E-Commerce in Indian way

Over the last few years, rising internet with smartphone penetration in daily life has changed the way we communicate and do business. E-commerce is revolutionary concept with growing acceptance. It is, at present, heavily leaning on the internet & smartphone revolution to fundamentally alter the way businesses reach their customers.
As per Wikipedia and other studies India’s e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $16 billion in 2013. About 75% of this is travel related (airline tickets, railway tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5% ($300 Million as of 2009). India has close to 10 million C shoppers and is growing at an estimated 30% CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.
Key drivers in Indian e-commerce are:
  • Increasing broadband Internet (growing at 20% MoM) and 3G penetration.
  • Rising standards of living and a burgeoning, upwardly mobile middle class with high disposable incomes
  • Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers
  • Busy lifestyles, urban traffic congestion and lack of time for offline shopping
  • Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs
  • Increased usage of online classified sites, with more consumer buying and selling second-hand goods
  • Evolution of the online marketplace model with sites like eBay, Flipkart, Snapdeal, Infibeam, qnetindia, Dealkyahai.com and Tradus. The evolution of ecommerce has come a full circle with marketplace models taking center stage again.

India’s retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%. According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.

As per “India Goes Digital”, a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at ₹ 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach ₹ 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at ₹ 3,600 crore (US$800 mn) in 2011 and estimated to grow to ₹ 53,000 Crore ($11.8 billion) in 2015.
On March 7, 2014 e-tailer Flipkart claimed it has hit $1 billion in sales, a feat it has managed to achieve before its own target (2015).
Overall e-commerce market is expected to reach ₹ 1,07,800 crores (US$ 24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.
The real cause of success of e-commerce in India is ‘Cash on Delivery’ or COD. The major reason for COD popularity is that the buyers do not have to pay anything before the goods are delivered to them. In India most of the population either does not have a Debit or Credit card (Jan Dhan yojana still need to go long way) and the ones that do, do not such it much for online transactions. Cards are basically used to withdraw cash from ATMs but not for making payments online. Therefore ‘Cash on Delivery’ is one means where a seller can reach out to buyers even if they don’t have means to make an online payment. Another reason of COD is Indian mentality of the trust for online shopping, although e-commerce is increasing in India but many still fear using new e-commerce companies and fear that they’ll be scammed.
Though COD has helped e-commerce in India grow, it does have drawbacks. It can be expensive for the seller if the buyer returns a product, as the e-commerce company have to pay two-way courier charges. As per the E&Y report, The return rates in online shopping in COD transactions averages around 40 per cent.
There are also cash flow issues. The report notes that COD adds a layer to the supply chain, because of cash handling. This can increase the settlement period of online retailers and courier companies to as much as three weeks. This stretches the e-retailers’ market outstanding.
“Apart from high logistic cost, from a operation & control point of view, COD is not the best environment.” says Suhas Zele, co-founder & Operation head of ‘pustakwale.com‘ an online book store company. However, from business point of view specially in e-commerce in India COD is ‘Most required Devil’.

Author: Vishal

Vishal is lead Technology Consultant and founder member of Ranadive Consultancy Services Pvt. Ltd. He is carrying Engineering degree in Electronics & Telecommunication Engineering from University of Pune. He is a multifaceted professional with core competencies in Computational techniques, ERP & Business Consultancy. With more than 14 years of experience in his field