The head of Future Group, one of India's largest and most established retailers, admits he can't keep up with web sites like Snapdeal and Flipkart when it comes to spending money to entice shoppers to buy online.
Private investors have poured $2.3 billion into India's e-commerce companies so far this year, according to consulting firm Technopak, giving them financial firepower to overwhelm shoppers with bargains and deals that brick-and-mortar retailers like Future Group, which runs a host of chains including Future Retail Ltd and Future Lifestyle Fashions, cannot match.
"It's all about money. The e-commerce guys have money to experiment - I don't have this kind of money to blow," Kishore Biyani, who pioneered modern retail in India and is chief executive of the Future Group, told Reuters in an interview.
In an attempt to match up, traditional retailers are forging partnerships with well-funded websites such as Flipkart.com, Amazon.com Inc and Snapdeal to put their wares on the web without investing heavily in their own online infrastructure.
This tentative approach to e-commerce, however, leaves traditional retailers vulnerable to being completely overtaken by their better-funded online rivals in a country where a rapidly expanding middle class is doing more and more shopping on the web.
In October, Future Group tied up with Amazon's Indian arm to sell its brands online. A month earlier, electronics retailer Croma, owned by the Tata Group, struck a similar arrangement with Snapdeal.
According to Technopak, organized retail in India is expected to grow to $182 billion in 2020 from the current $46 billion. E-tailing is forecast to expand at a faster clip, to $32 billion by 2020 from $2.3 billion now.
India's protectionist government policies have long shielded established retailers from competition. As a result, they never felt the need to invest in state-of-the-art technology, said Bhavit Desai, a U.S.-based strategy consultant who has worked with companies such as Walmart International, the global unit of Wal-mart Stores Inc, and Target Corp.