March 2011

DI GI TAL
COMMERCE
IAMAI, 2011
All rights reserved. No part of this report may be reproduced,
either in part or in full, without the prior permission of
Internet & Mobile Associaon of India
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Execuve Summary..................................................................................... 4
Methodology ............................................................................................. 5
Glossary of Terms........................................................................................ 6
Introducon .............................................................................................. 6
Market Size of Product Categories ............................................................. 9
Online Travel ............................................................................................. 9
E-tailing .................................................................................................. 10
Financial Services ..................................................................................... 11
Digital / Mobile downloads ...................................................................... 12
Other Online Services .............................................................................. 13
Indian Online Shoppers ........................................................................... 14
Mode of payment .................................................................................. 15
Reasons for not shopping online ........................................................... 16
Promising Future .................................................................................... 18
4
Net commerce on India has evolved over the past decade in terms of magnitude. Total net
commerce market of India is esmated to be INR 19,688 crores in year 2009 and is expected
to grow to INR 31,598 crores by year 2010. It has come a long way since 2007 when the mar-
ket size was just INR 8,146 Crores. The detailed usage paern, however, has remained quite
uniform and skewed over the years. Certain services connue to dominate the overall market
while other sll lag behind.
As of 2009, among Internet users, online travel leads the pack with 76% share in Net
Commerce (INR 14,953 crores) while eTailing takes second posion with 7.82% share (INR
1,550 crores). In eTailing, computers and computer peripherals account for INR 560.52
crores while cameras, mobiles and MP3 players contribute INR 389 crores. Other major con-
tributors to net commerce include online classieds (jobs, online matrimonial, cars, real es-
tate and others), buying movie ckets, food delivery and gaming subscripon is esmated to
be INR 1,210 crores. Financial service transacons over the Internet comprise nearly 7.8%
of the market size (i.e. 1,540 crores).
Online users in India have exhibited willingness to make purchases over the Internet; this is
quite evident from the growing net commerce industry. In the last few years, the interacons
have been skewed towards specic categories such as travel or certain products in eTailing.
Executive summary
NL1 CCMMLkCL MAkkL1 SI2L IkCM 2007 1C 2011
Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+
Total market size 8,146 14,030 19,688 31,598 46,520
Online travel 6,250 10,500 14,953 25,258 37,890
industry (77%) (75%) (76%) (80%) (81%)
Online non-travel 1,896 3,530 4,735 6,340 8,630
industry (23%) (25%) (24%) (20%) (19%)
(Figures in crores. Percentages indicate share of the overall market size)
*Financial aervices were not calculated in the years prior to 2008. + Esmated gures
e-Tailing 978 1,120 1,550 2,050 2,700
Digital downloads
or paid content 238 290 435 680 1,100
subscripon
Financial services * 1,200 1,540 2,000 2,680
Other services
incl. classieds 680 920 1,210 1,610 2,150
5
The results of the report have been arrived at by conducng primary research among Inter-
net users in 15 cies as well as secondary research for triangulang the ndings from exter-
nal sources.
Primary Research: Primary informaon about net commerce was collected by 800 individu-
als through face-to-face interviews during I Cube 2009, a syndicated product of eTech, IMRB
Internaonal. These individuals were interviewed in 15 cies across India.
Secondary research was done to understand the structure and dynamics of the net com-
merce market in India. Informaon from various published resources was used to perform a
data validaon check. Informaon collected from secondary as well as primary research was
thoroughly analyzed in preparing the report.
Methodology
CI1ILS 8 S1kA1A
Top 4 Metros Delhi, Mumbai, Chennai, Kolkata
Other 4 Metros Bangalore, Hyderabad, Ahmedabad, Pune
Small Metros Patna, Cochin, Lucknow, Ludhiana, Indore
(More than 1 million pop.)
Non Metros Guwaha, Bhubaneshwar
(Between 0.5 and 1 million pop.)
This behavior has evolved recently and is expected to blanket dierent kinds of products
and services purchased over the Internet and mobile networks. Given the increasing aware-
ness and acknowledgement, the overall industry is slated to experience a high growth in the
next couple of years. While online travel will connue to comprise a major proporon of the
overall market, e-Tailing and digital downloads could experience a high growth. Mobile/Digi-
tal downloads are expected to grow given the high proliferaon of mobile devices in the
country among dierent users as well as introducon of interacve content over the Inter-
net.
