E-COMMERCE IN INDIA

:
Evolution, Growth and Challenges

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MSLGROUP India
MSLGROUP India is the nation’s largest PR and social media network. Made up of three agencies, HANMER MSL, 20:20 MSL and 2020Social, MSLGROUP India combined includes 15 offices, 565 staff and an activation network reaching an additional 125 Indian cities. With a proven track record of servicing multinational and Indian corporations since 1989 and 40 senior counselors with 15 or more years of strategic communications experience, clients, colleagues and business partners benefit from MSLGROUP India’s breadth and depth of experience and insights.

01 | Executive summary 02 | E-commerce Categories • B2B  • B2C  • C2C  • C2B 03 | Growth of e-commerce in India

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MSLGROUP Asia
For 23 years, MSLGROUP’s Asia team has counseled global, regional and local clients, helping them establish, protect and expand their businesses and brands across this fast-growing region. Today, MSLGROUP has the largest PR, social media and events teams in Greater China (16 offices and 1,000 colleagues) and India (15 offices and 575 colleagues) and is actively working to lead the development of the industry with the regular publication of whitepapers/reports and innovative Learning & People Development programs to nurture talent. The MSLGROUP Asia team includes 38 owned offices and 1,675 colleagues in Beijing, Shanghai, Guangzhou, Chengdu, Hong Kong, Macau, Taipei, Tokyo, Seoul, Singapore, Kuala Lumpur, Mumbai, Delhi, Ahmedabad, Pune, Bangalore, Chennai, Hyderabad and Kolkata. An activation network of colleagues reaches an additional 125 Indian and 100 Chinese cities and a strong affiliate partner network adds another 23 Asian cities to our reach. MSLGROUP Asia was awarded Campaign Asia Pacific’s Network of the Year, 2011 and MSLGROUP Asia’s teams have also been recognized as leaders by multiple industry groups, including most recently Hanmer MSL India (‘PR Agency of the Year 2011’ by PRCAI), Luminous (‘Local Hero/Agency of the Year 2010’ by Marketing Events Asia), Genedigi Group China (‘Innovative China SMEs’ by Forbes China), ICL MSL Taiwan (‘Agency of the Year 2011’ by Taiwan Advertiser Associate), and won more than 50 awards in the last two years. Learn more about us at: asia.mslgroup.com+ Twitter + Facebook

04 | Sectors  • Travel • Automobiles • Financial services  • Stock trading • Real estate  • Gifts  • Matrimony  • Job search  • Online retailing  • Online ads 05 | Opportunities  • Global trade  • Virtual businesses  • Lower search costs  • The rise of facilitators 06 | Challenges  • Payments  • Logistics  • Cyber crime 07 | 10 years from now: E-commerce is dead, long live e-commerce 08 | The e-commerce evolution 09 | India and the internet

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MSLGROUP
MSLGROUP is Publicis Groupe’s strategic communications and engagement group, advisors in all aspects of communication strategy: from consumer PR to financial communications, from public affairs to reputation management and from crisis communications to experiential marketing and events. With more than 3,500 people across close to 100 offices worldwide, MSLGROUP is also the largest PR network in fast-growing China and India. The group offers strategic planning and counsel, insight-guided thinking and big, compelling ideas – followed by thorough execution. Learn more about us at: www.mslgroup.com + http://blog.mslgroup.com + Twitter+ YouTube.

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Publicis Groupe
Publicis Groupe [Euronext Paris FR0000130577, part of the CAC 40 index] is the third largest communications group in the world, offering the full range of services and skills: digital and traditional advertising, public affairs and events, media buying and specialized communication. Its major networks are Leo Burnett, MSLGROUP, PHCG (Publicis Healthcare Communications Group), Publicis Worldwide, Rosetta and Saatchi & Saatchi. VivaKi, the Groupe's media and digital accelerator, includes Digitas, Razorfish, Starcom MediaVest Group and ZenithOptimedia. Present in 104 countries, the Groupe employs 53,000 professionals. Learn more about us at: www.publicisgroupe.com, Twitter:@PublicisGroupe, Facebook: www.facebook.com/publicisgroupe.

