Rise
of E commerce in India: It’s Characteristics and Challenges
The rapid growth of ecommerce in India Over the last two decades,
rising internet and mobile phone penetration has changed the way we communicate
and do business. E-commerce is relatively a novel concept. It is, at present,
heavily leaning on the internet and mobile phone revolution to fundamentally
alter the way businesses reach their customers. While in countries such as the
US and China, e-commerce has taken significant strides to achieve sales of over
150 billion USD in revenue, the industry in India is, still at its infancy.
Chief
characteristics of the e-commerce market
•
‘ Cash-on-delivery :
India has
been a vibrant cash economy where the consumer’s purchasing behaviour involves
an initial overall inspection of the product from different perspectives and
paying subsequently. Further, customers in India do not extend much trust on
the transit facilities for the delivery of the products. This has resulted in
‘cash-on -delivery’ (COD) as a preferred payment option of majority of the
Indian consumers buying online.
•
Return
process :
Consumers in India expect the return process to be seamless and
convenient. However, with an expectation of return of the items purchased
online, online shoppers have made available the option to return the purchased
goods at the behest of the retailer. Retailers have considered this option of
return to develop trust and confidence which results in seamless subsequent
purchases and positive word-of mouth support.
•
Free and
quick home delivery :
It is another characteristic of the ecommerce
industry in India. E-retailers offer free delivery of the products within a
promised timeline. Though this may be unsustainable in the long run but
e-retailers have to offer the same convenience of free and quick shipping to
compete with other retailers.
Challenges :
Though the e-commerce sector is growing exponentially in India, it
faces several challenges like: customer mindset, high cash on delivery (CoD)
based orders, reach ability, poor courier services and other policy-related
issues.
·
High competition :
There are
several players doing the same business in almost the same way. With intense
competition the profitability is decreasing due to aggressive pricing
strategies, heavy discounts and offers, free delivery, high commissions to
affiliates and vendors during sale period to name a few.
·
Supply
chains and logistics networks :
With this benefit also comes the challenge
of robust supply chains and logistics networks, which are not comparable and
developed to global standards in India. The courier companies do not have
nationwide delivery networks and also do not have the skills of handling
commercial value goods. They also do not have the skills for handling CoD,
recheck return parcels, and other complexities related to digital sale. This is
forcing several e-tailers to establish their own delivery network across the
country and might have to engage with multiple shipping methods using FedEx or
DHL for the last mile delivery.
·
Payments :
E-commerce
companies have to offer a wide variety of payment options including CoD, credit
and debit card, and internet banking, among others. 60-70% of the payments are
made using the CoD option in India as customers fear to share information
online and do not trust the website for secure payments. Moreover, the return
percentage of orders in CoD is much higher compared to online payments. To
counter these fears, e-tailers have started to provide facility of paying with
Card on Delivery.
Growing
power of e-Marketplaces:
The e-Marketplaces are growing significantly with the increase in
the Internet penetration and Smartphone usage. Internet enabled mobiles are
making shopping a unique experience for buyers. E-Marketplaces provide a
technology platform for sellers to participate and a trusted environment to
scale up rapidly, increase profit and are highly valued by the customers.
The non-inventory led B2C
model also allows the e-commerce players to provide attractive discounts and
offers which are difficult for inventory led brick-and-mortar shops as well as
for pure e-Tailers. According to Deloitte’s study [1] “Global Powers of
Retailing 2015,” online marketplaces rather than pure inventory-led companies
tend to serve as the primary e-commerce model in Asia. The high costs of
holding inventory, poor logistics and supply chain challenges in India are
shifting the inventory-led companies and new entrants to adopt marketplace
model. Also, e-Marketplaces work well in India due to high fragmentation on
supply side.
The rise of online sales in the developing markets is encouraging
retailers to go online for global expansion. The e-retailers are becoming
exclusive partners for different brands. e.g. The Chinese Smartphone
manufacturer, Xiaomi, entered Indian market through Flip kart e-Marketplace
that helped to reach a large customer base in a short time. Similarly, [2] One
Plus teamed up with Amazon India for exclusive partnership.
The Way
Ahead :
Less than a quarter of India's population has access to the
Internet today, but the country's future in e-commerce appears promising.
Online shoppers are expected to increase from 20 million in 2013
to 40 million in 2016, as an additional 200 million Indians will access
the Internet in the next three years, with majority of them coming online
through smartphones, indicates a new joint study by Assocham
and Grant Thornton.
The e-commerce is one of the biggest things that have taken the
Indian business by storm. It is creating an entire new economy, which has a huge
potential and is fundamentally changing the way businesses are done. It has
advantages for both buyers as well as sellers and this win-win situation is at
the core of its phenomenal rise.
Rising incomes and a greater variety of goods and services that can be bought over the internet is making buying online more attractive and convenient for consumers all over the country.
Rising incomes and a greater variety of goods and services that can be bought over the internet is making buying online more attractive and convenient for consumers all over the country.
Sources:
1. Deloitte study on “Global Powers of Retailing 2015: Embracing
innovation”. See: http://www2.deloitte.com/global/en/pages/consumer-business/
articles/global-powers-of-retailing.html
2. Xiaomi to go independent without Flipkart. See:
http://www.americanbazaaronline.com/2015/03/18/xiaomi-to-go-independent-without-flipkart/