E-commerce in India and its Evolution
India has an internet base which will be crossing 3 million user’s end of 2014, which is growing at a faster pace. However in terms of penetration it is very low compared to the US and the UK. A significant aspect of the e-commerce that needs to be noticed is Cash-On-Delivery being preferred mode of payment. India is a vibrant and cash rich economy, as a result of this. 80% of the transactions of Indian e-commerce work on Cash-On-Delivery mode. In the long run, this may affect business prospects in e-commerce in India.
Growth and Key Drivers
Key Drivers in Indian e-commerce are
a) Increase broadband internet and 3G penetration
b) Highly disposable incomes and raising standards of living
c) Wider Product Range compared to Brick Mortar retailers
d) Traffic Congestion, busy lifestyles and lack of time for shopping
e) Lower prices compared to Brick Mortar Retailers
f) Companies having less presence using e-commerce route to sell their produce
g) Increased usage of consumer buying and selling second hand goods
According Forrester, the e-commerce market in India set to grow to the fastest in Asia Pacific region. Almost above 57% CAGR from 2012-16. India e-commerce grew by whopping 33% last year, $3.5 billion worth of goods were exchanged hands. These tips to grow further $6 billion by end of 2015. This may set to grow further $50 -70 billion by end 2020. Major contributors to this growth are fast growing population and improvement in infrastructure such as better payment and delivery systems.
In the wake of huge interest generated by buyers in online shopping, eRetailers wanted to know the factor for such an increase in sales.
Few factors that influenced the splurge in sales came into picture such as age, since India has young population who are between 18-25 age groups who are major influencers for the sales. This may be personal use or for family.
Some segments like electronics, travel and tickets were hot selling. Due the touch and feel factor, certain segments like jewellery, grocery and furniture reported to be less preferred. However these are getting changed in next future, as online jewellery sector will contribute $8 billion in next two years to e-commerce bucket.
Another major contributor to evolution is mobile/DTH recharges with 1 million transactions reported daily by each operator.
Most e-commerce companies yet to make money that are tangible. Due to growth prospects, many venture capital companies like Accel Partners, Naspers, Tiger Global and others have invested considerably in companies like Flipkart, Myntra and Snapdeal. When Flipkart and Myntra merged together, cyber law and due diligence are ignored by the investors who invest in these e-commerce companies in India.
E-Commerce companies demand highly secure, stable and protected hosting whereas the infrastructure provided now is not secure and stable. Since most hosting companies located in India are not suitable for e-commerce purpose. Indian Government is planning to introduce cyber security breach disclosure norms shortly.
Regulatory Violations and Unfair Trade Practices
Legal issues of e-commerce are generally ignored by e-commerce websites, which may change in near future. Foreign Companies and e-commerce portals have to register in India and comply with Indian Laws. Demand for introduction of suitable laws and provisions to regulate taxation; predatory pricing by Indian and Foreign e-commerce websites has been raised.
In short, e-Commerce companies will witness a sea change in terms of sales as well as compliance in next few years.