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Executive Summary
A study by Avendus Capital - a financial services firm - said that Indian e-commerce revenues grew to $6.3 billion in 2011, from $4.3 billion in 2010 and $3.3 billion in 2009. The study estimated that online retailing would catch up with online travel by 2015, each contributing $12 billion in revenues. K Vaitheeswaran, founder of Indiaplaza.com, India’s oldest online retailer, told ‘China Daily’: “In 1999-2000, only 3 million people used the internet and out of that, only about 15,000 to 20,000 users were shopping online. Today that 3 million has grown to over 100 million. More importantly, those 20,000 online buyers have grown to over 14 million.” The benefits are clear to consumers – convenience, lower prices and price comparisons. As Pankaj Jain, consultant at Tlabs and lead organiser at Startup Weekend said: “Customer service is the key. If you can build a customer-centric ecommerce company in India that provides a Zappos-like experience, you will have a major edge over other ecommerce businesses.” The rise of smartphones, secure transaction gateways, banks going online with a vengeance and the easy issue of credit and debit cards have aided ecommerce. All this has attracted investors in a big way; in 2011, the sector received investments of more than $1 billion. In January 2011, Snapdeal.com, an online deal shop, raised $12 million and another $40 million at a valuation of $100 million six months later. Meanwhile, online retailers Fashionandyou.com and Myntra.com raised $40 million each. Flipkart, the books retailer which has now diversified into various products, raised $150 million from Accel Partners and Tiger Global Management, putting its valuation at $850 million. While the opportunities are myriad, so are the challenges. Foremost among them is finding a way to grow the customer base. What is needed, said industry sources, is a quantum leap getting at least 25% of internet users to start transacting online from the present 6%-8% (E-commerce, excluding travel). Logistics – timely deliveries, ensuring against damage during shipments, return of products and reversal of faulty transactions – are a problem too, as is the poor bandwidth and unreliable internet connections. English is the dominant language of e-commerce, but only 35% (estimated) of the population speaks it. As the internet adapts and assimilates different languages, the industry will have to follow suit to ensure its customer base expands. Besides, the problematic supply chains could be a deal-breaker. The sizeable investments, however, are allowing Indian firms to build delivery channels and devise payment systems. Cash on delivery, for instance, is the preferred payment option in India and will remain so until consumers feel secure about parting with their credit card numbers online. All leading players have introduced this option. The industry is now betting on India’s young consumers – more than half the population is under 25 years of age and more than 65% under 35 years – to push growth. Understanding consumer behaviour and building online brands will be the key. How will Indian e-commerce firms adapt? The next decade will tell.

Composition of internet audience
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 15-24 years 25-34 years 35-44 years 45-54 years 55+ years

INDIA ASIA-PACIFIC WORLDWIDE

Source: Comscore State of the Internet With a Focus on India (2011)

In the second half of 2011, as India’s 100 millionth internet user logged on and the number of mobile phone users crossed 600 million, it became clear that the foundation for an ecommerce revolution had been laid. The internet is already changing the way connected Indians shop. Not only has it opened up a new world of lower prices and choices, it has also emerged as a wealth-creating tool for entrepreneurs. Given the size of the Indian market and growing consumerism, industry sources aren’t surprised that ecommerce companies are reporting double-digit growth. “Most e-commerce ventures, particularly online retail, are experiencing phenomenal growth with online transactions growing by leaps and bounds every month,” said Mukesh Bansal, CEO and founder of Myntra.com, a Bangalore-based
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online shopping retailer, to the ‘China Daily’ (April 20, 2012), an English language newspaper. He claimed that Myntra.com was doubling its revenue every four to five months, which was the trend across the industry. Ravi Srinivasan, veteran business journalist, said: “Ecommerce is a force multiplier for retail. Whatever retail does for the economy, e-commerce improves and enhances. The primary advantages are reducing the cost of intermediation, enhancing consumer information and choice and ‘democratising’ retail. All of these would go towards increasing choice and lowering cost for consumer.” Online ticketing and banking services are already popular, but Indians are only just dipping their feet in the e-commerce pool. Slowly, the comfort level is extending to other products and services.

Growth of online population

19%

13%

MARCH 2010-2011

20% 18%
INDIA CHINA RUSSIAN FEDERATION BRAZIL
Source: Comscore State of the Internet With a Focus on India (2011)

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E-commerce categories
Business-toBusiness (B2B)
Originally coined to describe electronic communication between businesses or enterprises, Business-toBusiness or B2B is now commonly used to describe all products and services used by enterprises. Business-toBusiness covers the entire gamut of e-commerce that can occur between two organisations. Transactions between industrial manufacturers, partners and retailers, or between companies, primarily fall into this category. B2B activities include purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management, and service and support. Tradeindia.com, India’s largest B2B portal, maintained by Infocom Network Ltd, observed that e-commerce transactions in India show a growth rate of 30% to 40% and will soon reach the $100 billion mark. International brands are keen to make the most of the growing Indian market and are relying on the web to exploit the customer base. Tradeindia.com, Matexnet.com, AuctionIndia.com, Indiamart.com, TeaAuction.com, MetalJunction.com, Chemdex, Fastparts and FreeMarkets are some of the leading B2B exchanges. Over the years, the scope of B2B transactions has broadened. Moving on from sales, corporations are now using B2B communications to promote investment, trade stocks and forge financial alliances.

