E-commerce in India

ecommerceIndia has an internet user base of about 137 million as of June 2012.The penetration of e-commerce is low compared to markets like the United States and the United Kingdom but is growing at a much faster rate with a large number of new entrants. The industry consensus is that growth is at an inflection point with key drivers being:

  • 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

Market size and growth

India’s e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $14 billion in 2012. 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 online 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.

Future trends

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.

Marketing

There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll.

India got its own version of the Cyber Monday on 12 December 2012. Google India said it had partnered with many of e-commerce companies including Flipkart, Snapdeal, HomeShop18, Indiatimes shopping and MakeMyTrip. Cyber Monday is the term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day. Google said that, this was the first time, when an industry wide initiative of this scale was undertaken to offer users an incentive to gain from deals that they can find on the web on a single day.

Funding

As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising, Flipkart.com, in August 2012, raised about INR8.22 billion (US$150 million). Entertainment ticketing website BookMyShow.com raised INR1 billion (US$18 million) investment by Accel Partners.

 Costs

  • Website development and maintenance cost
  • Hosting and data security cost
  • Marketing costs
  • Warehousing costs
  • Product delivery cost
  • Payment gateways charges
  • Trust-building costs
  • Customer acquisition

Unique to India

Some of the aspects of Indian e-commerce that are unique to India (and potentially to other developing countries) are:

  • Cash on Delivery as a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash on Delivery.
  • Direct Imports constitute a large component of online sales. Demand for international consumer products (including long-tail) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.

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