E-Commerce

An Indian Perspective

Usage Of E-Commerce
According to the survey conducted among the Industry players, the E-Commerce Industry in India was worth Rs 7080 crores at the end of 2006-07. The adoption and usage of E-Commerce in the country is a function of the overall environment for Internet usage in a country. To correctly understand the likely growth path for ECommerce in India it is imperative to understand the internet ecosystem in the country.

The Internet and India

The Internet has undergone a steady evolution. VSNL was initially responsible for Internet access and the connection rates ran as low as 5%. With various Service providers emerging in the past few years, 5,280,000 broadband subscribers as of June, 2009 per ITU were reported. Home Internet usage in India grew 19% from April 2006 to April 2007. In April 2007 it became 30.32 million and the eMarketer accept that there will be 71 million total Internet users in India by 2011.

Internet Usage and Population Statistics

YEAR Users Population % Pen.

2000
2001 2002 2003 2004 2005 2006

5,500,000
7,000,000 16,500,000 22,500,000 39,200,000 50,600,000 40,000,000

1,094,870,677
1,094,870,677 1,094,870,677 1,094,870,677 1,094,870,677 1,112,225,812 1,112,225,812

0.5 %
0.7 % 1.6 % 2.1 % 3.6 % 4.5 % 3.6 %

2007
2009 2010

42,000,000
81,000,000 81,000,000

1,129,667,528
1,156,897,766 1,173,108,018

3.7 %
7.0 % 6.9 %

Kearneys annual Global Retail Development Index (GRDI), in 2008, puts India as the fifth largest retail destination globally. Currently the retail industry stands at 390 billion and growing at decent rate. Internet penetration rate in India is 7.1% which is one of the highest in the world.

 2009 report on Ecommerce in India published by the IAMAI (Internet and Mobile Association of India) indicates a healthy growth rate over the previous years. PC users have increased from 72 million in 2008 to 87 million in 2009. Indias share of online commerce is projected to grow from 1.3 percent of Asia-Pacific in 2006 to 3.3 percent by 2011. The projected value of the market over the years and projected for the following years are: 2006 : $800 million 2007 : $1.2 billion 2008 : $1.9 billion 2009 : $2.8 billion 2010 : $4.1 billion 2011 : $5.6 billion

 Despite the improved penetration of Internet usage, both in urban and rural India, the actual figures are far short unlike in the US and Europe. Indias economy is pegged at about Rs.1.2 trillion (by 2008 estimates) and its Ecommerce market is approximately Rs.9000 10000 crores (nearly US$ 2 billion). In comparison, the US economy is $14.2 trillion and its Ecommerce market (B2C) is estimated at $ 220 billion in year 2008. Thus Indias ecommerce to GDP ratio is disproportionate considering its economy is 7% of the US economy but the size of its ecommerce market being only 1% that of the US. These figures, though disappointing, indicate the potential for growth of Indias Ecommerce market and that it is getting there slowly but surely. There is still tremendous scope for investors and entrepreneurs in Indias Ecommerce space.

Scope of Ecommerce
The low cost of the PC and the growing use of the Internet has shown the tremendous growth of Ecommerce in India, in the recent years. According to the Indian Ecommerce Report released by Internet and Mobile Association of India (IAMAI) and IMRB International, The total online transactions in India was Rs. 7080 crores (approx $1.75 billion) in the year 2006-2007 and expected to grow by 30% to touch 9210 crores (approx $2.15 billion) by the year 2007-2008.

Market Size & Growth

Indias e-commerce market was worth about $2.5 billion in 2009. About 75% of this is travel related (airline tickets, railway tickets, hotel bookings etc.). Online Retailing comprises about 12.5% ($300 Million as of 2009). India has close to 10 million online shoppers and is growing at an estimated 30% CAGR vis--vis a global growth rate of 8-10%. Electronics and Apparel are the biggest categories in terms of sales.

 tradeindia.com have 700,000 registered buyers and it has the growth rate of 35% every year which is likely to double in the year 2008. Indiamart.com claims revenues of Rs. 38 crores and has a growing rate of 50 every year. It receives around 500,000 enquiries per month. The travel portal MakeMyTrip.com has attained Rs 1000 crores of turnover which is around around 20% of total e-commerce market in India. Further an annual growth of 65% has been anticipated annually in the travel portals alone.