Consumer-toConsumer (C2C)
C2C commerce is the oldest form of trade and has existed long before the web. However, global connectivity has given it a different dimension. Such transactions are yet to make a significant impact on web-based commerce. Auction sites are one example of such business. When individuals have to sell goods, they list them on auction sites where others can bid. This transaction involves consumer-toconsumer interface. These may or may not involve a third-party like in the case of the auctionexchange eBay. One of the biggest challenges that C2C faces is lack of trust. The lack of a reference point makes it difficult for buyers to feel confident about the people they are dealing with. Both buyer and seller are unsure of the quality of goods, credibility and payments.

Business-toConsumer (B2C)
Simply put, B2C transactions are direct dealings between businesses and consumers. A relatively new category, B2C started gaining momentum in the late 1990s when the internet became more accessible. This category includes everything, from information searches and electronic shopping to interactive games delivered online. Some share of e-commerce revenues is generated from B2C transactions. With a huge number of travel portals, railways and airlines have played a significant role in e-commerce transactions in India. Recently, Makemytrip.com registered a turnover of Rs 1,000 crore ($200 million). In 2007-08, travel alone constituted 50% of Rs 4,800 crore ($960 million) online market. In the last few years online services like banking, bill payment, ticketing, hotel room booking, matrimonial sites and job sites are getting increasingly popular. With the stock exchange, too, coming online, there has been a tremendous boost in the online business. However, B2C still has a long way to go to be on par with B2B in India. This is mainly because B2B transactions are of much greater value than B2C.

Consumer-toBusiness (C2B)
In this business model, it is consumers who offer products and services to companies. In India, C2B is at an early stage. C2B connects a large audience to a bi-directional network through the internet. The accessibility of the web and technologies like digital printing, high-performance computers and powerful software are leading people to take this medium seriously.

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Growth of e-commerce in India
a business model, it appeals to the ‘value-minded’ Indian mindset, which is about getting the best value for money spent,” said Nelson D’Souza, general manager, Fundsupermart.com, one of Asia’s largest distributor of mutual funds online. “Around the world, e-commerce has brought in ‘bargain hunting’, which is common to middleclasses around the world. The success of Flipkart and Snapdeal shows that ecommerce is here to stay.” At present, travel leads the pack among e-commerce segments, flourishing on the back of growing disposable incomes and an internet-savvy urban population. However, other segments such as retail, classifieds, jobs, matrimonials and downloads are doing well too. Mobile commerce, which is only just being introduced in India following the boom in telephony, could prove to be a stable complement ecommerce. Mehul Patel, a serial entrepreneur who founded KIPL, a new media consultancy, and Mozomo, a mobile commerce consultancy, believes that the shift is already happening. His definition of ‘mobile commerce’ includes iPads and tablets, apart from cellphones. “There are more and more Android, iOS and Blackberry apps today in India than ever before. Most of our clients now have a dedicated smart apps budget,” he said. “I am highly optimistic that by 2015 we will have close to 400 million people online using services through mobiles, tablets, handhelds or personal computers. It’s all merging, and it’s happening very fast.” The Internet and Mobile Association of India (IMAI) estimated that India’s ecommerce market is growing 70% every year; 500% since 2007. In 2010, it was estimated at $6.79 billion, dwarfing its 2007 value of $1.75 billion. By the end of 2011, the ecommerce market is expected to have hit $10 billion. While it is expected that travel will remain the dominant sector, e-tailing and digital downloads will probably grow at a faster rate. Home Internet usage in India grew 19% between April 2006 and April 2007, when it reached 30.32 million users. By the end of 2011, there were an estimated 100 million Internet users. With a middle class of nearly 300 million, these numbers can only grow. “The future is certainly going to show an upward trajectory – competition will heat up, more players will come in and then there will be a consolidation in the market,” said Amrit Ahuja, vice-president, 20:20 MSL. “A new breed of aggregators will arise for customers to visualise the multiple deals available; expect a new business model too.”