E-Tailing which has experienced growth in few select products ll now; is another area for
growth. Recently, a lot of ecommerce iniaves have started to garner decent aracon from
Internet users (albeit in limited categories such as books and digital products). There has
also been an increase in funding for such iniaves. Further, famous retail chains are also
opening up to embrace the medium to ensure there are sales over the Internet. If this mo-
mentum connues, ecommerce is expected to be an important acvity among regular Inter-
net users.
6
I AC1IVL USLk: An individual who has used the Internet at least once in the last 1 month.
I CLAIMLD IN1LkNL1 USLk: An individual who has used the Internet at any point in me
in the past. This gives us a clear indicaon as to how many Indians have experienced Internet
at least once in their lifeme.
I IN1LkNL1 NCNCWNLk: An individual who belong to a household which does not own
Internet connecon.
I IN1LkNL1 NCNUSLk: An individual who has not accessed Internet at any point in me.
I C LI1LkA1L: An individual who knows how to use a PC. While this term does not signify
the extent of PC usage, it means that a computer literate is able to work on a PC without as-
sistance.
I LII: Internet users who Look for Informaon (LFI) for a product or a service they want to
buy.
I CNLINL SnCLkS: Internet users who look for informaon and eventually buy a prod-
uct or a service over the Internet.
Glossary of terms
Introduction
In India, Internet has primarily been used for enabling communicaons between individu-
als through various modes such as emailing, messaging or even social networking. However,
a digital interacve media is only so much successful if it fails to pervade every single acvity
an individual indulges into in their daily life. In India, iniaves over the Internet have sll
not been able to make users buy products and transact monies.
The I-Cube 2009 study clearly reects on the limited penetraon of eCommerce among In-
ternet users. In the survey conducted in top 15 cies in the country among 17.5 Acve In-
ternet Users, who access Internet at least once in a month, there are 13.6 million users who
look for informaon regarding products. Of these, there are merely 7.4 million (40%) have
bought any product over the Internet.
7
The gure, below, illustrates the growth in the market size since 2007.
NL1 CCMMLkCL MAkkL1 SI2L IkCM 2007 1C 2011
Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+
Total market size 8,146 14,030 19,688 31,598 46,520
Online travel 6,250 10,500 14,953 25,258 37,890
industry (77%) (75%) (76%) (80%) (81%)
Online non-travel 1,896 3,530 4,735 6,340 8,630
industry (23%) (25%) (24%) (20%) (19%)
(Figures in crores. Percentages indicate share of the overall market size)
*Financial aervices were not calculated in the years prior to 2008. + Esmated gures
e-Tailing 978 1,120 1,550 2,050 2,700
Digital downloads
or paid content 238 290 435 680 1,100
subscripon
Financial services * 1,200 1,540 2,000 2,680
Other services
incl. classieds 680 920 1,210 1,610 2,150
LCCMMLkCL LNL1kA1ICN AMCNG AC1IVL IN1LkNL1 USLkS
Acnve Internet Users
Shop Cn||ne
Look Ior Informanon
17.5
million
7.4
million
13.6
million
Those who
have used
the Internet
for at least
once in a
month
Access|ng
the Net for
deta||s on
any product
Who have bought
any product/service
on the Internet
8
Net commerce industry has grown from INR 8,146 crores in the year 2007 to INR 19,688
crores in 2009. This growth is primarily driven by online travel industry which contributes
76% to total net commerce industry in India today. Next year the market is expected to grow
and reach INR 31,598 crores. This strong growth is expected to connue due to the support
of service providers and regulators it has started to garner and is expected to reach INR
46,520 crores by the year 2011.
Of the market size of INR 19,688 crores; online travel, which includes booking rail and air ck-
ets, hotel accommodaons and tour packages comprised 76% of the whole pie. E-Tailing
which includes purchases of
durable products such as elec-
tronic items, home and kitchen
appliances as well as personal
items apparels and jewellery
constuted 8% of the overall
share. Conducng transacons
to dierent types of nancial
services such as insurance pay-
ments and renewals, as well as
transacons through trading
accounts amounted to 8% of
the overall share. Downloading
mobile and digital content
comprised 2% of the overall
share. Whereas other online
services such as classieds (jobs, matrimonial, cars real estate and others), online food deliv-
ery as well as buying movie ckets and DVD rentals comprise 6% of the overall market.
GkCW1n CI NL1 CCMMLkCL CVLk
1nL LAkS (I|gures |n INk crores)
CCMCNLN1S CI NL1 CCMMLkCL
MAkkL1 2009 (INk 19,688 crores)
9
Online travel industry has grown from INR 6,250 crores in year 2007 to INR 14,953 in the
year 2009. The restrained growth in 2009 was due to the overall slowdown in the industry.
