E-Commerce in India – The Growth, Future and Issues

4-5 years ago buying “anything” online was considered either madness or blasphemy. Then came the hyper-speed growth of Flipkart, Amazon, Snapdeal and others, coupled by the increased penetration of internet in India which resulted in a radical growth of online sales. While the major three have been in a race to outdo one another in sales, what they have actually done is, grow India’s eCommerce market at breakneck speed.

 

According to an October report by Gartner, an American Information Technology Research and Advisory Firm, eCommerce in India is likely to cross $6 Billion in revenues by 2015, recording a 70% increase from a year ago. About 8 Million people were shopping online in 2012, and the number this year has grown to 35 Million. By 2016, the online shopper base will grow almost three times to 100 Million, and over half of the new buyers would be from Tier I and Tier II cities. This makes India one of the fastest-growing eCommerce markets in Asia-Pacific region.

 

With the confidence to shop online having grown to 71% among the Tier I and Tier II audience and with more than 30% of traffic on eCommerce platform arising from handheld devices, the Indian market is set to reach $15 Billion by 2016, reports say. All said, the present Indian eCommerce market is similar to the China market in 2005!

 

eCommerce in India

We tend to associate E-Commerce mostly with the online sale of goods, mainly from the FMCG industry. Down to the numbers, one can actually notice that 71% of total eCommerce business in India last year was from the Travel Industry. This has grown at a compound rate of 32%  over 2009-13. Even with the strong presence Flipkart enjoys in the sale of books, the total eCommerce business in India, for books was a mere 7%, mobile phones 2% and fashion goods 1%.

 

To get a better idea in terms of how the eCommerce firms are doing, for every Rs 100 spent on e-tailing, Rs 35 is spent on supporting services like warehousing, payment gateways, and logistics, among others. Delivery costs a platform owner another 8-10% which ends with the eCommerce giants making nothing profitable out of the deal. This explains why Amazon is yet to achieve a happy figure in profitability while the other Indian counterparts are nowhere in terms of even thinking about profitability, anytime in near future.

 

This has a lot to do with the customer experience too. The reports say that 62% buyers were not satisfied with the whole buying experience while 67% said that the present return/refund process was too complicated and unsatisfying. 55% did not trust the quality of products sold online while 63% were concerned about safety of online transactions.

 

These numbers add up to a lot when the whole eCommerce Industry in India is to be considered. But balancing between the growing customer base, expanding market and customer trust is where the eCommerce organizations need to lay their focus on. And then as time passes, India is bound to become one of the largest players in the eCommerce market, even stronger than its present status.