Has e-commerce come of age in India?

All reports indicate that ecommerce is booming in India. With a growth rate of  40% per annum the industry is currently valued at Rs.50,000 Crore, of which 80% comes from travel-related purchases (online ticketing and booking of rail/air tickets) and 20% comes from retail e-commerce (purchase of products). Research also reveals that 40% of ecommerce activity comes from small towns (Tier 2 and Tier 3 cities). Further, venture capitalists like Tiger Global and Accel Partners have pumped in more than $300 billion into the sector, heavily backing companies like FlipKart, Indiaplaza and Myntra.

And the ecommerce industry is predicted to grow to Rs.400,000 Crore by 2025, with retailing projected to have 50% share of the total.

I have seen changes in my own online shopping behaviour in the last two years.One of the biggest ones is that I do not hesitate to buy high ticket items online - mobile phones, laptops, expensive speakers. Another change is that I often end up buying from foreign sites, in dollars - the range includes content subscriptions through apps, software, ebooks and even gadgets. And I am not counting the numerous apps that I have purchased through the Apple Store, or the dozens of monthly bills that get processed directly through my bank account or credit card,

Clearly, my trust in e-tailers has increased. I trust the security of online transactions and the reliability of online sellers. Even more importantly, I have purchased most products, including the most expensive ones, without ever seeing or testing them out in real life. In fact, I would not have been able to, because many of these products like the Kindle, my Audioengine speakers and my Dell Vostro V131 laptop were simply not available in any brick and mortar store in India. I have learnt to use customer reviews and forums to get comfortable with products, and it is working very well for me. Ten years ago, I worked on a research project to study the (then miniscule) audience of e-shoppers in India, and I encountered barriers like "how can you buy something without seeing it?" "What if they cheat me? How will I get my money back?". Our very innate cultural need to touch, see and smell what we buy and make sure we are not cheated, seems to be finally dissolving, and this is a welcome change.

Finally, online buying has brought me a lot of value. I buy online under two conditions - either I get cheaper stuff (upto 30% cheaper than brick and mortar stores in some cases) and secondly, I get stuff that is otherwise simply not available in India. And when I buy through sites like Flipkart or Ebay, I get the option to avail EMI schemes on my credit card, which makes it easier to decide on high value purchases.

I imagine that the same factors are driving the growth of ecommerce in small towns, fuelled by the steady growth of internet penetration which has finally crossed 100 million in 2011. The internet bypasses many limitations of brick and mortar retail, allowing you to order the most expensive international brands and get them delivered anywhere from  Bhatinda to Madurai, and that too at a discount! With many sites offering Cash on Delivery, payment by DD etc, you do not even need to own a credit card to order online.

The growth of ecommerce has been promising, but lots more effort is needed for the sector to reach the ambitious figure of Rs.400,000 Crore.

Firstly, we need to see more action in the mobile space by ecommerce companies. By 2020, mobile internet access is projected to reach 600 million, completely overhauling the stagnating broadband access. Companies need to start initiatives to encourage shopping through mobile phones and I do not mean only apps. I am talking about payment gateways, mcommerce and even  devices set-up for purchase like the Nook and the Kindle Fire. We have already seen the launch of many cheap. sub Rs.15,000 tablets in India like the Akaash and Reliance 3G Tab, and any of them could be set up to provide exclusive access, to say Indiaplaza or Flipkart products. Sell them discounted, and it could be a huge trigger.

Secondly, we have to see more flexible online payment mechanisms. Credit cards are under-penetrated in India, and while penetration may grow, e-banking is likely to grow faster. I would like to see growth of methods to securely transfer money to a seller including e-drafts, bank transfers etc. Of course, all of these need to be accompanied by a foolproof buyer protection mechanism. It would be good if banks can step in to create a system, like Ebay's paisa pay, which protects buyers from fraud.

Thirdly, we need vernacular language versions of ecommerce sites (Off topic, but vernacular content lags behind big time in India), so that people can transact in the language they are most comfortable with.

And finally, we need to see more initiatives to encourage women to shop online. Worldwide, including in India, women form the bulk of shoppers in brick and mortar stores. In India, internet access by women continues to lag behind men. Educating and encouraging the housewife to switch to ecommerce could lead to an explosion of online categories like perfumes, clothes, household groceries and provisions, and even toys.

Sources:
Forbes India
Deccan Herald
SiliconIndia


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