Ecommerce in India has seen rapid growth over the past few years. Thanks in large part to increased adoption of broadband and the introduction of 3G and now 4G. What began in a small scale is today a revolutionary industry valued at approximately $ 13.5 billion according to a 2014 estimate.
Indian ecommerce – the history, growth factors and future prospects
Flipkart started operations in 2007 as a book-selling website. In a span of seven years, its rapid growth was punctuated by new features, foreign investments and a record billion dollar funding in 2014. Shortly after Flipkart, Amazon, eBay, and others followed. In 2009, the Indian ecommerce industry was valued at $3.8 billion, and this figure rose to $12.6 billion in 2013. Increased Smartphone usage, low prices, and the breaking of physical barriers by the internet led to the explosive growth of the ecommerce industry in India.
IOS did a roundup of the ecommerce industry in India for 2014-15. It covered major trends that had swept the industry including acquisitions, newly appointed brand ambassadors, government policies, and additions to delivery policies.
Online marketing is the fastest growing segment in Indian ecommerce at a growth rate of 56% between 2009 and 2014. By 2020, etail will contribute to 3% of retail, indicating that there is much scope for increasing this percentage. Mobile phones have been the driving force of growth.
Supporting factors such as logistics and storage also play a major role in the success of ecommerce. As a result, several logistics companies have come up, for instance, GoJavas, Ecom Express, and even India Post. Existing courier companies have also branched into ecommerce, with tie-ups and services offered for online sellers.
Cash on delivery (COD) is the preferred mode of payment for 45% of shoppers, credit card users amount to 16%, debit card users are 21%, internet banking users amount to 10%, and mobile wallets have only 8% of the total takers.
Indian ecommerce has caught the fancy of multiple investors. Many, including foreign venture capital firms, have pumped huge tracts of money into the industry.
The Chinese ecommerce industry
Let us see how our close neighbour and closest contender, China has fared in the ecommerce sector. According to this KPMG study, the rise has been meteoric in a short span of time. The study quotes Mary Chong, KPMG Partner and Head of E-commerce and Payments for China who says that the main drivers of ecommerce in China are – ecommerce platforms, social media platforms, digital payment platforms and mobile devices.
Trends and driving factors
Alibaba is doubtlessly the leading player in the industry.
Chinese ecommerce is increasingly going mobile. In 2012, mobile buys contributed to 3.7% of all ecommerce transactions. Buyers in tier 1 cities like Shanghai are buying cars, vacations, and personal care items like cosmetics and bags. Brand loyalty and fashion consciousness seem to be higher among the tier 1 cities than in the tier 2, 3, or 4 cities.
Consumers are also very aware of what they want. This Bain study concludes that buyers spend a lot of time browsing before they decide their buys. They compare prices with offline stores before deciding on their buy. Several prefer to buy from brick and mortar stores as they have the option of touching and observing the products. Trust in online stores is still low as many customers fear being cheated with low quality stuff.
India versus China – a study
This study conducted by PWC says that China has a larger penetration than India has. The study says that UK, USA and China contributed to 57% of the business to customer ecommerce sales in the world in 2013. The study says that India’s poor internet penetration stands at 46 million. This pales in comparison with China’s internet base, 207 million.
eMarketer conducted a study that found that China’s sale figure in 2014 stood at $ 426.26 billion. Compared to this, India’s sale figure for 2014 stood at $ 5.3 billion.
The study also observes that the Chinese ecommerce industry has only one major player, Alibaba which owns subsidiaries. However, in India, the market share is split among several companies.
Experts are of the opinion that ecommerce in India is in the baby stage, and it will take at least 10 plus years from inception for it to flourish. Ecommerce in countries like China began its operations in early 2000s, and today, it is an established and booming segment. In India, it will need a few more years to thrive.
Why India will need more time to hit milestones that China has crossed
This Quartz India article clearly points out that important factors like last mile delivery, low usage of credit and debit cards, and competition from offline stores will play spoilsport in India’s ecommerce industry. Apart from that, the income and spending power in the Chinese seems to be higher than that of the Indians.
In a nutshell, Indian ecommerce has a long way to go before it can match pace with Chinese ecommerce.
What can Indian ecommerce do to speed up the growth?
Indian online sellers should as of now focus on the following:
- Improve logistics – particularly last mile delivery. Sellers should try to minimise the delivery time by enlisting trusted and established logistics companies.
- Improve pre and after sales service and support.
- Promote the usage of debit and credit cards, and mobile wallets.
- Listen to the customers’ needs and wants as best as they can.
- Explore different options to add more customers to the buyer base.
- Join hands with strategic and influential parties who can help better the sales.
- Consult experts in the fields of sales, advertising, and marketing.
- Rope in local players to ensure quicker and hassle free delivery.
These are few things that a seller can do. However, improving the big picture will need better infrastructure (good roads, improved telecommunication), policies (tax holidays) and encouraging and rewarding foreign investments, which are in the hands of the government and policy makers. All said and done, growth and development is a slow and steady process and will take a reasonable amount of time. As the proverb goes, ‘Rome was not built in a day’!