last year.

More and more people are now experiencing Internet. 70% of the people who know computer
have used Internet in their life which is a very healthy sign for Internet in India. It shows that
people are becoming aware of the Internet and are moving ahead to experience it.

66 | P a g e
People have started realizing that Internet can serve as a one stop point for all their needs. Be it
communication, entertainment, shopping, information search, Internet serves as a panacea for all
their requirements. This has led 70% of the ever users to glue themselves to the Internet and
access it on a regular basis.

Internet is slowly permeating into the non metros

People from non metro and small towns are increasingly experiencing their tryst with this new
medium. This is evident from the fact that their contribution to Internet user base is increasing.
As more users from, the non metros show their interest in becoming a part of the Internet
Community the digital divide is poised to reduce in the years to come.

This change is due to increasing computer literacy and awareness and good word of mouth of
this medium.

Internet is also going down the affluence divide

Decrease in the prices of PC hardware and Internet connection has brought these two within the
reach of less affluent sections of the society. This is evident from the fact that the share of users
from SEC D/E in the Internet "ever-used" population has increased rapidly in the recent years.
Though SEC A and B are still the major contributors to India's Internet market this is undergoing
a steady change. With mass media helping in increasing the Internet awareness coupled with
slash in the prices of PC hardware and Internet connections, it will surely result in further
increase in contribution of SEC D/E. The huge marketing done by gamut of players should help
attract new users.

Youth drives the Internet domain

Youth forms the major chunk to the growing Internet user base in India. This may be due to the
fact that all the sticky applications which are present today are focusing on youth and youth
forms the segment which can adapt easily with the changing times and changing applications.
Another major segment on the Internet comprises the school kids. They have shown their
increasing interest in Internet due to the initiatives taken by the Internet application providers.

There has been an unexpected decrease in the share of older men and non working women in the
Internet user pie This might be due to the lack of sticky applications for this segment and greater
growth rates of other segments clouding out growth in this market.

Continuous growth of PC owners & Internet subscribers

(Ref: http://www.economywatch.com/business-and-economy/e-retailing-india.html)

The lowering of PC prices, and increase in multimedia features have shown a huge 48% growth
67 | P a g e
from last year in PC ownership across India. With GoI declaring 2007 as the Broadband Year,
Internet ownership has seen a 32% growth over the last year. The proportion of PC owners with
Internet connection has shown a decline from last year. Last year it was above 75%, but this year
it has fallen down to 68%. The widening of this gap is due to the difference in growth rate of PC
owners and Internet subscribers.

The gap might reduce once the Internet connectivity with Non Metro towns and Small towns
increases as programs like NEGP, digital divide and other private initiatives become more
effective.

Office is becoming more popular as point of access

The advent of newer technologies and growth in IT industry has given more access points to
Internet users.

Yet the cyber café continues to rule as the most prominent point of Internet access. It has shown
a significant drop since the year 2003 , when half of the Internet users used it as main point of
access. More recently, Internet users growth is seen to be shifting to office as a main point for
Internet access. The reason could be demographic shifts with greater working population coupled
with growth of IT/ITES sectors and increasing penetration of PC as a productivity tool in various
organizations. As a result of increase in office as a main access point, a drop in the usage of
home and cyber café as access points has been observed. Contrary to this usage from
schools/colleges has increased to 7% due to introduction of computers and Internet in the
educational system.

The Convenience, Cost & Content sought trade off

Preference for the primary access point is a function of the following 3 C's: Convenience, Cost &
Content sought.

School going kids and college students find it more convenient to use cyber café as it is the
cheapest source of access & also gives them more privacy regarding content.

68 | P a g e
On the other hand, home and office has gained popularity amongst young men, older men and
working women as they find these access points to be more convenient & cost effective over
others. The content they seek also involves e-commerce applications which need a secure
network. This acts as a limiting factor for them to the use of cyber café as point of access.

Non working women like to access from home as it is more convenient for them.
The evolving role of Internet
As interaction with the Internet is increasing there has been an evolution in the role played by
this medium. Where once it used to be a medium for communication it has advanced its role to
be used as a source of information, entertainment, and e-commerce.

The role played by Internet can be clubbed into three broad categories:
Internet as a COMMUNICATOR - Communication remains the key application over the
Internet. Email and chat are the exclusive applications offered by the Internet which do not face
any competition from other media vehicles.

