Growth of e-Commerce in India

The growth of e-Commerce in India has had a very high correlation to the adoption of Internet in the country. And as the country stands at the cusp of the proverbial 'S' shaped curve, prospects indeed look bright for the e-Commerce industry in India.

India today is the third biggest Internet market in terms of users, with over a 100 million Internet user base. Forty million people in India access the Internet from work, 30 million from Cafes, apart from 11 million households that have a broadband connection in place. The time an average Indian spends online today is now on par to TV viewing time at 16 hours in a week.

e-Commerce has, therefore, grown at a fast clip in India and the Internet and Mobile Association of India (IAMAI) expects e-Commerce to grow by 47% to over INR 46,000 crore in the 2011 calendar year.

Certain concomitant trends, therefore, have become apparent and these are further fuelling the growth of e-Commerce in India.

More and more brick and mortar institutions, and those involved with organized modern retail are building/beefing up their online transaction capabilities. A major marketing trend, it now allows organizations to reach out to potential consumers in geographies, where the institution does not have a physical presence and thus opening up avenues for increased sales.

Online medium --key marketing tool

In the next five years, the sector is expected to grow at a CAGR of 24.6 per cent to reach INR26 billion in 2016 and shall account for 4.6 per cent share of total advertising spend.

Considering the fact that youth form a significant proportion of the regular Internet users (approximately 78% of the regular Internet users are in the age group of 19-35) and average household disposable incomes are on the increase, consumerism has majorly set in.

An analysis shows that average real household disposable income in India, which was around INR 113,744 in 2005, is growing at a compounded annual growth rate of 5.3% and is, expected to reach INR 318,896 by 2025. This is much more rapid than the 3.6 percent annual growth of the past 20 years and with the exception of China, much quicker than income growth in other major markets.

As more and more organizations join the digital marketing bandwagon —it can only have the salutary effect of further expanding the e-Commerce market.

Availability of 'perfect information' and 'perfect competition' shall shave off supernormal profits from vendors and only those with deep pockets shall only be able to survive this blood bath.

Another visible trend is the hygiene service expectations of consumers as these are becoming more and more stringent. With the battle now being played out on price and with every e-Commerce portal eyeing a share of the consumer's wallet — buyer power has now shifted entirely to the consumers and consumer loyalty is a passé.

Whoever provides a better price/service offering/a superior buying experience shall be rewarded with the consumer's valued order and thus sets in a virtuous cycle where only the fittest shall survive.

Game changers in e-Commerce

One of the most important aspects of modern day e-Commerce, Cash on Delivery (COD) is fast becoming a game changer. The Indian consumer is still uncomfortable with online transactions and would prefer to part with his/ her money only on receipt of the goods and services contracted for. The proclivity towards this has resulted in providing the COD option as an important alternative to online payments. eRetailers have indicated that 50% to 80% of their sales now come from COD and rejection rates upon delivery are lower than 10%.

Providing for EMI options in online payments is one of the latest innovations in the e-Commerce sector. The goods bought on the Internet typically are of low denominations — primarily to mitigate the risks involved in buying a big ticket item online. The EMI options are expected to fund the interim working capital requirements of the consumer and in many cases the organizations themselves bearing the interest costs has provided that added fillip to online transactions.

In addition to the EMI option, Aggregate Buys are also slowly catching on. This is a win-win for both the buyer and the seller as the relevant sites offer products and services at a significant discount so long as the deal has a minimum number of buyers. This has seen a virtual explosion of portals in the past months.

The rise in group buying has been propelled by the growth of e-Commerce and the increased spending power of India's middle class. Already consolidation has begun in the group couponing scenario. International major Groupon has entered the Indian market by acquiring Kolkata-based SoSasta. In 2010, within months of its launch, SnapDeal, a front-runner in this industry with over four million users, acquired Bangalore-based Grabbon.

Another similar site WanaMo was acquired by serial entrepreneur Harish Bahl and Group Buying Global AG and re-branded to Deals and You. In March this year, Mobstreet, which was shut down in December 2010, reportedly due to lack of funds, was acquired by Groffr, which focuses on real estate and high-ticket deals like automobiles, jewellery and watches. International companies are also joining the fray. eBay India launched a collective buying section, Social Shopping, in January this year.

Google has plans to bring its answer to Groupon, Google Offers to India.

The usage of Net banking and Debit Cards for online purchases has been on the rise indicating the growing comfort of people in using these instruments online.In fact many banks are now offering incentives to their customers for transacting online.

All these trends only foretell one thing —e-Commerce shall swamp the Indian market and organizations shall necessarily have to align themselves to the market dynamics or perish.

In summary, the Indian eCommerce scenario has never been so good.