E-commerce in india
10,000 6,790 4,230 3,015 1,750 31.38 1998-99 103.84 1999-00 2007-08 2008-09 2009-10 2010-11 2011-12 (projected)

TRANSACTIONS (IN $ MILLION)

Source: ‘Indian Ecommerce Report’ by Internet and Mobile Association of India and IMRB

Market share in 2010
Other services 5.09% Financial services 6.31% E-tailing 6.48% Downloads 2.12%

E-commerce in India is still nascent, but it is important for developing countries like India. The opportunities for ecommerce players are many – rapid urbanisation and rising literacy rates, rapidly growing internet user population,

advances in technology, growing adoption of computers, introduction of 3G and falling net access costs. “E-commerce is probably the best thing that has happened to the Indian middle-class and emerging small businesses. As

Online travel 80%

Source: Comscore State of the Internet With a Focus on India (2011)

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It’s clear that from the data that market share is moving towards India and especially China. China’s share of regional B2C ecommerce will grow from 4.1% in 2006 to 14.3% by 2011. Here, too, travel will be the largest category. “The Chinese are way ahead on the e-commerce front. The massive success of local sites such as Alibaba reverberate the growth story for e-commerce in China. E-commerce businesses have managed over 10% of the GDP in some countries. India has a lot to catch up on. In 10 years, we will be probably where China and the world are today,” said Fundsupermart’s D’Souza. Ahuja, however, disagreed. “In 10 years, the Indian market will be at par with the US and China as most of the pain points will be sorted out, consolidation will have happened and profitable models will have evolved,” she said. While Indian consumers are less wary of buying train or airline tickets online, most agree that the market will mature only when consumers start buying more expensive categories such as apparel, home furnishings and jewellery.

a range of products and services – from movie tickets and flowers to electronics and insurance. With stock exchanges coming online, ecommerce has arrived in India. However, the business landscape is not without challenges. Credit cards are not ubiquitous and the payment challenges are myriad. Logistics, especially in the case of deliveries to consumers, are a problem. These problems are being resolved. While the delivery system – via courier and post – has improved, modern technology like secured socket layer (SSL) has helped protect consumers against payment fraud. Banks, too, have successfully adapted technologies to provide customers with real-time account status, transfer of funds and stop-payment facilities. There are regulatory challenges too. As investment rules in India liberalised and it became easier to move large amounts of money into and out of the country, 100% foreign direct investment (FDI) in ecommerce was ushered in. However, there were riders: FDI was allowed only in B2B ecommerce activities and not in retail, and 26% of FDI must be divested to the Indian public within five years if the companies are listed in another country. Therefore, FDI in B2C ecommerce firms is not automatic; approvals must be sought from the Foreign Investment Promotion Board, which considers applications on a case-to-case basis. As systems and regulations improve, the volume of transactions will rise.

Besides, India is on a growth path, accelerating consumerism. Growth will aid the rise of e-commerce, which in turn will spur more commerce.

E-commerce sales (in $ billion) in A-Pac (2006-11)
Country/Year Australia China India Japan South Korea Asia-Pacific 2006 9.5 2.4 0.8 36.8 9.6 59.9 2007 13.6 3.8 1.2 43.7 10.9 73.3 2008 20.4 6.4 1.9 56.6 12.4 97.7 2009 26.4 11.1 2.8 69.9 14 124.1 2010 28.7 16.9 4.1 80 15.9 145.5 2011 31.1 24.1 5.6 90 17.9 168.7

Globally, the lifestyle category dominates e-commerce with a 64% share of transactions, said the eBay Census Guide of 2009. The guide said that South India has the most active buyers (41% of all transactions), followed by West India (27%). However, West India has the most active sellers (46%), followed by North India (28%). There has been a rise in the number of companies taking up e-commerce; major portals are shifting towards e-commerce instead of relying on advertising. The sites are selling

Source: e-Marketer, data includes projections for 2009, 2010, 2011

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Sectors
Today, in India, several goods and services are bought online. The ecommerce landscape includes companies that provide a single product or service as well as multiproduct or multiservice firms. These include clothes and accessories, health and beauty products, books and magazines, computers and peripherals, cars, software, electronics, home appliances, entertainment, real estate and jobs, to name a few. Travel
This is the most popular category in India. The deals offered on tickets – rail and air – as well as on hotel stays and tours are major draws. Many sites categorise their offerings as per themes – trekking, adventure, wildlife, history, culture, etc. In 2010, industry estimates put the online travel business at $6 billion. India’s leading travel portals are Makemytrip, Yatra, Cleartip and Travelguru. (insurance and banking), CAMs – an insurance repository. The leading players in this segment include Policybazaar.com, Indiainfoline.com and banks such as ICICI, Axis and HDFC.