 According to a McKinsey-Nasscom report the e-commerce transactions in India are expected to reach $100 billion by the 2008. Although, as compared to the western countries, India is still in is its initial stage of development.

 India has its share of success stories in the B2C segment in the form of Indiatimes.com, Rediff.com, Shaadi.com, Indiamatrimony.com, ebay.com, MagicBricks.com, Monster.com and Makemytrip.com etc. These and such other portals are generating a lot of interest and increasing transaction traffic. Smaller businesses have jumped onto the bandwagon by offering products and services online and have successfully carved out niches for themselves.

Factors responsible for the sudden spurt in growth of eCommerce in India such as:
Rapidly increasing Internet user base Technology advancements such as VOIP (Voice-over-IP) have bridged the gap between buyers and sellers online The emergence of blogs as an avenue for information dissemination and two-way communication for online retailers and eCommerce vendors Improved fraud prevention technologies that offer a safe and secure business environment and help prevent credit card frauds, identity thefts and phishing Longer reach - Consumers in the Tier II & Tier III cities are fast realizing the potential of the Internet as a transacting medium The young population find online transactions much easier

E- commerce challenges
Bureaucratic wrangles: fear of destabilizing power
equation

Cultural change: fear of change Not many are prepared Lack of skill and training Big businesses are the driving force Need for global market Lack of proper legal environment

Triggers and Barriers for the ECommerce market in India

In addition to the industry size, it is imperative to understand the reasons behind the growth and reasons hampering the growth E-Commerce industry in the country.

Ecommerce and the Government of India

The government is aware of the increasing misuse of the electronic media and online frauds. Therefore, the government of India has passed the Information and Technology Act to keep a check on the transactions carried on via the electronic media and to make the process of Ecommerce safe and reliable. The Act imposes heavy penalties and punishment on those who try to misuse this channel for personal benefit or to defraud others. The law has also established the authentication of the electronic records. Increase in the Cyber crimes in Ecommerce is causing concern among the credit card users in India. Now, the government has opened Cyber Crime Police Station. Online complaints can be filed for both cyber and Non Cyber crimes, through an online form which is available athttp://www.bcp.gov.in/english/complaints/newcomplaint.asp to accept complaints filed with digital signatures. The Government of India has decided to impose service tax on ECommerce transaction and that will result in making the net shopping expensive.

Ecommerce in India: Pitfalls in the way of Ecommerce

Studies have revealed that 23% of the customers quit even before they register themselves at a particular site because they hesitate to register themselves. The time of delivery stated is unclear. The time taken for downloading is very long. People in India have habit of buying goods only after feeling the goods. This drawback can only be removed if matured companies enter the Ecommerce in whom people have good faith. The behavior of the Indian customer is very need driven as compared with the US customers who are impulsive buyers. Most of the entrepreneurs in India lack is sufficient capital or resources and hence cannot wait for a long period of time for positive results.

Ways to remove the pitfalls

Consistency in execution. Strong government policy against cyber crimes and frauds. Tight integration of the system by the online retailers. Stating clearly the time required for the delivery of the product and delivering the goods within that time period. Making the payment mechanism more safer.

E-marketplace in India can push Ecommerce

Electronic marketplace is an online platform or website to facilitate transctions between the buyers and the sellers at organizational level. After a seller registers himself with a particular e-marketplace he can display information regarding his product or services on that portal. Once a buyer registers itself with the e-marketplace he can have access to all the information he wants. It is also known as B2B exchanges. The first e-marketplace in India was established by New Delhi-based SteelNext for trading "mild" or commodity steel in the year 2001. The E-marketplace can: Reduce the time and cost of interaction for the transcationss. Facilitate distant trade with efficiency. Help in the payment procedure. Help the buyers to find new suppliers and place orders with them. Create a safe and friendly online deal process.