eCommerce in India
India is one of the largest consumer markets in the world. Being the youth capital of the world, India has emerged as one of the most lucrative business destinations for digital and ecommerce businesses. In the last few years, there is a huge surge in interest and investment in the ecommerce in India, and many studies assert that the influx is not going down any time soon. But are the estimates of projected gains really true? Or is it just a hype?
Internet Penetration in India
It is a no-brainer that ecommerce in India is not possible without access to the internet. While in terms of retail market size India is much bigger than several countries in Europe combined, internet penetration in India still lags behind.
According to a 2018 study published by Pew Research Centre, only 25% of the Indian adult population uses the internet regularly. Again, this is mostly restricted to urban and semi-urban areas. Lack of proper infrastructure plays a big role in restricted access to the internet for our citizens. Moreover, in remote areas, owning a cell phone with internet access is still a dream for poor people.
However, the situation is changing, and fast. India is a highly competitive market for telecom service operators- this has led to intense price wars, which have progressed to cheap internet usage rates among service providers, much to the benefit of customers.
India has one of the fastest growth rates of digital proliferation in the world. A study by the Aranca says that internet penetration in India took a massive leap of 24.23% between 2007 and 2017. In 2007, the penetration rate was just 4%. As of 2017, it stands at 35.03%.
Just imagine the market size from that data. In sheer numbers, these projections mean that the number of internet users in India is more than that of several other countries combined. There is definitely a huge potential to be unlocked in the online commerce sector.
History of Ecommerce in India
It was in the early 2000s that the Indian internet invasion began. Online transactions came much later, mostly being restricted to paying bills for utility services and buying train tickets- and eventually, flight bookings.
Ecommerce in India, as we know it, today was slowly growing. In 2007, the Indian ecommerce industry saw the launch of Flipkart. While online shopping was technically present before that, it took flight with the deeply discounted model that Flipkart introduced. Soon, young people were flocking online to buy gadgets and clothes in unprecedented numbers.
The change did not go unnoticed. Global players now saw a huge potential market in India. The next benchmark in India’s ecommerce market was the entry ecommerce behemoth Amazon. Amazon India emerged as the main competitor to Flipkart, and they went neck to neck in discounting and holding regular sales.
Meanwhile, other big players like Snapdeal, ShopClues, HomeShop18 and other online commerce sites also made their entry. However, as the market grew more competitive, many were pushed out, while the bigger players acquired other smaller ones.
In 2018, the sector saw the takeover of Flipkart by WalMart in one of the biggest deals in the Asia Pacific region. How this new development plays out is anybody’s guess- but one thing is for sure- Indian shoppers will surely be spoilt for choices and will be aggressively courted by the global giants.
Future of eCommerce in India: Aspects that are fuelling the growth
India is considered the youth capital of the world. It is a no-brainer that this is the focus demographic for ecommerce operators anywhere in the world. In a country where internet penetration is growing in tandem youth aspirations, the universe sees a sea of opportunity for ecommerce to flourish.
Millennials today are setting industry trends. Since technology and internet is by and large the domain of the upwardly mobile youth, it does not take a rocket scientist to understand the kind of opportunity it presents for entrepreneurs and industry heavyweights alike. As the adage goes, you have to “catch ‘em young’. Any brand worth its salt must look to stay relevant by appealing to the youth. This is the single most crucial factor in ensuring a brand’s long=term survival in the digital age.
As broadband usage rates have gone down, more people are going online and shopping online. Cheap, internet-enabled cellphones have made it possible for everyone to carry the world in their pockets. Look around, and you will see every other person busy peering into their phones. Earlier, we had to wait to get back home to start surfing. Now, we can do that to our hearts’ content even while riding an elevator or travelling across the country.
The growth of eCommerce in India with the Rise of Digital Payments
The growth of eCommerce in India is led by and co-existed with- the rise of digital payment methods and platforms. Online payment is a boon for busy customers, who often do to find time to visit a bank. What was once restricted to just net banking for paying utility bills and services, has today transformed into a vast sector. Today, you can pay your utility and even consumer bills from your cell phone.
There are several apps and digital payment platforms that have enabled this shift. Since most people now are wary of carrying large amounts of cash, digital payment has become their favourite way. Sensing the preference of the customers, more and more companies are now enabling digital payments- and as a result, snagging the digitally savvy customers.
This has also been a blessing to small businesses and startups. Enabling digital payments helps them attract more customers. This is the reason why you will see many companies encouraging digital payment via their own apps or other partnered platforms while offering attractive discounts to customers.