Gifts
Before the advent of the internet, if you had to buy a gift, you’d most likely visit the nearest store and look through the shelves, sometimes for hours. Gift sites have enabled consumers to reduce the time spent on this activity. Now, you can browse through various categories - toys, perfumes, jewellery, accessories - and buy what you like in a matter of minutes.

Business/finance sites growth
INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011)

Travel sites growth
INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011)

47% 49% 41% 39%

47% 46%

Matrimony
These portals provide seekers with information on potential matches and can include information such as the city of residence, religion and caste. Allied services include astrological matching, legal help, beauty, clothing, etc. India’s leading matrimony portals are Shaadi.com, Jeevansathi.com, Bharatmartimony.com and Indiamatrimony.com.

35%

40% 31% 31% 23% 22% INDIA ASIA - PACIFIC WORLDWIDE

Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work

INDIA

ASIA - PACIFIC

WORLDWIDE

Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work

Stock trading
This category is rapidly gaining prominence in India, based on its economic performance and the impact of growth on stock markets. The services include buying and selling of stocks, market analysis, research, company profiles and data, stock performance over time and buying of mutual funds. The advantage is that you no longer need a stock broker, and the commissions are a fraction of what broking houses charge. Leading stock trading websites include Sharekhan.com, ICICIDirect.com, Indiabulls.com, Religare.com, Indiainfoline.com and 5Paisa.com. Many banks, such as Axis and HDFC, also offer the service.

Real estate
These sites provide information on properties users wish to buy, sell or rent. They allow you to search by location, cost, size, etc. Normally, the site provides you with the contact details of the buyer/seller/broker. There are several allied services, too, which make these portals onestop shops for consumers and provide the portals with several revenue streams. These services include housing finance, loan instalment calculators, loan rate comparisons, loan eligibility calculators, insurance, interior design and packers and movers. Some of the leading realty portals are Magicbricks.com, Makaan.com, Indiaproperty.com and 99acres.com.

Automobiles
On these sites, you can buy and sell cars and two-wheelers. These include new and used vehicles. Some of the services these firms provide are: Research, reviews, evaluation, technical specifications, insurance and finance.

form. E-policies, said the newspaper, will be available across the life, motor and health segments. The regulator is said to be in the midst of infrastructure checks and might start allotting licences by June 2012. Quoting industry sources, the newspaper said ICICI Prudential Life Insurance and Birla SunLife Insurance would be among the first to launch. While customer uptake may be low initially – 2% to 5% of new business – it would rise to 10% to 15% within a year. “Policy holders will understand the ease of owning an e-policy and gravitate towards it,” said KR Chandrasekaran, head

Financial services
While banking services have been available for a while online, financial products such as mutual funds can also be purchased off the internet now. The ‘Business Standard’ newspaper recently reported that insurance policies may soon be issued in electronic
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Personals sites growth
INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011)

technology brings, can provide a range of goods and services at discounted prices. India is expected to have the third largest internet user base by 2013, which is a major opportunity for online retail stores. ‘Campaign India’ (February 24, 2012) said that the ecosystem required for online retailing to flourish in India is at an inflection point. “Rising standards of living and a burgeoning, upwardly mobile middle-class with high disposable incomes, availability of a much wider range of products... and lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs have helped e-commerce get a larger share of the consumers’ wallet,” reported ‘Campaign India’. The eBay India Census 2011, which studied e-commerce consumer patterns, noted some key trends: Online shopping is mainstream and a pan-India phenomenon, rural buyers and sellers are increasingly making their presence felt, and the number of women shoppers is growing. Kashyap Vadapalli, director (category and business development), eBay India, told ‘Campaign India’: “We see aspiring consumers from smaller cities latching on to online shopping like never before.” These consumers, he pointed out, have the aspiration for brands and lifestyle products, but no access. Online shopping destinations resolve this problem. Added Fundsupermart’s D’Souza: “[Online retailing] will give strength to the Indian growth story by broad-basing the consumption story across India’s many towns, cities and all genders.” Some of India’s leading retail stores include Pantaloon’s FutureBazaar.com, Flipkart.com and Indiatimes.com.

Retail sites growth
INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011)

Online ads
Indians access the internet from home, office and on their phones. There is a large population that now uses the internet as its primary source of information and bases its purchase decisions on what it views online. No wonder, then, that advertisers have identified the internet as the primary medium for marketing their businesses. Online advertising is expected to grow exponentially – in 2008-09, industry estimates pegged growth at 38%; in 2009-10 it was estimated at 32%.