Internet as a INFOTAINER - In this role the Internet is squeezing the share of traditional media.
With the sprouting of applications like gaming, news, blogs etc users find Internet a substitute to
library, TV, newspaper and radio.

Internet as a STICKY APPLICATOR - Online banking, online ticketing, e-tailing are some of
the emerging applications which act as hooks to make the users stick to the Internet. These
services are some of the extended benefits offered by Internet and used by the application
providers to increase the stickiness index.

Web 2.0 is the new buzzword for the Internet

The exposure to Internet over the years has made people switch to Internet for performing even
their routine tasks. Utility services such as, bill payments, ticketing, banking which were earlier
done manually are now preferred over the Internet. Continuous improvement in email features
has led to a bullish journey of email which was earlier on a declining trend.

69 | P a g e
Further to this, the popularity of entertainment activities like online gaming, video downloads
has increased the share of entertainment segment in the main applications used. Niche websites
like matrimony, news, jobs etc have still a longer way to go as content on these sites is largely
limited to English. The user base of these sites is expected to increase once content becomes
available in other Indic languages.

Applications used over the Internet vary across demographics

Online application providers have understood the diversity of content sought among
demographics. To tap the potential market of young India they are targeting school going kids at
their nascent stage. They are exposing them to the latest technology so that they become habitual
to Internet usage and would be proactive in driving web 2.0 in the future.

13.1 Enablers for Internet Industry in future

Essentials for Internet expansion

Even though Internet traffic has increased significantly; there exists a larger untapped area which
need to be targeted. This requires an understanding of various essentials required to increase the
Internet penetration. The four key essentials are: Technology, Access, Content and Awareness.
These four need to be targeted collectively in a balanced way to expand Internet usage in India.

Awareness: How is it useful? How can I use it? From where do I can use it? These type of
questions need to be answered to target the mass.

Access: This acts as a platform through which a person starts using the Internet. The numbers of
touch points are already on a rise but more needs to be done due to slowdown in broadband
growth.

Content: Understanding the requirements of the people and delivering them over the Internet is
required to increase the usage.

70 | P a g e
Technology: This includes the backbone of Internet hardware. It includes Broadband, Wi-Fi,
Wimax, optical fiber, DSL etc.

These essentials are to be targeted differently for non users and users to have an overall Internet
expansion.

Pushing the Internet Non Users 

Converting an Internet non user to a user might be seen as a process. Though the four essentials
are interconnected and they all are required for this transformation to take place, they need to go
step wise.

Apart from the positive word of mouth, using other traditional media i.e. cross media
consumption to spread awareness is required. Various e-governance initiatives, programs run by
private players and NGO's are required to be made more widespread and intense...

Once aware the critical task ahead is to push them to use the Internet. The key factor behind this
is to show them the places from where they can access the Internet. The reducing cost of PCs &
Internet connection along with effort from telecom and Internet service providers to increase the
cyber café's and GPRS enabled mobile phones will help in increasing the touch points. More
efforts will also be required to increase broadband penetration as it provides the ecosystem for
increasing stickiness of various Internet applications.

Technology will still remain the backbone to all other three essentials as the Internet non-user
starts to transform itself into a user. Government IT policies, Digital divide programs like SWAN
will help to increase the reach of Internet.

Pulling the Internet Users 

71 | P a g e
Apart from the transformation of Internet non users, it is also required to increase the
involvement of claimed users with the Internet.

The primary requirement for this is to fulfill their need gaps. Web 2.0 will surely unravel
opportunities for development of specialist interest communities centered around the Internet.
Though the current stickiness is centered around social networking, the future of web 2.0 will
surely shape itself into a great platform for more serious user generated content. Increasing the
content around vernaculars would pull the users to increase their involvement with the Internet.
Coupled with this is the need to widen the choice of point of access. The increase in use of IT in
offices, penetration of cyber café's, availability of Internet over mobile and slash in PC prices
have paved the ways to multiple access options.

In addition to this, the evolution in technology will definitely act as an enabler to expand the
reach and quality of Internet.

If all these essentials work in tandem, it will not be difficult to increase the frequency of Internet
access of a claimed Internet user and pull him into the Active Internet user base.

72 | P a g e
 Conclusion

Over the years the usage of internet has drastically increased especially India. From the statistics
we have seen a growth of 6.8% over the decade, therefore there is huge potential for retail
internet industry to grow and there is untapped segment to capture on. Youth forms the major
chunk to the growing Internet user base in India.