The Government of India has been actively pushing for large-scale adoption of digital payment method- as this is hassle-free, convenient, fast, and eco-friendly. This has been crucial to the “Make in India” movement, which aims to foster indigenous entrepreneurs and manufacturers. With digital payments becoming more popular, it is now possible for them to conduct transactions with clients, customers and suppliers from all over the world.
With the launch of UPI and Bhim, more people are now paying online- a development that is already showing a significant increase in sales for online retailers.
India eCommerce Market Size
The ecommerce industry is booming in India, with electronics and fashion/apparel sector leading the charge. According to a study by PWC, the industry grew by almost 35% CAGR from $3.8 billion in 2009 to an estimated $12.6 billion in 2013. The study determined that the e-retail industry in India is poised to be $10 to $20 billion in 2017-2020.
Other market projections go even further. The Internet Brand Equity Foundation estimates that the e-commerce market is expected to reach US$ 64 billion by 2020 and US$ 200 billion by 2026 from US$ 38.5 billion as of 2017.
The same study says that urban Indian centres, with an estimated population of 444 million as per 2011 census, already has 295 million using the internet as of December 2017. Rural India, with an estimated population of 906 million as per 2011 census, has 186 million internet users as of December 2017.
There is, therefore, a great opportunity for increasing penetration in both the spheres- especially in rural India. Though studies show that rural youth are now adopting the internet fast, lack of infrastructure still posits a big hindrance for ecommerce aspirations.
The scope of eCommerce in India
A recent study by PwC and Nasscom estimates that the Indian ecommerce market may grow more than fourfold to $150 billion by 2022, fuelled by rising incomes and a surge in internet users. The Indian middle-class population is also growing, which means a rise in the number of aspiring consumers. Companies will do well to reaching out to them- because, in sheer numbers, this is a massive market potential waiting to be unlocked.
The study projected that the number of internet users is expected to nearly double to 850 million in five years. Among them, 150 million users are expected to do digital transactions and they will mainly be based in tier-2 and 3 cities. These customers can take advantage of diverse language choices available for surfing the internet, payment modes and products.
It can be assumed that growth in the ecommerce sector will involve the growth of all significant sectors- e-travel and e-ticketing, e-tail, financial services such as e-wallets and insurance, consumer services (classifieds and e-services) and digital content segments.
Trends in eCommerce in India
With the acquisition of Flipkart by Walmart, the Indian ecommerce industry is scheduled to undergo a significant change. Since its launch, Flipkart has been the chief domestic competitor for global giant Amazon. During its reign, Flipkart pushed out other big players like Snapdeal, while acquiring popular lifestyle shopping portals like Myntra and Jabong.
While other fashion online retailers managed to launch, they were either pushed out or taken over. As of now, there are many such companies which are surviving on the fringes. In the most popular categories- fashion and electronics, Amazon and Flipkart are the leaders.
With Flipkart being taken over by Walmart, there are now no homegrown retailers who can challenge Amazon. However, Walmart brings its considerable financial might to Flipkart, so it will be interesting to see how the rivalry plays out. Most probably, we will see even more aggressive discounting and an increase in product variety on both ends.
In this highly competitive space, one cannot expect to rake in big profit margins. The Indian shopper too has proven to be savvy enough to go for the best deals. What now, can be done to attract new customers and inspire brand loyalty in them?
The answer, of course, is providing great customer service. How a company treats its customers has always been a deciding factor in determining the former’s survival. The next frontier for the battle in the Indian e-commerce industry is set to be fought around a seamless shopping experience, building digital trust, voice-based or conversational commerce and creating an inventory of localised content,” said Sandeep Ladda, partner and global technology, media and telecom sector leader at PwC India.
Is India ready for eCommerce
As more customers are now going online, local area ecommerce now stands poised on the brink of a huge growth potential. Think about the last time you wanted to dine out. Chances are, you fired up your preferred food delivery app or travel website and selected from the list of eateries you spotted in your vicinity.
Local listings are going to become more critical, and this is something all small business owners should keep in mind. The competition is with your next door rival will now spill over to the virtual space. This presents a significant opportunity for small businesses as well as other retailers.
If they shore up their digital presence and capacities, not only can these businesses rationalise costs and grow their influence- they will also see an increase in revenue. Retail ecommerce sales can have a significant impact on a company’s margins.
It goes without saying that there is a massive market for ecommerce in India, and it is slated to grow even further. While a large number of people still do not have access to the internet, it is changing slowly, and with the influx of more internet users, online shopping and ecommerce are also expected to grow proportionately.
The ecommerce space is not only booming, but it is also highly dynamic and is seeing constant changes- in terms of customer trends, technological advancements and product offerings.
Retailers, multinationals and small businesses alike should now prepare themselves for the future digitally. As more customers go online and choose to seek out services and payments online, anyone who does not update themselves will be left behind.