e-Walmart will be a bigger threat than Walmart

When BJP’s prime ministerial candidate Narendra Modi spoke to a trader association in Delhi, he batted for e-commerce. He spoke of increasing trader’s capability through the internet and how virtual malls can be created using modern technology. But even as Modi was speaking to the traders, retailing giant Walmart was silently working to roll out its –ecommerce venture in India.

 

An Economic Times report says that Walmart is quietly readying a major e-retailing push in India with an electronic marketplace business model, similar to US based Amazon and eBay. The report says that Walmart will be ready with an electronic platform and is expected to go live over the next 3-4 months. Since the restrictions are stiff for foreign retailers wanting to sell directly to consumers, these companies sell their goods to vendors. 

 

And its not just Walmart, a Business Standard (Read here) report today says that other US retailers such as JC Penney and Macy’s are also planning to test the waters before a full fledged retail play.

 

While there have been no takers for FDI in multi-brand retail (two states where the Congress lost elections have scrapped FDI in retail) there is considerable interest in e-retail. The reason for this is revealed in a report released recently by Crisil.

 

Crisil’s report says that on-line retailing will triple to Rs 50,000 crore in three years growing at an astonishing speed of 50-55 per cent. That would be over 30 times the size of what it was in 2008. The report says that e-retailing is already a threat to traditional brick and mortar retail. 

 

However, there is lot of ground to be covered to be a serious threat to the brick and mortar model – both in the organised and unorganised space. Current market share of e-retail is only 8 per cent in the organised retail space which is likely to double to 16 per cent by 2016. Despite that e-retail will still be less than 1 per cent of the total organised and un-organised space. That compared to 9-10 per cent in the US and UK and around 4-5 per cent in China.

 

Looking at the rapid growth potential of e-retail, Indian mom-and-pop shops should be more cautious about the electronic version of retailers rather than the brick and mortar ones. Recognising the growth and potential of e-retail, Walmart is now canvassing with the government to open FDI investment in e-commerce.

 

E-retail also does not require money to be blocked in real estate and employees to man the stores. E-retail is all about logistics and footprints across the country. Multinational companies, including their Indian counterparts have managed to master logistics with prompt deliveries even to some of the smaller cities in the country. 

 

The traders that Mr. Modi was talking to will have much more competition to face from e-retailers than posed by a brick and mortar retailer. When FDI in retail was discussed, those opposed to it said that India would become a country of sales boys and girls. Perhaps when e-commerce will come up for discussion, we will have some politician opposing it saying that India will be a country of delivery boys and girls.