The project deals with the statistical data on value, volume and segmentation of internet retailers
& consumers in India and will and analysis of the industry's recent performance and future
prospects. In the last two decades increased penetration of credit cards and availability of
computing facilities to a wider population, Internet retailing is witnessing a stellar growth. The
various categories include pure play, bricks and clicks, catalog retailers, wholesale suppliers etc.
the majors players in India are: Reliance Rmoneymall, Pantaloon’s Futurebazaar.com,
Videocon’s eDigiworld.com, Vishalmart’s Vishalmegamart.com. Tata is coming up with its own
e-mall.

From the primary data, using the factor and cluster analysis we have seen that various reasons
like privacy issues, transparency in method, accessibility, security issues etc restrain people from
purchasing products online.

From the analysis we have seen many Indian customers don’t prefer to shop online but still they
do it because certain products are not available in market or the penetration is not too much for
these products. From product categories like books, music, electronic & software, groceries,
apparels, perfumes, jewellery and sports most of the customers prefer buying from store than to
purchase online, this is because Indian customers prefer to feel and touch the product before
buying it.

The future of internet retailing in India is very bright. People have started realizing that Internet
can serve as a one stop point for all their needs. Be it communication, entertainment, shopping,
information search, Internet serves as a panacea for all their requirements. This has led 70% of
the ever users to glue themselves to the Internet and access it on a regular basis.

The online shopping globally is growing at around 8-10% annually, in India the growth rate is
upwards of 30%. In next five years there is going to be a huge potential for online shopping in
India.

73 | P a g e
Attachments Questionnaire

This questionnaire is part of survey conducted, to understand the factors influencing the consumer
preferences/willingness for online shopping.

Q1 Demographics (cluster)

g. Gender 1. Male 2. Female 3. others

h. Occupation 1. Businessman 2. Service 3. others

i. Education 1. Undergraduate 2. Graduate 3. Post-graduate 4. others

j. Age 1. 15-25 2. 26-30 3. 31-40 4. 41 & above

Q2 How frequent you use internet services?

a. I don’t use
b. Once in a month
c. once in a week
d. twice a week
e. Three-four times in a week
f. Daily
g. More than once daily

Q3 Have you ever visited online shopping sites?

a. Yes
b. No

Q4 If the product has the same price both in shops and on the internet, where do you prefer to buy it?

a. Online
b. Store

Q5 Indicate your willingness to buy the following products from an Internet retailer

Will may May or May buy Will

never never may not always
buy buy buy buy
Purchase books, music, videos,
Software, consumer electronics (TV, radio,
cameras)
Clothing (apparel)
Research investments online
Research or purchase travel options and prices
Research or purchase automotive information
Grocery & food
Sports/outdoor
Online medicines/ pharma
Perfumes
Jwellery

74 | P a g e
Q6 what are the reasons that influence your decision while making purchase of online products/services?

Strongly disagree neutral agree Strongly

disagree agree
Privacy issues
Transaction security issues
Ordering & delivering issues
Internet access problem
Technical knowledge
Site Utility and Aesthetics
Site Product Attributes (quality & price)
Transparency
Perceived risks of credit card fraud
E-tailer’s credibility & trustworthiness
Brand name & recognition
Marketing &advertisement
Customer service online

Q8 have you ever experience online fraud?

a. Yes
b. No

Thank you

75 | P a g e
 CHAPTER 14-References
 www.amedeo.com
 www.litrature.org
 www.iranonline.com
 www.spun.com
 www.tradeaway.com
 www.buy.com
 www.google.com
 www.yahoo.com
 www.go.com

 www.wikipedia.com
 in.reuters.com/article/idINIndia-50614720100804
 www.retaildatasolutions.com
 wikimapia.org/779022/Retail-Data-Systems-of-Wisconsin
 www.euromonitor.com/World_Retail_Data_and_Statistics
 http://www.scribd.com
 www.retailspace.com
 www.zencartoptimization.com/.../top-100-retail-websites-of-2009/
 www.niyati.biz/retail-websites.htm
 www.broilking.com/retail_websites.html
 www.zencartoptimization.com/.../top-100-retail-websites-of-2009/
 www.niyati.biz/retail-websites.htm
 www.broilking.com/retail_websites.html
 http://www.scribd.com/doc/22369844/E-Retailing
 http://www.docstoc.com/docs/15200764/CHAPTER-8-e-Tailing
 http://www.slideshare.net/Annie05/online-retail-and-services-presentation
 http://retailjunction.goelji.com/

76 | P a g e