13%

14% 9% 5% 5% 8%

47%

54%

55% 56%

63% 63%

INDIA

ASIA - PACIFIC

WORLDWIDE

INDIA

ASIA - PACIFIC

WORLDWIDE

Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work

Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work

Job search
The internet has simplified the search for the right job and presented an e-commerce opportunity. In India, a number of portals match a prospective employer’s requirements with

that of candidates. The major job portals are Naukri.com, Monsterindia.com, and Timesjobs.com. The allied services include resume building and employment counselling.

Career services and development sites growth
INTERNET USER PENETRATION (MARCH 2010) INTERNET USER PENETRATION (MARCH 2011)

37%

40% 22% 25% 23%

19%

INDIA

ASIA - PACIFIC

WORLDWIDE

Source: Comscore State of the Internet With a Focus on India (2011). Internet audience 15+ accessing Internet from Home or Work

Online retailing
As web connections improve and credit cards become more common, online retailing or e14

tailing will grow. Internet retailers, because they don’t have to invest in brick and mortar stores or a large staff and because of the saving

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Opportunities
existent in tiers 2 and 3 cities),” pointed out 20:20 MSL’s Ahuja. “Data shows that most goods shipped are reached to cities with a population of 3 million or less. Also, the internet user base is expected to grow to 120 million soon, so there will be new users to target.” KIPL’s Patel believes that the opportunity is “infinite”. “Commerce is more than 10,000 years old. E-Commerce is only 15 years old. As of now, India has very few websites people know, remember or trust. We need many more,” he said. He pointed out that ecommerce also provided an opportunity to empower smaller entrepreneurs in remote areas. E-commerce could also be the catalyst for ‘social product development’ and ‘crowd funding’, said Patel. His views were echoed by Tlabs’ Jain. “The opportunity lies in tapping into markets that haven’t been easily accessible rural areas, for example - as broadband and mobile Internet technologies become more pervasive,” he said. past that mark. In India, for instance the e-commerce growth rate has been projected as 51%.

Virtual businesses
E-commerce has enabled enterprises to become virtual businesses. A virtual enterprise is a modular structure of companies, customers, competitors, suppliers, linked by information technology. The web is used to share skills, costs, and access one another's markets. The flexibility of a shared network allows companies to maximise the use of resources and compete in a complex market.

changed the way banking was traditionally perceived. ‘Demat’ (electronic) accounts for sale/purchase of stocks and shares, foreign exchange services, direct/instant payment of bills on the accountholder’s behalf, financial planning and advice, electronic funds transfer are just a few of the services offered online. • Credit/debit cards: Banks have empowered consumers with credit and debit cards, without which ecommerce would be impossible. • Information directories: The web offers a host of information directories that list products and services with appropriate subheadings for those looking for information. Message boards, chat rooms and forums add to the interactive experience.

Lower search costs
In terms of costs, e-commerce spells good news. The Internet encourages high transparency in prices. As competitors publish their prices on the web, there are search engines that monitor prices across websites. This is supplemented by the growth of protocols such as XML. There are also fears that price transparency may prompt collusion. However, increased communication and frequent market interactions will deter this.

Global trade
E-commerce has changed the way businesses approach globalisation. Businesses are leaning towards International Financial Reporting Standards (IFRS), and internet financial reporting. While the former is a global standard for accounting and financial reporting, the latter has been extremely helpful to e-commerce companies. Globally, the annual growth rate of e-commerce is estimated as 28%. Some countries are way

The rise of facilitators
The internet today is flooded with facilitators that simplify electronic transactions. • Net banking/phone banking: Online banking is a powerful tool and has

The opportunities for ecommerce — in fact, businesses in general — are well documented: rising incomes, 8% GDP growth, a young population with high aspirations. Call it a clichéd

argument, but it’s also a truism that the above factors will collectively be the growth engine for e-commerce. “The opportunities are plenty. Almost half the Indian

population is under 25 years of age, and they are growing richer as they join the workforce. Per capita is on the rise. The internet offers better deals and a wider variety compared to supermarkets (which are non-

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Challenges
Very often, the payments carry the baggage of octroi, entry tax, VAT and several state - specific forms that can be baffling. risk that people are not easily willing to take. Cyber crime is a serious concern the world over. It is a law enforcement challenge for governments.

Logistics
Customers want their goods delivered in perfect condition and within a specific time frame. Regular post is not a viable option and couriers have their limitations in terms of reach. All this adds to the costs. Shipping high - value goods might need insurance, which is an additional cost.

Furthermore, loopholes in the current legal and regulatory framework, lack of assurance in safeguarding the privacy of personal and business data, lack of payment gateways have hampered the growth of ecommerce.

