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Home > Business > Special

The other BIG retail story

Prasad Sangameshwaran & Rituparna Chatterjee | December 20, 2005

In this retail business, you don't count footfalls. Nor do customers get the real world, touch-and-feel experience of the goods they buy. The shopping ambience, too, is only as good as the customer wants it to be.

Still, shoppers are flocking to these 'virtual malls' in the millions. Online shopping is no longer a fad; it's an acknowledged and important part of the retail experience, with more than a tenth of the world's population having bought products and services over the Internet.

According to market research organisation ACNielsen, there are more than 627 million online shoppers in the world. Over 135 million people across the globe have purchased DVDs or video games and an equal number have made air ticket reservations. More than 128 million purchased clothes, accessories or shoes, while more than 112 million customers paid for music downloads or CDs.

The numbers are impressive even for high-ticket purchases: more than 106 million customers purchased electronic devices like cameras and close to 98 million bought computer hardware.

These are the findings of the twice-yearly global ACNielsen Online Consumer Opinion Survey, which polled more than 21,000 consumers in 38 countries to understand their shopping behaviour and preferences.

Respondents from Europe, Asia Pacific, North America, Latin American and South Africa were asked about their online shopping experiences, including when they last purchased online, what they bought and how they paid for it.

The Strategist brings you highlights of the study, commentary from ACNielsen's online expert NS Muthukumaran and what Indian online shopping sites are doing to grow their businesses.

The big pixel

Not surprisingly, online shopping is most popular in Europe and North America. Germany, Austria and the United Kingdom top the list, with 95 per cent of Internet users in these countries having purchased online at least once.

In the UK and Germany, when asked whether they had bought online in the past month, 89 per cent of the respondents said yes.

In the Asia Pacific region, recency of Internet purchase was lower, with less than half the respondents saying they had bought online in the past month; the corresponding figure for India was even lower, 38 per cent.

Still, India's average number of online purchases (5.2) in the past month was higher than the region (4.9), higher than the global figure (4.9) and even higher than that for Europe (5.1).

"For Indian online shoppers, the relatively higher number of purchases is likely to be driven by convenience and a desire to own the latest," explains N S Muthukumaran, director and head of online research, ACNielsen ORG-MARG (see below: Quickbite - Windows Shopping).

Preeti Desai, president, Internet And Mobile Association of India (IAMAI), seconds this. "The 18-35 age group is the highest online buyer of apparel in India. With the fashion culture transcending metros, the net allows smaller metros to leverage the distance and buy from fashionable metros."

'Book' your buys

Which is not to say the Internet is only for those looking to make a style statement. Across the globe, books are the most popular online purchase, with 34 per cent of the respondents mentioning books in their list of last three items purchased online.

Reading is most popular in China, where 56 per cent of the respondents said they bought books online, followed by Austria, Russia and South Korea, at 50 per cent. At 35 per cent, India's figure wasn't too impressive (though close to the regional average of 37 per cent), but still better than Chile and Denmark's 11 per cent.

But then, Indians seem keener on making their travel arrangements online. More than 36 per cent of Indian respondents said they bought air tickets over the Internet, making that the most popular online purchase, and higher than the global average of 21 per cent for the category. The other popular buys for Indians: videos (22 per cent) and clothes (21 per cent).

Visa power

How do online shoppers pay for their purchases? Credit cards won this race by a handsome margin. Fifty nine per cent of the total respondents raised their hands for credit cards, while bank transfers trailed at 23 per cent , followed by cash on delivery (COD) with 13 per cent.

Indian respondents were even more overwhelmingly in favour of credit cards (68 per cent), but opted for COD (29 per cent)as their second choice, rather than bank transfers (19 per cent).

So, which card will it be? Visa was far ahead of arch rival MasterCard, with 59 per cent opting for it against MasterCard's 26 per cent. The ratings remained unchanged for India, too, with 67 per cent preferring Visa against 22 per cent for MasterCard.

MasterCard was master only in South Africa and The Netherlands. Interestingly, Pay Pal -- a Web-based service that allows secure, electronic funds transfer between Internet users -- ranked fourth in the popularity stakes, with just 12 per cent of all respondents using it as their method of payment; the figure for India, 7 per cent.

Asked about their "preferred" mode of payment, consumers across the globe stuck to their existing choices: credit cards (45 per cent), followed by bank transfers (15 per cent). Forty seven per cent of the respondents in India, too, said they would prefer to use plastic for online payments.

What little advantage Pay Pal had gained, it lost when ranked on the preference scale: globally, it dropped to 7 per cent, while just 4 per cent Indians said they would prefer it to other payment options.

India login

Senior citizens seeking to book train tickets still need to queue outside separate counters at the railway booking office, but younger travellers found a short cut a while ago -- they buy their tickets online.

