Future of E Commerce in India


As India inc. echoes the sentiments of new business models, ecommerce industry is set to expand at a monumental scale. India’s e-commerce industry is primed to become the next big revolution with the dramatic change in the shopping trends witnessed in the recent times. Being the 11th largest economy, India has already marked its presence on the eBusiness Organization of key international markets. With 124.7 million online users currently, Indian Ecommerce market has turned out well with estimated revenues of around USD 10 billion. Flipkart, Snapdeal, Myntra etc. speak volumes about it. But the big question remains whether it‘s just a fad or is it the curtain raiser to the humongous growth awaiting in business circles.

According to the Zenov report, India’s ecommerce industry is poised to become a $125- $260 billion industry. Currently, shoppers in metropolitan India are the key drivers of the ecommerce model. The ecommerce websites cater to its consumers by selling everything from books to apparel, from electronics to grocery items. For the growing consumer base, there are numerous options popping up to choose from the various ecommerce websites. But behind the backdrop, there are ongoing battles for customer acquisition and price wars evident from the competition intensive facet of this growing segment.

Catering to Indian Consumers: Taking up a major gauntlet

Fulfilling the specific requirements of the Indian consumers has predominantly remained a task in itself for any business model. In the ecommerce context, retailers must be aware that consumers demand the return process to be seamless and convenient. The cost involved in the service is high but the retailers consider it necessary for ensuring customer trust and confidence. While such at-home pickup for returns is typical in other emerging markets, the markets tend to shift from this labor-intensive, often inconvenient process to prepaid return labels as the ecommerce ecosystem develops in the future.

Another service provided is the free door-to-door shipping which is commonplace in such markets. Online retailers have little choice but to offer the same convenience, services and low costs that their local counterparts are offering. Thus companies investing in such spaces are often skeptical of the future sustainability of such offering.

It is always presumed that the ebusinesses must offer a variety of payment options. In India, online payments present multiple hurdles. Like most emerging markets, cash on delivery, most commonly referred to as COD, is a popular option — with 23% of online shoppers in metropolitan India choosing to pay for online purchases with cash. COD becomes indispensable to target the first-time shoppers who try to conceal their information over the Internet and shoppers who don’t use widely accepted cards and banks. Myntra.com, for example, sees 60% of its transactions paid for with COD. While COD can be a great way to acquire new customers, return rates on these orders can be colossal. In India, venture capitalists report COD return rates of up to 25% in some categories. Indeed, COD return rates tend to be much higher than when a consumer pays online. Even those companies that offer a variety of localized payment methods are struck in a predicament with infrastructure crunch. Payment gateways, for example, are notorious for being inconsistent, with failure rates as high as 35% in India. However, retailers can take a series of steps to ensure that they are offering the payment types that most appeal to consumers today. By doing so, these businesses position themselves to capitalize on growing online spending as infrastructure issues are addressed.

Future of Ecommerce in India 1

Influencing Future growth of ecommerce in India:

  1. Venture Capitalist are bullish on Ecommerce growth in Indian Market

    In 2011, Venture capitalists invested a whopping USD 177 million in the Indian ecommerce market to stir the future growth. The investors believe that the Indian urban consumers have surpassed the initial stages of online shopping and now find it convenient to shop online for any product which isn’t readily available in the local market. Women lingerie shopping, for example, is expected to grow in the near future where women can buy anonymously.

  1. Online Grocery Stores

Grocery, traditionally in India is perceived to be procured from the local kirana stores. However, an e-model that can service to such demands is no more a distant dream. It is a category that has started to venture online and is doing reasonably good in its nascent stages. Certainly, the concept is poised to grow in future. MyGrahak.com, for example, expects to have a turnover of USD 179.1 million by 2015. Although the website currently has 22,000 registered users, the sign-up rates are increasing by 25% and the firm is consistently aiming at doubling its warehouse and logistics capacity.

  1. Social Media- Growth in nonmetropolitan India

Ecommerce retailers are investing heavily in infrastructure to support the nonmetropolitan cities and capture the market in such cities. Online retailer Myntra.com is raking in moolah as 50% of its sales are outside India’s 10 biggest cities. To cash in the new segment these retailers are trying building warehouses outside central locations, testing various shipping options to semi-urban and rural consumers and providing options like COD.

Future of Ecommerce in India

Recommendations:

Ecommerce is in its nascent stage and developing fast. In order to offer the best to the customers and reflect their services, the players in this industry must be aware of the following considerations:

  1. Ebusinesses must be willing to work with different partners

Ebusinesses will need to manage every step in business operations- from site design to fulfillment solutions to employee training. Ebusinesses trying to enter the Indian market must be aware of the need to work with a variety of partners and work through integrating multiple solutions.

  1. Mobile will be a part of ecommerce mix

Ecommerce businesses can take advantage of this growing trend and start offering mobile website- ensuring that it is accessible on both feature phones and smartphones

  1. Multibrand retailers must be ready to launch as soon as FDI norms are lifted

Like Croma (single brand), one of the largest electronics stores that moved online to sell its entire range of products, multibrand retailers who have an eye on the Indian market, can map out their potential offerings so that they can move quickly when FDI norms are relaxed.

  1. Move beyond English to differentiate in the long run

Ecommerce leaders should consider multilingual websites as a potential long term option for differentiating their offerings and appealing to consumers who would prefer a local language.

As Hil Davis (co-founder of the online men’s retailer J. Hilburn), rightly says

“With more and more people seeking alternatives to bricks-and-mortar retail now is the time for development of new technologies to enhance the online experience.”

With ecommerce bridging the online/offline gap, India’s potential for e-commerce is immense. Overcoming its challenges will be incredibly rewarding.

But will it really get that big?

Only time will tell.

Till then Happy e-shopping!!

(This article has been written by Leena Kalani, a first year management student at SIMSREE)

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