FAST FORWARD: With its fast-growing economy, relatively young population, lack of big brick-and-mortar retail chains and rapid embrace of new shopping technology, India is a land of opportunity for fashion e-commerce, according to a new report.
Commissioned by the online fashion retailer Koovs.com and published by the management consultancy Technopak, the report cites India’s fashion-hungry youths and growing use of smartphones and e-wallets as factors.
The report, “India’s Demographic Dividend Drives E-Commerce in the World’s Fastest Growing Economy,” said 25 percent of India’s population is already online, and the figure is expected to rise to 40 percent by 2020. India’s average age is the world’s lowest, with a median of 27 versus 40 in the U.K.
The report said that because organized retail is limited, the potential for e-commerce is significant. E-commerce retail is largely about new growth and new revenue rather than replacement for traditional bricks-and-mortar.
It said mobile is set to become the dominant channel, with more than 500 million consumers already using phones. Smartphones will account for more than 90 percent of handsets in the market by 2020. At the same time, it estimated that around 45 million people in India transacted online in 2015, representing only 14 percent of all those connected: “This means there is a huge opportunity for growth and the opportunity to incorporate new technology for customer engagement, real-time data feedback, social engagement, recommendations and 3-D fitting rooms.”
The opportunity for Western fashion brands is large, the report said. Out of India’s 240 million households, at least 50 million are “aspirational global consumers.”
Mary Turner, chief executive officer of Koovs, said the company, which sells high street and premium brands including DKNY, Warehouse, Vans, Nike, Giles at Koovs and Henry Holland for Koovs, is seeing “significant and accelerated desire for Western style and culture” that is driven by unprecedented access to the Internet and social media.
The report said the arrival of large e-tailers such as Amazon has also brought great credibility and investment in the e-commerce business model.
However, the trend is for more specialization, with brands selling lifestyle as well as product online.
“Even though horizontal marketplaces, such as Flipkart, Amazon and Snapdeal, have held the major share of the market, they lack the curation and experience of selling fashion online and vertical players offering multiple brands are struggling to differentiate,” the report said.
“Against this background, the private-label-led space, where fashion becomes a lifestyle choice…now presents a real ‘sweet spot’ in the market.”
The report went on to say that as the e-commerce market becomes more sophisticated, the challenge is “not to be a generalist in trying to address all of the market, but to own a category, dominate a specific need/niche and remain relevant for the target customer.”
It cites Morgan Stanley as saying the market share of “first-phase” e-commerce market players has dropped from 91 percent to 83 percent, while new niche companies have grown market share from 2 percent to 7 percent.
Last year India’s economy saw 7.5 percent GDP growth, outstripping that of China, 6.3 percent, and the U.S, 2.6 percent.