Online retailing in India is nascent, highly fragmented and beset with big challenges. But in a market that some web merchants and venture capitalists predict could double in size to more than $3 billion in the next three years, there is also ample opportunity for online retailers to build a lasting business, says Harish Bahl, a well-known Indian e-commerce entrepreneur and founder of Fashion and You India Pvt. Ltd., one of India’s largest private-sale sites.

The Indian online retailing market is small compared to the U.S., China and parts of Europe, Bahl told attendees last week during a keynote address at the eTailing India Expo e-commerce conference in Mumbai.

Indian direct-to-consumer e-commerce totaled about $1.6 billion in 2012, and India has a base of about 20 million regular online shoppers with a universe of only about 400 well established merchants, according to Matrix Partners India, an Indian e-commerce venture capital firm.

But within a decade as the ranks of educated men and women under the age of 25 with growing disposable income and more web-enabled mobile devices grow, India’s online retail market could increase by as much as 50% annually. “There are numerous infrastructure challenges that India needs to overcome, and the cost of new customer acquisition is high,” says Bahl. “But there also is the opportunity to build long-standing customer relationships.”

Despite challenges such as limited secure national payments processing, a relatively small percentage of the population with a credit or debit card, and the difficulty of delivering orders to customers in rural India, Fashion and You India has been able to build up FashionandYou.com, a three-year-old private-sale site, into a viable e-commerce organization.

Today, Fashion and You India says it has more than 3.6 million members, and FashionandYou.com generates monthly traffic of about 2.8 million visits per month, according to comScore Inc. Bahl didn’t disclose annual sales, but says Fashion and You is growing because the company is taking advantage of Facebook and other forms of social media to reach out to fashion-conscious online shoppers. Fashion and You, which claims to have more than 1 million Facebook fans, also offers Indian consumers a diverse shopping experience, Bahl says.

Working from an inventory that includes about 500 brand names, FashionandYou.com offers registered shoppers about 15 private sales daily with discounts of up to 80%. “One key to succeeding in India online retail is to create a new mind-set and offer shoppers real value and a unique experience,” Bahl says.

Fashion and You India has been able to sustain adding more inventory and grow to 1,200 the number cities across India where it makes deliveries to in part because the company has been able to attract more than $48 million in outside investment. That includes a round of $40 million in November 2011 from private equity firms such as Norwest Venture Partners, Intel Capital, Sequoia Capital India and Nokia Growth Partners.

“There are obstacles to overcome in Indian e-commerce and some are getting big, but others are getting easier,” Bahl says. “But retailers can overcome obstacles by earning trust from shoppers and that happens by giving very long-term value.”

 

 

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