E-commerce firms race ahead, retailers hobble

E-commerce firms race ahead, retailers hobble

"It's all about money. The e-commerce guys have money to experiment - I don't have this kind of money to blow," Kishore Biyani,  chief executive of Future Group, told.

Picture for representation purpose only. (Source: Reuters) Picture for representation purpose only. (Source: Reuters)

Kishore Biyani, the head of Future Group, one of country's largest and most established retailers, admits he can't keep up with web sites like Snapdeal and Flipkart when it comes to spending money to entice shoppers to buy online.

Private investors have poured $2.3 billion into country's e-commerce companies so far this year, according to consulting firm Technopak, giving them financial firepower to overwhelm shoppers with bargains and deals that brick-and-mortar retailers like Future Group, which runs a host of chains including Future Retail and Future Lifestyle Fashions, cannot match.

"It's all about money. The e-commerce guys have money to experiment - I don't have this kind of money to blow," Kishore Biyani, who pioneered modern retail in the country and is chief executive of the Future Group, told Reuters in an interview.

In an attempt to match up, traditional retailers are forging partnerships with well-funded websites such as, and Snapdeal to put their wares on the web without investing heavily in their own online infrastructure.

This tentative approach to e-commerce, however, leaves traditional retailers vulnerable to being completely overtaken by their better-funded online rivals in a country where a rapidly expanding middle class is doing more and more shopping on the web.

In October, Future Group tied up with Amazon's Indian arm to sell its brands online. A month earlier, electronics retailer Croma, owned by the Tata Group, struck a similar arrangement with Snapdeal.

According to Technopak, organized retail in India is expected to grow to $182 billion in 2020 from the current $46 billion. E-tailing is forecast to expand at a faster clip, to $32 billion by 2020 from $2.3 billion now.

India's protectionist government policies have long shielded established retailers from competition. As a result, they never felt the need to invest in state-of-the-art technology, said Bhavit Desai, a US-based strategy consultant who has worked with companies such as Walmart International, the global unit of Wal-mart Stores, and Target.

"Many huge players in the market have invested very little in technology and have been followers at best," Desai said.


In 2012, then Prime Minister Manmohan Singh's government opened the retail industry to foreign operators, allowing companies such as Wal-Mart and Tesco to own majority stakes in Indian chains for the first time.

But the government left it to individual states to decide whether to let in foreign retailers. Few have stepped up, and the big foreign chains that might have shared their online expertise with India's stores are largely absent.

Instead, local online marketplaces have proliferated, backed by billions of dollars coming in primarily from abroad. Last month's $627 million investment by Japan's SoftBank Corp in Snapdeal illustrated a widening gap. The portal has also attracted funds from eBay and billionaire Ratan Tata. raised $1 billion earlier this year, in a round of funding from Singapore sovereign wealth fund GIC, along with existing investors Tiger Global Management LLC and South African media company Naspers.

That leaves traditional Indian retailers vulnerable, say industry advisers. Online marketplaces don't need to pay high commercial rents or build stores to serve India's 1.3 billion people, and they're soaking up outside investments and expertise from their international backers that can help them move faster to profit.

Organised retail is still developing in India. More than 90 per cent of shopping is done at informal roadside shacks and in bazaars. These small shops are seen as the lifeblood of the economy and successive governments have protected them.

But the same policies have also shielded much larger players like Shoppers Stop, Future Retail and others. At the same time, online stores are racing ahead, modernising the retail industry at a pace that traditional chains cannot match.

"It is exactly like what happened in telecoms," said Harminder Sahni, managing director of Wazir Advisors. "In India, we never took landlines to every single home - mobiles came in and leapfrogged that."

Published on: Nov 18, 2014, 11:37 AM IST
Posted by: Swati Verma, Nov 18, 2014, 11:37 AM IST