According to IAMAI, close to 24 per cent of the Rs 1,180-crore (Rs 11.80 billion) Indian online shopping spend is for railway tickets and close to half (47 per cent) of all online rail ticket buyers are in the 26- to 35-year age group.

Toss in airline ticket bookings, and travel makes up nearly 58 per cent of Indian online shopping spends. No other category (apart from electronic gadgets -- 10.10 per cent), contributes even close to 10 per cent in value in Indian online shops.

It's not just the money. Even the number of monthly transactions are increasing. IAMAI estimates the average number of transactions have increased nearly four-fold, from 207,000 a month in 2003-04 to 795,000 in 2005-06.

"Travel e-commerce has really picked up in the past year," agrees Pankaj Chandra, business head, e-commerce, Sify.

If travel by air and rail makes up more than of Indian online spends, online shopping portals like,, Sify and others could have a tough time selling their gifts, flowers and electronics accessories.

So what are their strategies? The trick is to go with the flow. For air tickets, Indiatimes, the market leader in terms of value -- even competitors accept it as such -- has tie-ups with Indian Airlines, Air Sahara, Kingfisher Airlines and Air Deccan.

But it doesn't stop there -- since travel and accommodation go more or less hand in hand, the shopping site has also tied up with 725 hotels across 100 cities to offer room bookings round the year. Adds Sharat Dhall, business head, ecommerce, Indiatimes, "We also have airline travel auctions, where people bid for tickets."

That may be a popular option but online shopping sites still face intense competition from their brick-and-mortar counterparts. Sify's Chandra points out that online sales dip by about 25-30 per cent on weekends and by about 50 per cent during long weekends, when customers go shopping to the real, rather than virtual world.

When that happens, Sify simply follows them: one of the top draws at is gift vouchers from Indian retail chains such as Big Bazaar, Shoppers' Stop and Globus.

Points out Chandra, "The idea is to go where the consumer is."

That includes its own cybercafés iWay, a 3,000-centre strong chain spread over 140 cities. Customers who shop online at these outlets are being offered special discounts, helping the company benefit from both, increased footfalls at the cafés and increased e-commerce.

For its part, Indiatimes' approach is slightly different: it follows shoppers into the malls. Malls around Delhi recently played hosts to Indiatimes' "hotspots", where customers could surf the net, shop and take part in special promotions organised by the company.

The site is also particularly active during peak shopping times (according to IAMAI, e-commerce transactions jumped to Rs 115 crore (Rs 1.15 billion) during Diwali 2005, compared to Rs 53 crore (Rs 530 million) last year).

As part of its run-up to the new year, Indiatimes is launching a shopping festival, offering gifts and lotteries; it's also putting up posters and flyers around select cybercafés, which advertise the best deals on its site.

Online retailers are also apeing their offline counterparts with direct mailers and loyalty programmes. At Indiatimes, shoppers get shopping points called "netcarrots" that are similar to loyalty points offered by departmental stores. As customers realise there's more to online shopping than just the convenience of not having to find a parking space, the divide between the real and virtual shopping worlds is blurring.


India's online population represents a set of consumers that offer marketers a winning combination -- greater affluence and the willingness to adopt technology faster. They will increasingly be too tempting to ignore.

Their reasons to shop online -- the obvious advantage of convenience; the ability to compare offers across providers; and get the latest goods available and the best possible deal.

For instance, book titles, music and games or even personal durables such as cameras, where having the latest version matters to people who belong to the "early-adopter" segment.

In India, books followed airline reservations closely as the most popular online purchase, with 35 per cent of online Indians buying them over the Internet. Apart from these, nearly 24 per cent Indians have purchased electronic equipment and more than 20 per cent have purchased apparel, music and electronic entertainment (movies, DVDs and games).

Online shopping in India is poised for greater acceleration as more manufacturers and service providers integrate the Internet into their sales models.

With PC and Internet penetration growing, instituting online mechanisms for sales and service and incentivising consumers to go online by passing on the benefits of lower transaction costs are the keys to increasing online buys.

At present, service industries such as retail banking and airlines have laid the groundwork for harnessing the power of the Internet in India. Undoubtedly, this has also been driven by their need to drive costs down.

The newly-launched budget airlines that insist on online (or telephonic booking), for instance, are prime examples of this. But to reach the tipping point of the online shopping boom will require active participation of the consumer marketing companies from manufacturing industries. -- NS Muthukumaran

NS Muthukumaran is the director and head of online research, ACNielsen ORG-MARG

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Number of User Comments: 2

Sub: great article

this is a wonderful article for any perosn. the figures are mindblowing and give a sneak peak in the consumer behaviour-the latest buzzword

Posted by agastee

Sub: Great article !

This is an awesome article. Very eloquent and well supported through facts. Great job !!! Keep up the good work.

Posted by Sachin Narang



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