Challenges and Opportunities of E-Tailing in Emerging Economies

Challenges and Opportunities of E-Tailing in Emerging Economies

Ritu Narang (University of Lucknow, India) and Prashant Trivedi (University of Lucknow, India)
Copyright: © 2016 |Pages: 22
DOI: 10.4018/978-1-4666-9921-2.ch003
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Abstract

The increase in penetration of internet and information and communication technology (ICT) along with change in consumer lifestyle and growing population of internet savvy consumers presents an encouraging platform for e-retailers in emerging markets. Education, technology and growing demand from middle class consumers are further driving the growth vehicle of e-tailing in these nations. There is adequate literature available for electronic business in the context of developed nations but applying that knowledge without any consideration of the unique business environment prevalent in emerging markets may spell danger for online traders. Therefore, the proposed chapter focuses on the growth of e-tailing in emerging economies. It talks about the driving forces for success of e-tailing in various developing economies. The opportunities, challenges and unique issues associated with e-tailing in emerging markets are also discussed. The chapter ends with a discussion on the future of e-tailing in emerging nations.
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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).

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