Due to conveniences of paying online as well as the facilitaon from the regulators the
growth is expected to grow at a much higher rate in the next few years.
At present, out of total INR 14,953 Crores Online Travel market, domesc air travel con-
tributes 63% i.e. INR 9,482 crores followed by Railway ckets contribung 28% (INR 4,184
crores) others such as internaonal air travel (INR 548 crores), Hotel bookings (INR 308
crores), Bus ckets (INR 294 crores), Tour packages (INR 86 crores) & travel insurance (INR
52 crores) contribute balance 9% to the total online travel market.
Market size of product categories
CNLINL 1kAVLL
CCMCNLN1 SnAkL CI CNLINL 1kAVLL (1C1AL: INk 14,9S3 CkCkLS - 2009)
Component Percentage Market Size (INR in crores)
Domesc Air Tickets 63 9,482
Railway Tickets 28 4,184
Internaonal Air Tickets 4 548
Hotel Bookings 2 308
Bus Tickets 2 294
Tour Packages/Travel Insurance 1 138
(I|gures |n INk crores)
10
CCMCNLN1 SnAkL CI L1AILING (1C1AL: INk 1,SS0 CkCkLS - 2009)
Component Percentage Market Size (INR in crores)
Computers, Accessories & Peripherals 36 560
Cameras & Mobiles 25 389
Personal Items (Apparels, Jewellery & others) 19 296
Electronic Durables 13 203
Home & Kitchen Appliances 4 62
Other Products (Toys, Gis, Flowers) 3 40
E-Tailing comprises of buying consumer items such as cameras, computers, home & kitchen
appliances, owers and toys, gis online. This category has grown from INR 978 crores in
year 2007 to INR 1,550 in year 2009.
At present, PCs, laptops, computer peripherals, accessories and storage, contribute the most
36% (INR 560 crores) to e-tailing followed by cameras & mobiles contribung 25% (INR 389
crores). Personal items such as jewellery, apparels, cosmecs, apparels, shoes and watches
contribute 19% (INR 296 crores) whereas Electronic items like TV, Audio systems & other ac-
cessories account for 13% (INR 203 crores) Balance 7% is contributed by Home & kitchen ap-
pliances (4%) and other online buying (toys, gis, owers etc.)
L1AILING
(I|gures |n INk crores)
11
IINANCIAL SLkVICLS
Financial services market is esmated to be INR 1,540 crores and is expected to grow to INR
2,000 crores in the year 2010. Prior to 2008, there were no accurate esmates of the online
nancial services. The online nancial services include Insurance and related services (INR
585 crores), online transacons for nancial services (INR 527 crores) and other fund-
based transacons (INR 426 crores) such as paying ulity bills.
CCMCNLN1 SnAkL CI CNLINL IINANCIAL SLkVICLS (1C1AL: INk 1,S40 CkCkLS - 2009)
Component Percentage Market Size (INR in crores)
Insurance and related services 38 586
Fund-based transacons (such as ulity bills) 34 527
Online transacons for nancial services 28 426
(I|gures |n INk crores)
12
DIGI1AL]MC8ILL DCWNLCADS
Digital downloads as a category has increased from INR 238 crores in 2007 to INR 435 crores
in year 2009. Given the proliferaon of mobile devices and the services available over the
Internet, the growth rate is expected to be higher in the next years.
Majority of mobile downloads is aributed to ringtone, wallpapers or pictures download
(INR 148 crores) and mobile recharges as well as bill payment (INR 148 crores) Soware &
ulity applicaons for mobile account for 18% of Digital downloads (INR 78 crores), paid
music/video downloads contribute 7% (INR 30 crores) while balance 6% is contributed by
mobile games downloads.
(I|gures |n INk crores)
CCMCNLN1 SnAkL CI MC8ILL ] DIGI1AL DCWNLCAD (1C1AL: INk 43S CkCkLS - 2009)
Component Percentage Market Size (INR in crores)
Ringtone/ Wallpapers /Pictures download 34 148
Pre-paid Recharge/ Post-paid Bill Payment 34 148
Sowares and Ulity Applicaons for mobiles 18 78
Paid Music/Video Downloads 7 30
Mobile Games Download 6 26
13
Online classieds includes services such as online dang, matrimonial and jobs. It is es-
mated that online classieds together is INR 1,210 crores. In the classieds, online jobs con-
stute major share of INR 484 crores. Online matrimonial/dang services form a share of
15% i.e. 182 crores.