The Information and Technology Act was passed to make e-commerce safe. It imposes heavy penalties on those who misuse the channel to defraud others.

Common cyber crimes
CRIME Virus Phishing DESCRIPTION A program that attaches itself to applications or other software, damaging systems and files Perpetrator sends out e-mails that link to fraudulent websites, causing victim to release personal information Hacker transmits instructions to other computers for the purpose of controlling them Use of e-mail to trick an individual into providing personal information that is used for unauthorised purposes Perpetrator hacks into banking system, diverts funds to his/her accounts Perpetrator hacks into systems or PCs to obtain confidential information Illegal online acquisition of a credit card number and its unauthorised use E-mail barrage, computer viruses or other techniques to damage or shut down systems Theft of intellectual assets Unsolicited e-mail

Vendor management
Very often, vendors end up dealing with an inefficient system for inventory management that affects the delivery process. In most cases, there is no digital data for products, no appealing visual, and no mechanism to check daily prices. When sites are not updated regularly, they cease to attract buyers.

Botnet Spoofing E-bank theft Netspionage Online credit card fraud Denial of service Software piracy Spam

In India, the growth of ecommerce has been steady but slow. There is a clear lacuna in the required resources and infrastructure that has hampered progress. Experts point to several hurdles. While Fundsupermart’s D’Souza pointed to low bandwidth, 20:20 MSL’s Ahuja said inventory based e-commerce is capital-inefficient, the revenue models are shaky and there is little consolidation. Tlabs’ Jain, on the other hand, listed supply chain automation, logistics, the lack of easy payment solutions and increased return in goods. Srinivasan said that consumers are “not adequately protected against fraud, misleading claims or poor service”.

Payment collection and taxes
Net payment involves sharing some revenue (4% or more). With a thin profit margin, this means parting with half the profits. Businesses also have to factor fraudulent charges and charge backs in their business model. “The biggest challenge is in the area of payments,” said D’Souza. “Most end consumers are sceptical while paying online, which has forced etailers to organise unconventional methods of payments.” This is why cash on delivery is a preferred option in India. However, it’s not the easiest thing for businesses. “Cash on delivery sucks and needs to die,” said Jain.

Cyber crime in e-commerce
One of the biggest fears that consumers have in ecommerce is cyber crime. Cyber crime includes criminal acts such as viruses, phishing and denial of service attacks that cause e-commerce websites to lose revenues. E-commerce companies suffer heavy losses due to stolen assets, breakdown of websites and so on. Apart from the financial loss, the company’s reputation is at stake. For the customer, it is a loss at the mere push of a button and it’s a

AREAS OF CONCERN • Quality of goods and services is a concern. E-commerce firms need to focus on this. • Security is promised, but not always delivered. Increased investment in security will bring more customers to this platform.

• Establishing trust and winning confidence isn’t easy. Brick and mortar stores tend to be more trusted, it’s no surprise. E-commerce firms will have to work hard to gain consumers’ trust. • Delivery times tend to be a problem. Too many cases of late deliveries or damaged

goods have made buyers suspicious. Logistics must improve. • Many sites lack detailed information about products and pricing. Transparency on this front is critical.

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10 years from now: E-commerce is dead, long live e-commerce
Narendra Nag, co-lead, MSLGROUP India Social | 2020Social

writing an article instead of a tweet. E-commerce can broadly be broken down into three parts: you, the valuable customer who’s always right, browsing through a catalogue of products on a website; paying for the products using a credit/debit card or in cash when they are delivered; and a logistics and delivery system that goes to work as soon as you place an order so it reaches you as quickly as possible. This model revolves around a web 1.0 worldview. It requires you, the customer who belongs to a Sec A audience and owns at least one car, to actually visit a website. The more modern online retail operations have expanded to social networks like Facebook, ensuring you can like a product before you buy it. Retailers like Levi’s show you which friends of yours like the pair of jeans you’re looking at. And in the next year or so, your timeline may well be flooded with other verbs as retailers go into overdrive, informing the social graph of every customer about their wonderfully decisive purchases. The world, however, is changing very quickly. So, I’m going to go out on a limb to bet what little reputation I have as a rational thinker on three major changes that will completely transform the way we shop in 10 years’ time. NUMBER ONE. Websites are becoming increasingly less relevant. As more and more people buy smartphones, we have an app for whatever it is that we want to know or do. On a PC (really, you, the customer who travels abroad every year, still owns a PC?) access to the data and services on the

