Indian E-Commerce Poised for Growth

E-commerce in IndiaWhile an e-commerce boom in India has been thought to be on the horizon for a long time now, the industry is finally showing signs that it is heading in that direction despite having several false starts.

Why now?

  • Critical Mass: The Indian e-commerce industry is finally close to achieving the critical mass required for it to genuinely go through the boom that has been predicted to happen several tmes over the past decade. The number of unique visitors on retail sites doubled between 2011 and 2013, and more than 1.5 million more are visiting every month.
  • B2B is open: To develop the sub-sector without being politically unpopular, the Department of Industrial Policy and Promotion clarified its regulations on B2B e-commerce, allowing foreign firms to have 100% ownership in such ventures.
  • B2C is likely to open up very soon: The Prime Minister’s Office is in favor of opening up the fast-growing e-retail sector to FDI—a move that will allow global majors such as Amazon and eBay to invest in the country. Preparing for the upcoming change will help companies stay ahead of their competition.

Why should e-commerce matter to multinationals?

  • Large, Fast-growing Base: India’s fast-growing online population has now surpassed that of Russia, Brazil, and Japan to become the third-largest Internet population in the world. It also has one of the youngest populations of Internet users in the world, providing a large base of users who will more easily adapt to technological changes.
  • Strong Growth Expectations: With the introduction of faster Internet, an increase in urban disposable income, and the launch of global players with sophisticated platforms, some experts expect the e-commerce industry to be worth US$ 70 billion by 2025.

Key Consumer E-Commerce Trends:

  • Significant Non-Metro Following: Contrary to popular belief, e-commerce users are not purely from the top metropolitan areas of India; in 2011, cities with a population of less than one million accounted for almost 48% of total e-commerce users. Another study showed that more than 57% of the revenue from e-commerce products and 54% from the e-commerce services industry was derived from beyond the top eight metros.
  • Time spent on retail not high: A closer look at the division of time spent online by users reveals that most of it is browsing through social-networking websites and on services (see chart below). With only 3% of screen time spent on actual retail, companies need to be exploring marketing (advertising) opportunities for influencing consumers’ final purchases.PC Screen Time

Key Business E-Commerce Trends:

    • SMEs will continue to be early adopters: SMEs are the primary users of B2B e-commerce in India (see case study on slide 21), because they manage businesses with relatively lesser amounts of capital and operate on a low-cost basis. Embracing this cost-efficient technological tool has allowed SMEs to create a self-serving business model, where they can access channel partners and customers through a single platform.
    • MNC’s likely to test with small orders and SMEs: Some large firms and MNCs in India have begun testing their B2B e-commerce platforms but are keeping them on a small scale to assess the integrity of the system. Avenues for testing a B2B platform would include launching it to (a) very small orders that are otherwise left unattended, (b) small firms that have not traditionally been of interest due to scale, or (c) firms looking for samples to test the product.

Holistic Strategy: Companies need to develop a holistic e-commerce strategy with tactics to handle both the online and offline channels. Not all industries will benefit from using online platforms for conducting commerce. But with users spending increasingly large amounts of time online and becoming dependent on the Internet for gathering of crucial information, companies need to investigate and form a social media strategy to create an impact.

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