Hoping to tap the growing potential in India for online commerce, the world’s largest online retailer, Amazon has launched its first shopping Web site in India.
The amazon Web site in India offers seven million books and 12,000 movies and TV shows. In the coming weeks, it will add more products such as mobile phones and cameras.
The U.S. online retailer will not sell its own products in India, because Indian laws prohibit companies that carry goods from more than one brand from selling directly to consumers on the web. Instead the Web site serves as a marketplace, selling goods of local retailers.
Last year, Amazon launched a site in India which allowed customers to compare prices online, but not purchase items.
The company enters a market where digital shopping is still in its nascent stages, but is expected to grow rapidly, said Shabori Das at market research firm Euromonitor.
“Internet retailing is expected to witness a year of growth of nearly 17 percent in the next five years, and this makes India among the top 20 fastest growing Internet retailing markets in the world,” said Das. “These will be driven by various products such as apparel, footwear and consumer electronics.”
Online retailers are eyeing India’s huge young, urban population as potential customers. Only about 12 percent of Indians have access to the Internet — much less than in countries like China.
But at about 150 million, the total number of Internet users in India is still the third largest in the world. And this will grow exponentially as more people get connected to the web.
These growing numbers have made entrepreneurs confident that online shopping in India will grab a larger slice of total retail.
However the path to big profits may not be easy for online retailers. Online retail adds up to $10 billion at present, but a large chunk is air tickets.
Das at Euromonitor said that most online stores are struggling to make money. To win customers, many companies have to offer facilities such as cash on delivery. And persuading people to shop online is a challenge.
“Most of the online retailing companies, despite the fact that their volume sales are high, their net profit is still in losses. If you see the cost of the item, along with its packaging, free shipping, together will be higher than the price the consumer is paying to the retailer. Finally, there is this reluctance among consumers whether the product being bought is in good condition, whether the money they are paying is worth it or not,” said Das.
With the entry of companies like Amazon, the competition to win new customers is only going to get tougher.