E-commerce in India

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India has an internet user base of about 250.2 million as of June 2014.[1][2] The penetration of e-commerce is low compared to markets like the United States and the United Kingdom but is growing[3] at a much faster rate with a large number of new entrants.[4] The industry consensus is that growth is at an inflection point.[5]

Unique to India (and potentially to other developing countries), cash on delivery is a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash on Delivery. However, COD may harm e-commerce business in India in the long run [6] and there is a need to make a shift towards online payment mechanisms. Similarly, direct imports constitute a large component of online sales. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.

Market size and growth[edit]

India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $14 billion in 2012.[1] About 75% of this is travel related (airline tickets, railway tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5% ($300 Million as of 2009)[citation needed]. India has close to 10 million online shoppers and is growing at an estimated 30%[7] CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.

Key drivers in Indian e-commerce are:

  • Increasing broadband Internet (growing at 20%[8] MoM) and 3G penetration.[9]
  • Rising standards of living and a burgeoning, upwardly mobile middle class with high disposable incomes
  • Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers
  • Busy lifestyles, urban traffic congestion and lack of time for offline shopping
  • Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs
  • Increased usage of online classified sites, with more consumer buying and selling second-hand goods
  • Evolution of the online marketplace model with sites like Jabong.com, Flipkart, Snapdeal, and Infibeam.

India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%..[citation needed] According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.[10]

As per "India Goes Digital",[11] a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015.

On 7 March 2014 e-tailer Flipkart claimed it has hit $1 billion in sales, a feat it has managed to achieve before its own target (2015).[12]

Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.[citation needed]

Closures[edit]

Though the sector has witnessed tremendous growth and is expected to grow, a lot of e-commerce ventures have faced tremendous pressure to ensure cash flows. But it has not worked out for all the e-commerce websites. Many of them like indiaplaza.com, 21diamonds.in, allshcoolstuff.com amongst others had to close down.[13]

Infrastructure[edit]

There are many hosting companies working in India but most[citation needed] of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting.[citation needed] Cyber security issues of e-commerce business in India would be required to be managed by Indian e-commerce stakeholders in the near future.[14] In fact, Indian government is planning to introduce cyber security breach disclosure norms in India very soon.[15] Recently Target corporation suffered a cyber attack that has put it under litigation threat in multiple jurisdictions.[16] Trends are changing with some of eCommerce companies starting to offer SaaS for hosting webstores with minimal one time costs.

There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll.

India has got its own version Cyber Monday known as Great Online Shopping Festival in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day.[17]

In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns.

Funding[edit]

As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising, Flipkart.com, in August 2012, raised about INR822 crore (US$130 million). Entertainment ticketing website BookMyShow.com raised INR100 crore (US$16 million) investment by Accel Partners.[1]

On 10 July 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors making up the additional $160 million include Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.[18]

Snapdeal - USD 50 million in 13 April.

In Feb 2014, online fashion retailer Myntra.com raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for Rs. 2,000 crores.[19] However, cyber law [20] and e-commerce due diligence are still being ignored by investors and financial institutions while investing in India.[21]

See also[edit]

References[edit]

  1. ^ a b c "Online shopping touched new heights in India in 2012". Hindustan Times. 31 December 2012. Retrieved 31 December 2012. 
  2. ^ "Internet World Stats". Internet World Stats. Retrieved 2013-07-04. 
  3. ^ Overview of E-commerce in India
  4. ^ 20 Hot E-commerce startups in India
  5. ^ "Indian e-commerce at inflection point?". Vccircle.com. 2010-08-19. Retrieved 2013-07-04. 
  6. ^ "Cash On Delivery May Harm E-Commerce In India". E-Retailing Laws And Regulations In India. 13 March 2012. Retrieved 19 August 2014. 
  7. ^ Consumer E-commerce in India
  8. ^ "India broadband penetration growth". Internetworldstats.com. Retrieved 2013-07-04. 
  9. ^ PTI 29 August 2010, 02.22pm IST (2010-08-29). "E-commerce growth with 3G". Economictimes.indiatimes.com. Retrieved 2013-07-04. 
  10. ^ "Asia Pacific Online Retail Forecast, 2011 To 2016," Forrester Research Inc. Zia Daniell Wigder, with Steven Noble, Vikram Sehgal and Lily Varon.
  11. ^ http://www.avendus.com/Files/India_goes_Digital.pdf
  12. ^ http://www.thehindu.com/business/Industry/flipkart-hits-1-billion-in-sales/article5757634.ece
  13. ^ http://www.klypy.com/in/ecommerce-shut-downs-acquisitions-india/
  14. ^ "Cyber Security Issues Of E-Commerce Business In India". E-Retailing Laws And Regulations In India. 13 August 2014. Retrieved 19 August 2014. 
  15. ^ "Indian Government Is Planning A Legislation Mandating Strict Cyber Security Disclosure Norms In India". Centre Of Excellence For Cyber Security Research And Development In India (CECSRDI). 27 March 2013. Retrieved 19 August 2014. 
  16. ^ "Indian Government Is Planning A Legislation Mandating Strict Cyber Security Disclosure Norms In India". Cyber Laws In India And Technology Laws And Regulations In India. 16 March 2014. Retrieved 19 August 2014. 
  17. ^ "Google partners e-commerce sites for 'Cyber Monday' on December 12". Economic Times. 4 December 2012. Retrieved 31 December 2012. 
  18. ^ "Flipkart raises $160M more from Morgan Stanley, Vulcan Capital, Tiger Global, others". VCCIRCLE. 
  19. ^ http://timesofindia.indiatimes.com/tech/tech-news/Flipkart-acquires-Myntra/articleshow/35472797.cms
  20. ^ "Cyber Law Due Diligence Must For Foreign Investors In E-Commerce And Technology Ventures Of India". E-Retailing Laws And Regulations In India. 8 February 2014. Retrieved 19 August 2014. 
  21. ^ "E-Commerce Due Diligence In India Is Neglected By Investors And Financial Institutions". E-Retailing Laws And Regulations In India. 13 March 2014. Retrieved 19 August 2014.