Challenges and Opportunities of E-Tailing in Emerging Economies

Introduction

E-tailing is catching up quickly with the offline stores and expanding its reach in emerging economies. The last few years have seen a radical increase in traffic from traditional to online retail formats (Tong, 2010). The increase in penetration of internet and information and communication technology (ICT) has resulted in development of new distribution channels, making online presence a major requirement (Liang & Huang, 1998) for retailers to expand their geographic reach. Consequently, the national boundaries are blurring and consumers across the globe are being served by good quality products at a competitive price, at their convenience, at their door step and at their chosen paying terms.

Market saturation and slow growth rate in developed economies has shifted the focus of the marketers in the globalised world towards the growth potential prevailing in emerging economies (Narang & Singh, 2014). They are looking forward to invest in these new markets where online retail platforms are emerging to woo the customers away from the traditional retail formats (Kearney, 2013). Among emerging nations, Brazil, Russia, India and China are turning out to be the hubs for business and economic activities because of their attractive growth forecasts, huge population and encouraging business environment. China is at the top of the global retail e-commerce index among the nations where e-tailing has shown tremendous potential. The enormous success of Alibaba, Taubau and Tmall bears testimony to this. China houses 1.36 billion people. Its 517 million internet users constitute a market worth 64 billion USD. It is poised to achieve 271 billion over the next five years (A.T. Kearney, 2013). In 2012, 54% of its consumers had made more than 20 purchases through internet. India also offers a fertile untapped potential for e-tailers. A big response received by companies like Flipkart, Amazon, Snapdeal, etc. reveals the growing interest towards e-tailers. It is the young population ranging between the age group of 15 to 35 years that constitutes the majority of online shoppers in India where internet penetration is reported to be around 19%. However, it is expected to experience a yearly growth rate of 41% (ASSOCHAM, 2012) which will provide further impetus to online purchases. Another example can be taken of Brazil which has a strong and growing middle class with 80 million online customers who spend $ 10.6 billion annually in making purchases on internet and are poised to spend 18.7 billion by 2017. Russia is not lagging far behind. It boasts of Europe’s largest online population of 70 million users with 33 million consumers shopping online. Cities like St Petersburg and Moscow are the main centres of online retailing, accounting for three fourth of online retail transactions (A.T. Kearney, 2013).