E-commerce wave in India

E-commerce in recent times has been growing rapidly across the world. E-commerce means
sale or purchase of goods and services conducted over network of computers or TV channels
by methods specifically designed for the purpose. Even though goods and services are
ordered electronically, payments or delivery of goods and services need not be conducted
online. E-commerce transaction can be between businesses, households, individuals,
governments and other public or private organizations. There are numerous types of ecommerce transactions that occur online ranging from sale of clothes, shoes, books etc. to
services such as airline tickets or making hotel bookings etc. The bookings done through
electronic communication could be Business to Business (B2B) or Business to Consumer
(B2C). Business to Business i.e. B2B is e-commerce between businesses such as between a
manufacturer and a wholesaler or between a wholesaler and a retailer. There are several
variants in B2C model that operate in e-commerce arena. From the point of view of business,
there are two models of e-commerce. First model is known as Market Place model, which
works like exchange for buyers and sellers. The Market Place provides a platform for
business transactions between buyers and sellers to take place and in return for the services
provided, earns commission from sellers of goods/services. Ownership of the inventory in
this model vests with the number of enterprises which advertise their products on the website
and are ultimate sellers of goods or services. The Market Place, thus, works as a facilitator
of e-commerce. Different from the Market Place model is the second category of business
known as Inventory Based model. In this model, ownership of goods and services and
market place vests with the same entity.
India, the second most populous country in the world, is home to 1.2 billion people.
It is has a huge potential for the e-commerce business. India has an internet user base of about
250.2 million as of June 2014 and is still growing with a large number of new entrants.
Currently India has e-commerce for 11 categories and is open to still many. Let us view the
role of the key players in these categories that are growing to a much larger scale and
defining e-business in a new way in the Indian market. With a huge funding raised by the
companies have given boost to the new players in the market. The multicategory segment is
on fire in the current year. The top players- Flipkart, Snapdeal and Amazon are expected to do
$4 billion in sales this fiscal. Flipkart projects its sales to reach 10 billion by year 2014. On
average, Flipkart sells nearly 20 products per minute and is aiming at generating a revenue
of 50 billion (US$0.81 billion) by 2015. Cash-on-delivery has been one of the key growth
drivers and is touted to have accounted for 50% to 80% of online retail sales. Amazon.com
has said it plans to invest $2 billion more in India, where it has slashed prices, ramped up
marketing and accelerated warehouse construction to try and take on local competitors.

Online travel has traditionally been the largest e-Commerce sub-sector (by revenue) in India.
Travel segment constitutes nearly 71% of the transactions of consumer e-commerce industry.
Online travel players are diversifying their offerings to include hotel reservations, along with
the regular ticketing services.
According to CRISIL Research, Indias online retail industry has grown at a swift pace in the
last 5 years from around Rs 15 billion revenues in 2007-08 to Rs 139 billion in 2012-13,
translating into a compounded annual growth rate (CAGR) of over 56 per cent. The 9-fold
growth came on the back of increasing internet penetration and changing lifestyles, and was
primarily driven by books, electronics and apparel. CRISIL Research expects the buoyant
trend to sustain in the medium term, and estimates the market will grow at a healthy 50-55
per cent CAGR to Rs 504 billion by 2015-16. . Key players in this category are Jabong,
Yepme, Myntra (which has now been acquired by Flipkart) and many more. Furniture sale is
also picking up using e-commerce. German Rocket Internet-sponsored FabFurnish and
Norwest Venture Partners-funded Pepperfry are among those who have entered the furniture
segment. The Indian home and furnishing market is pegged at about $20 billion (Rs 1.2 lakh
crore), of which the furniture segment accounts for about half. As about 90 per cent of the
market is unorganised, it is an attractive avenue for online players. Groceries sell irrespective
of the state of the economy. You can stop going to the cinema and restaurants, but there's no
way you can live without toothpaste, soap and, well, vegetables. Caught in the city's fast
pace, tedious commuting and long working hours, many consumers don't have the time to
buy groceries or would like to avoid the chore. With improving comfort with online
payments, selling groceries online has become relatively easy. AaramShop.com, EkStop.com,
BigBasket.com, AtMyDoorSteps.com, MyGrahak.com, ZopNow.com, Omart.in,