C1nLk CNLINL SLkVICLS
(I|gures |n INk crores)
CCMCNLN1 SnAkL CI C1nLk CNLINL SLkVICLS (1C1AL: INk 1,210 CkCkLS - 2009)
Component Percentage Market Size (INR in crores)
Online Jobs 40 484
Movie Hall Tickets and CD/DVD Rentals 35 424
Online Matrimonial/Dang 15 182
Other B2C classieds (Cars, Real Estate) 9 109
Online Food Delivery 0.5 7
Online Gaming Subscripon 0.3 4
14
Barring few services such as online ckeng, broadly speaking, Indian consumers aren't shop-
ping online. Large numbers of surfers use Internet to look for informaon about the prod-
uct or service they want to buy followed by physical visit to shop for buying.
According to I Cube 2009, 13.6 mn In-
ternet users looked for informaon (LFI)
for purchasing product or services on-
line. Of these, 7.47 mn purchased prod-
uct or services online. This indicates that
almost each alternate Internet users
who looks for informaon on products
and services on Internet, ends up buying
them online.
LII indicates users who access internet
to search for products or services. They
may or may not buy them online.
CNLINL SnCLk indicates users who
access internet to purchase product or
services. These are internet users who
transacted online and purchased prod-
uct or services over internet.
Indian online shoppers
13.6
million
6.13
million
7.4
million
CNLINL SnCING 8LnAVICUkS
AMCNG IN1LkNL1 USLkS
(Base: 17.5 million
Acve Internet Users
in 15 cies surveyed
in I-Cube 2009)
NCNCNLINL SnCLkS (CNL LII)
(Base: 13.6 million Acve Internet Users who look for informaon)
15
CNL LII indicates those users who access Internet to look for informaon on product or
services, however, didnt purchase it over internet.
AMCNG CNL LII, 61% access internet to look for informaon on Online Travel (such as ck-
ets and hotel bookings); of these 42% end up buying travel services through oine route.
Cameras and mobile is the second most looked for informaon category. 60% of Only LFIs ac-
cessed Internet to look for informaon on cameras and mobiles while 17% of them bought
the product through convenonal shops.
AMCNG CNLINL SnCLkS, 89% accessed internet to look for informaon on Online travel
services and 80% actually purchased product or services belonging to online travel using in-
ternet.
Cameras and Mobiles was looked for informaon by 62% of online shoppers, however only
12% actually bought it over Internet. This indicates that even online shoppers access internet
to know more about products, but only handful of them actually use internet to purchase
them.
Mobile downloads and personal items were purchased by 22% and 20% of online shoppers
respecvely.
MCDL CI AMLN1
Online shoppers use Debit cards/Internet banking as mode of payment for shopping online.
Credit cards follow closely at second posion. Paying against delivery comes at third posion
whereas demand dra and mobile payment is almost negligible.
MCDL CI AMLN1S
(Base: 7.5 million Acve Internet Users who have made online purchases)
16
Lack of trust is the prime reason for not shopping online. According I-Cube 2009, various
reasons for not shopping online as menoned by internet users include:
LACK OF TRUST
Most of non-shoppers do not shop online due to lack of trust in transacons. This includes
reasons such as worried about personal security and distrust with quality. In other words, this
lack of trust primarily leads to security concerns one has while transacng over Internet.
SECURITY CONCERNS
Most Net commerce shopping happens through credit or debit cards. Indians, however are
sll concerned about their personal security and prefer to transact in person.
UNCERTAINTY ABOUT PRODUCT AND SERVICE QUALITY
Unlike convenonal shopping, buyers worry about online shopping. They arent sure if they
will get good quality products online.
FULFILLMENT ISSUES
When person is transacng over Internet, they are not sure who is sing across the table.
They are worried about delivery of goods. It includes issues such as delay in or non delivery
of goods.
Non delivery of goods: Apart from shopping experience and convenience, one of the major
factors for net commerce not taking o in India is due to the on-me dispatch of goods. De-
livery delays invariably have le people wondering if their money was lost in the transacon
and are averse to conducng future online transacons. Merchants start order processing
and shipping only aer the receipt of money through credit card or online banking payment.