internet are controlled through the browser. On the mobile, we’re accessing online data and services primarily through apps. In 10 years’ time, it’s safe to assume that the smartphone will be a feature phone and Apple will be selling iMods — chips for our brains that allow us to be plugged into data streams all the time. In essence, some of us will be living in two worlds simultaneously and the store we visit in either will be very similar. Choosing a product from either will feel the same; after all, we’ll be adding things to a cart, not clicking on an ‘add to the cart’ button. And checking out will be similar as well. I’m not suggesting the online world will be more like the real world, a la bad virtual reality movies from the last century, but that the real world will be more like the dot-com world — physical retail outlets will offer a large variety of products without stocking them physically in their own stores. NUMBER TWO. Paper money is going to be a rarity, perhaps even a party trick or the highlight of a museum tour. Credit card companies won’t disappear, but cards well might. We may be paying using our mobile phones or the chips in our head. The point being, there will be no real difference in the manner in which we make and receive payments online or in the real world. This will remove another important distinction between physical commerce and electronic commerce. NUMBER THREE. Just-intime logistics will have reached a whole new level. Why carry something you’ve liked at a store home when it can be delivered at an address of your choosing. This makes a lot of

sense to the retailer, allowing him to save money on valuable real estate, delivery and storage charges. In fact, the size of the store can be directly related to the number of people they hope to serve at any single point of time, rather than the number of products they hope to stock and sell. These three things, if they happen in the way I’m imagining them, will break down the walls we have created between online and offline shopping. We’ll be living in a world where we’ll shop without worrying about these distinctions. There are many obvious positives for retailers and consumers. For example, non-availability of a product will be a thing of the past. Children born the latter half of this decade will not be able to properly process the concept of something being out of stock. After all, if it isn’t physically present in the store, it’ll still get delivered to them in doublequick time. E-commerce as we know it will be dead. But, commerce and trade, in all its glorious variations will thrive in a world where there will be more people and more choice than ever before. Ten years from now.

E-commerce, both the word and the concept as we understand it today, will die within the next 10 years.

Before the luddites amongst you throw a party to celebrate a return to a simpler world where corner stores serve all your

needs, Monday to Saturday, between 11 in the morning and 7 in the evening, let me throw some water on the parade by

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The e-commerce evolution
1946 : First computer, ENIAC, constructed at University of Pennsylvania 1958 : To counter Soviet technological advances, US forms the Advanced Research Projects Agency (ARPA) to develop leadership in military science and technology 1969 : ARPANET, forerunner of the Internet, established 1970 : First applications of electronic data interchange (EDI) surface 1973 : First international connection to ARPANET. Initial work on a transmission protocol (later called TCP/IP) that allows computer networks to communicate 1974 : BBN opens Telnet, first commercial version of ARPANET 1979 : Michael Aldrich invents online shopping 1981 : Thomson Holidays, UK, is first B2B online shopping destination 1982 : Transmission Control Protocol (TCP) and Internet Protocol (IP) established by ARPA. This leads to a definition of an ‘internet’ as a connected set of networks 1984 : Science fiction author William Gibson coins the term ‘cyberspace’ in his novel ‘Neuromancer’. Gateshead SIS/Tesco is first B2C online shopping destination and Mrs Snowball, 72, is first online home shopper. CompuServe launches Electronic Mall in the US and Canada; it is the first comprehensive electronic commerce service 1985 : Nissan UK sells cars and finance with credit checking to customers online from dealers’ lots 1987 : Internet users exceed 10,000 1989 : Internet users exceed 100,000 1990 : ARPANET shut down 1991 : Sir Tim Berners-Lee, working at CERN at Geneva, develops a hypertext system, posts first computer code of World Wide Web in a newsgroup, ‘alt.hypertext’ 1992 : World Wide Web released by CERN 1994 : Pizza Hut sells pizza on its website. First Virtual, the first cyber bank, opens 1995 : Jeff Bezos launches Amazon.com. First commercial-free 24-hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use internet for commercial transactions. eBay is founded by Pierre Omidyar as AuctionWeb. 1997 : US Postal Service issues electronic postal stamps 1998 : Alibaba Group is established in China 2000 : Internet users exceed 360 million, dot-com bust occurs 2010 : Groupon reportedly rejects $6 billion offer from Google. Instead, the group buying websites plans IPO in mid-2011 2011 : Internet users at 2 billion

India and the internet
Internet country code: .in Internet service providers: 180 (2010) Internet hosts: 4,536,000 Internet users: 100 million+ Internet penetration: 8.4% of population Number of internet connections: 22.39 million Broadband Internet users: 13.35 million Users who access internet from their phones: 59% Average broadband speed: 256 kb/second; internationally, it is 5.6 mbps, according to the International Telecommunication Union

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