A click away… The success story of E-Commerce in India

The year 2014 saw the rise of a remarkable phenomenon called E-Commerce in India. The revolution has taken not only the country, but also the world by storm and has captured the imagination of consumers, suppliers and entrepreneurs. The industry has expectedly performed phenomenally well over the last few years by almost tripling in market value. More so, the industry is touted to grow almost seven times by 2020 according to market studies.

A popular space in E-Commerce is online retail that is perhaps the fastest growing segment in this domain. The current trend in the E-Commerce sector is due to multiples factors; namely the increased mobile and smart phone penetration, access of high speed broadband internet, a demography with a population mostly between 18 to 30 years, large online population etc.

E-Commerce has played a big role in educating people about the brands available in the market, its price, features, best alternatives, first-hand information of the product in the form of feedbacks and reviews etc. In a way it can be concluded that E-Commerce has createdinformed consumerism in India.

The market that is driven by the rising levels of income and standards of living, the lack of time to go shoppingdue to busy lifestyles and urban traffic, and the availability of large variety of goods on the online portals are the primary drivers of the industry.

What ismarket share of e-commerce in India?

The E-Commerce business in India is only one fiftieth the value the market holds in the USA ($ 250 Billion) and less than one tenth the market value of China (a country with a comparable population of India). The Indian Market is clearly in its infancy with popularity in the urban areas (mostly Tier 1 and Tier 2 cities). Despite having the third largest mobilephone user base in the world, the penetration of the internet has been fairly low. However, this is changing at a very fast pace.

Current figures indicate that almost 80% of the population of the country uses mobiles and 40% use smartphones or tablets indicating a sizeable amount of people using the technology. By the end of the decade, mobile penetration is expected to be much higher with better marketing (by employing means such as search engines, blogs, forums, online advertising sites like Adroll and Google adwords etc.) and higher media attention, setting the stage for E-Commerce to roll in full swing in the country. Also, the demography of the country are primarily the youth, and more so a large number of educated youth who are ready to break cultural-social-economic and geographic barriers by adopting new ideas and services and incorporate them into their ways.

What is the impact of online retail on offline retail?

Interestingly, the E-Commerce revolution will never be able to dominate the total market share in retails since the maximum share e-commerce can occupy in a country is only up to 20% even if it realizes its full potential. Thus a phenomenon like E-commerce will only force offline retails to lose some market shares, at the most.

This will help offline retailers and entrepreneurs to realize that a sizeable share of the market will always belong to offline retail and it is indeed time for both online and offline retail to co-exist in harmony. E-Commerce not only gives retailers a good platform to sell their products, but is also significant for the consumers who avail of several schemes and freebies, and options to compare products, brands and make the right buy. Either way, the revolution is a blessing to merchants.

What are its obstacles?

This internet juggernaut, however, can realize its full potential and gain momentum only if it can overcome the following obstacles along its way. And these obstacles though not just typical to India, can apply to other developing countries as well.

• Internet Revolution: The reason why the percentage of Internet penetration will never give us the right number of people using the E-Commerce medium is because sometimes such numbers are never an accurate indicator of the number of people actually using these services due to a number of reasons. The reasons could be varying from lack of plastic money (Like Debit Cards/Credit Cards), intimidation to use the technology, cultural barriers, uncertainty about the quality of the products delivered from online retail, inaccessibility of location etc. Each of these possibilities must be dealt with in a systematic and planned manner.

Internet connections are mostly weak or easily lost. The connection most often is shifted from 3G to a much slower (say Edge) connection, once out of city limits, deterring buyers.

• Infrastructure:

1. Needless to say, Logistics infrastructure is a must to build a conducive environment to nurture e-commerce. Despite the 90,000 postal PIN codes and locations identified by the Government, no online Retail Company delivers to more than 10, 000 of these Pin Posts, rendering a majority of these Pin Codes unserviceable due to their inaccessibility.
2. Payment Infrastructure is another important consideration for the e-commerce to pick up in the country. India is still primarily cash driven economy with less than 2% of the population having access to formal net banking facilities. Cash on delivery is the most preferred payment method with 75% of the consumers opting for it; and unfortunately a good number of products have no Cash-On-Delivery (COD) option at all.
3. Cyber security issues are another aspect that requires the attention of both the stakeholders and the law-makers.

• Governmental Policy and regulations: The government needs to chalk out solid rules and guidelines based on which trade must be carried out in a free, fair and unbiased manner. This is undoubtedly a new form of business, following a different kind of a business model and should be thus handled with the required alacrity.

An absence of clear guidelines is impacting the business substantially. Demands for suitable taxation norms, anti-competitive practices and pricing are some of the issues that are being raised.

• Lack of good service and support: The industry is fairly haphazard at the moment with no fixed norms of conduct or transaction with most of the companies lacking customer satisfaction and trust.

What opportunities does the future hold?

For the longest period in the history of e-commerce in the world Amazon was one of the biggest giants in the industry having left their footprint in the developed nations of the world. By the time the Giant Corporation discovered its potential in India, local players like Flipkart and Snapdeal started gaining prominence and popularity in the market. Several big organizations such as Reliance Companies areall set to enter the market.

• One of the opportunity areas of the market is the need to develop a Multichannel Integrated Solution. This means a seamless integration of online and offline retails.
• Work towards better quality and quantity.
• Companies in the business must concentrate on superior customer experience, delivery services and better payment environment.
• Opportunities in the online grocery shopping with start-ups such asBazaarcart, Grocery Market and BigBasket.
• Evolution of start-ups like Zomato, Bookmyshow, Jabong, Makemytrip etc. in the domain of food, lifestyle and travel.
• SaaS being offered for hosting webstores with minimal one-time costs
• Social media like Facebook and Twitter likely to become channels for sales and customer engagement.

So far SIX Indian Companies have managed a whooping Billion-Dollar valuation in this sector with names like Flipkart, Snapdeal, InMobi, Quikr, OlaCabs and Paytm.

The Indian online retail with a market value of $ 6 billion occupies only 1% of the $ 600 billion value worth of the total retail industry in India ensuring that there is no intension to kill small players. Many countries in the past have shown us that both forms of trade: online and offline can co-exist and flourish at the same time.

It is however hard to say where the e-commerce revolution is taking us. The seeds of this business have been already been sown. Only time will show us the fruits it bears.

SaiKiran Kadam is an Analyst working with Mordor Intelligence, a market research consulting firm which specializes in Market Research Consulting, Market Research Reports, Market Sizing Reports, Industry Research Reports.