Reasons for not shopping online
(Base: 6.1 million Acve Internet Users who do not purchase online)
17
SHOPPING EXPERIENCE
Buying a product or service is many mes associated with shopping experience. It includes
shopping experience includes fun, entertainment and the sasfacon derived from shopping
of product or service. While transacng online, most users lack this experience and it has re-
sulted in people refraining from shopping online.
Lack of touch & feel: Touch & feel of product being purchased lacks while shopping online.
Online shopping is best suitable for products and services that do not require touch & feel ex-
perience by buyer. Probably thats one of the reasons for books & ckeng being more suc-
cessful than apparels while shopping online.
18
Promising future
The online users in India have evolved and are acvely seeking to include their digital in-
teracons into their daily acvies making purchases and indulging in transacons being
one of them. Although the behaviour in online transacons has been a lile skewed in the
past wherein travel comprised the majority of the market; this has changed since 2009.
As per the primary research, e-Tailing is one the primary growth driver and will remain so
in the near future. A major reason for such growth is the connuing niche and generalized
websites that are being introduced over the Internet. These websites serve certain seg-
ments that are willing to transact monies for the products such as high-end Fashion and per-
sonalized products, due to the convenience and range of products it oers. There have also
been certain iniaves that include mass market; for instance, certain aggregators and
traders are oering their products over the Internet to reach wider audience in the non-
metro markets. As Internet seeps more into the Tier-II and Tier-III cies there is bound to be
increase in the number of online users that would be willing to indulge in online purchases.
Financial services over the Internet is another area that holds promising growth. Al-
though there were no esmates prior to 2008, the online nancial services amounts to a
sizeable proporon of the non-travel online interacons. Given the characterisc of the -
nancial services, it is very bound to experience a high growth. Instead of indulging in beau-
rocrac methods of compleng nancial transacons, online modes of obtaining such
services will always be benecial. There is no inherent need of transactors to be present in-
person to get nancial services as there is no need for a touch-and-feel experience. Con-
sequently, most of the transacons involving nancial services such as renewing insurance
or paying ulity bills can be completed over the Internet.
An important aspect in ensuring connuous growth of the net commerce industry is the
increasing awareness of exchanging money over the Internet by all the stakeholders as well
as the acknowledgement of such possibility by the regulators. As the online and mobile
medium grows, the regulators are in the process of formulang guidelines to make opons
available to the users as there are substanve benets in transacng money over the Inter-
net. Not only providing convenience, online transacons also reduce personnel and re-
source overheads that organizaons and the government have to bear. As the issue of
security minimizes due to stringent methods adopted by banks and nancial instuons;
large numbers of retailers and online aggregators are providing services to Internet users
for their varied purchases they make on a daily basis.
IMk8 Internanona|
e-Tech Group | IMRB Internaonal (a specialist unit of IMRB Internaonal) is a re-
search based consultancy oering insights into IT, Internet, Telecom & emerging
technology space.
Our connuous link with industry and a constant eye on the pulse of the consumer
ensures that we can decode the movements of technology markets & consumers.
To our clients we oer an understanding of the present market environment and a
roadmap for the future.
Internet and Mob||e Assoc|anon of Ind|a (IAMAI)
The Internet and Mobile Associaon of India is a not-for-prot industry body regis-
tered under the Sociees Act, 1896. Its mandate is to expand and enhance the on-
line and mobile value added services sectors. It is dedicated to presenng a unied
voice of the businesses it represents to the government, investors, consumers and
other stakeholders. The associaon addresses the issues, concerns and challenges
of the Internet and Mobile economy and takes a leading role in its development.
The associaons acvies include promong the inherent strengths of the digital
economy, evaluang and recommending standards and pracces to the industry,
conducng research, creang plaorms for its members, communicang on behalf
of the industry and creang a favorable business environment for the industry.
Founded in January 2004 by leading portals in India, IAMAI in the only specialized
industry body in India represenng the interests of online and mobile value added
services industry.
Contact deta||s
Dr. Subho kay, President, IAMAI
406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018
Tel: +91-22-24954574 | Fax: +91-22-24935945 | hp://www.iamai.in
Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Associaon of India
406 Ready Money Terrace, 167, Dr Annie Besant Road, Worli. Mumbai 400018.
Contact deta||s
e1ech Group | IMk8
IMRB Internaonal
A Wing, Mhatre Pen Building
Senapa Bapat Marg, Mumbai
kesearch team for th|s report
Balendu Shrivastava, Group Business Director
(balendu.shrivastava@imrbint.com)
Tarun Abhichandani, Insights Director
Ashwin Godbole, Insights Director