Indian E-Commerce Space: Challenges and Opportunities

The digital commerce market in India is expected to clock a higher growth this year on the back of better internet penetration, increase in trust level and pricing advantage.
Indian E-Commerce Space: Challenges and Opportunities

 

Guest article by: Prof. Saurabh Mittal

The digital commerce market in India is expected to clock a higher growth this year on the back of better internet penetration, increase in trust level and pricing advantage. The recent analysis and reports published by various industry experts are suggesting that the boom in Indian E-Commerce industry will remain for the next few years before reaching the saturation point.

 

Indian E-Commerce Landscape

As per industry reports, the e-commerce industry in the India was worth $15bn in the year 2013, which is estimated to reach $50bn-$70bn by year 2020. CRISIL Research report Feb 2014, India’s online retail industry has grown at a swift pace in the last 5 years from around Rs 15 billion revenues in 2007-08 to Rs 139 billion in 2012-13, translating into a compounded annual growth rate (CAGR) of over 56 per cent.

The 9-fold growth came on the back of increasing internet penetration and changing lifestyles, and was primarily driven by books, electronics and apparel. CRISIL Research expects the buoyant trend to sustain in the medium term, and estimates the market will grow at a healthy 50-55 per cent CAGR to Rs 504 billion by 2015-16. The entry of new players in niche segments such as grocery, jewellery and furniture, along with large investments by existing players in the apparel and electronics verticals, will be the drivers.

 

Buyer’s Behaviour

Presently, there are over 2.5 crore(2% of the overall population of the country) online buyers and more than 24 crore internet users in the country but the large portion of Indian population is still to be covered. The number of internet users is estimated to reach 50 Crore mark by the year 2018. The rise is number of internet users may be attributed to the usage of mobile phone, especially the smart phones in the country

Interestingly, the percentage of internet users is around 16-18% of the population of India, but the big gap between the number of online buyers and internet users shows that the general internet user is still scared of the online payments. The reasons might be many, starting from product quality concern, delivery time, expectations not met with the final product, shipping time, logistics challenges, online payment risks, frauds and so on.

Challenges to the sellers

The ecommerce retailers need to focus on the threat areas for the Indian buyers. Still the large population is not literate enough to complete the online transaction. The language barrier and the cultural issues are also keeping the Indians away from benefitting from the Cyber World.

The large middle class in India still trusts the neighbourhood shops, where they can have variety and go for bargaining. Various studies show that successful bargains are giving more satisfaction to the consumer than the discount offered by the sellers.  The personal touch of selling offered in the brick & mortar system is missing in the online buying.

Opportunities

Central Government and the various state governments are coming up with new projects to enhance the education level and quality of school/college going students.

The new generation is bound to be more tech-savvy and risk taking. The Indian youth in schools/colleges is already very active on the social media platforms like Facebook anf Twitter. The threats perceived by the current Indian internet users may not have big impact on the coming generation.

The e-tailers have the opportunity to tap this big market early on, by launching their youth oriented products. With the new evolving models for e-commerce, the market will have many more options to attract the customers. Deals and discount coupons have been a big “hit” in the Indian ecommerce space. Companies like Snapdeal, Shopclues, Coupondunia, 100bestbuy etc. have attracted more and more customers to their offerings.

The further integration of Shipping, Logistics, Customer Support along with the core e-commerce will open new opportunities to the sellers in the next phase.

 

Success stories

India's e-commerce market has been red-hot in recent years with market leader Flipkart clocking a valuation of $7 billion in a July funding round when it raised $1 billion from a clutch of existing investors. A day later, Amazon announced plans to invest $2 billion in India. The e-commerce giants like Flipkart, Snapdeal, Amazon India, Ebay India and other have attracted the attention of the investors and buyer over the last few years.

Flipkart’s commitment of Speedy delivery of the product, Snapdeal’s exclusive deals, Amazon’s amazing return policy and Ebay’s payment guarantee programmes are few examples which can definitely show path to the future e-tailers. With the news of Big Brands like TATAs planning to enter the e-commerce space with the marketplace model that has been made immensely successful by Alibaba, the excitement in the Indian market is bound to further grow.

The challenges like timely delivery, security of transaction, quality of product, customer service etc need to be duly tackled by e-commerce companies and they need to keep their research on, to develop new models continuously, so that the customers feel comfortable while doing the online transactions.

The security of payment on the internet and mobile phone are still a major hurdle for e-commerce growth in the country which need attention of the ecommerce companies. We can definitely hope to have many more success stories in the near future, till then, Happy E-Shopping!

 

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