LocalBanya.com, RationHut.com and SeaToHome.com are some of the online stores retailing
groceries. Most of the existing etailers offer their service in metros and major urban centres.
Healthcare in India is an underserved and underpenetrated market. There is a huge demand.
Lenskart, Healthkart, Firstcry are some of the leading names in this segment.
According to Flipkart CEO Sachin Bansal, India is going to be the third biggest e-commerce
(market by value) in the world (after the US and China) going forward. Online retail is worth
$3.1 billion, or 10% of the organized retail market, and is estimated to grow to $22 billion, or
over 15% of the organized retail market, in five years, according to a November 2013 report
by brokerage firm CLSA. Large global financiers such as Morgan Stanley, Singapores staterun investment firm Temasek Holdings and US investment firm BlackRock are queuing up to
invest in Indias e-commerce businesses. Ratan Tata has made a personal investment in online
jewellery retailer Bluestone as the former Tata Group chairman scales up his exposure to
India's red hot e-commerce sector which has attracted a steady stream of investor money.
Ancillary services providers such as logistics companies and supply-chain companies are also
likely to benefit from this, apart from the e-commerce companies themselves.
Challenges for the e-commerce players in India:
1. Internet penetration is low.
Internet penetration in India is still a small fraction of what you would find in several
western countries
2. Logistics is a problem in thousands of Indian towns.
The logistics challenge in India is not just about the lack of standardization in postal
addresses. Given the large size of the country, there are thousands of towns that are not easily
accessible. Metropolitan cities and other major urban centres have a fairly robust logistics
infrastructure. But since the real charm of the Indian market lies in its large population,
absence of seamless access to a significant proportion of prospective customers is a
dampener.
3. Payment gateways have a high failure rate
Indian payment gateways have an unusually high failure rate by global standards.
Ecommerce companies using Indian payment gateways are losing out on business, as several
customers do not reattempt payment after a transaction fails.
4. Cloud surrounding e-commerce laws
Existing regulations on e-commerce in the country:
As per extant FDI policy, FDI, up to 100%, under the automatic route is permitted in B2B ecommerce activities. As such, extant FDI policy does not permit FDI in B2C e-commerce.

Information Technology Act, 2000 provides legal recognition for transactions carried out by
means of electronic data interchange and other means of electronic communication,
commonly referred to as "electronic commerce", which involve the use of alternatives to
paper-based methods of communication and storage of information, to facilitate electronic
filing of documents with the Government agencies.
India has the Consumer Protection Act 1986. However, nothing in the Act refers explicitly to
e-commerce consumers. It provides for regulation of trade practices, creation of national and
state level Consumer Protection Councils, consumer disputes redressal forums at the
National, State and District level to redress disputes, class actions and for recognized
consumer associations to act on behalf of the consumers. The Act provides a detailed list of
unfair trade practices, but it is not exhaustive.
The legal requirements for undertaking e-commerce in India also involve compliance with
other laws like Contract Law, Indian Penal Code, etc. Further, online shopping in India also
involves compliance with the banking and financial norms applicable in India. For instance,
take the example of PayPal in this regard. If PayPal has to allow online payments receipt and
disbursements for its existing or proposed e-commerce activities, it has to take a license from
Reserve Bank of India (RBI) in this regard. Further, cyber due diligence for Paypal and other
online payment transferors in India is also required to be observed.
Laws regulating e-Commerce in India are still evolving and lack clarity. This poses a
challenge for potential entrants and existing players. Furthermore, the lack of law firms or
lawyers specializing in e-Commerce laws compounds the problem.
Conclusion
Industry surveys suggest that e-commerce industry is expected to contribute around 4 percent
to the GDP by 2020. According to a NASSCOM report, by 2020, the IT-BPO industry is
expected to account for 10% of Indias GDP, while the share of telecommunication services
in Indias GDP is expected to increase to 15 percent by 2015. With enabling support, the ecommerce industry too can contribute much more to the GDP.