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A Study of Marketplace Business Model in India

Thesis · March 2021

DOI: 10.13140/RG.2.2.29533.95208

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Swagatika Simanchal Sabat

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A Study of Marketplace Business Model in
India

- Swagatika S. Sabat

1
 EXECUTIVE SUMMARY

E-commerce is one of the most dynamic and important sectors of the Indian economy.
Its development is driven by rapid expanding in Internet access. For the past few years,
e-commerce is dominated by the marketplace. There are both advantages and
disadvantages for both buyers and sellers. The thesis focuses on how e-commerce has
gained significance in India and its growth factors. The objective of the thesis is to
understand why the marketplace business model is an important aspect of the e-
commerce sector and how it has gained significance in the modern digital era.
Followed by how the marketplace business model generates revenue and what are
different modes of revenue generation along with that understand each revenue
model’s pros and cons. Finally, to understand consumer behaviour towards the whole
concept of a marketplace business model, to do so an online survey was conducted
using a questionnaire. The questionnaire was distributed to respondents from different
age groups and their responses were analysed. Data was collected from other
secondary sources too.

The thesis analyses importance of the marketplace business model, its revenue model
and consumer preference and behaviour towards different types of marketplace
models. Marketplaces create new opportunities for expansion on a larger scale for
online sellers. Companies do not need to invest in various sales platforms. Moreover,
they have access to innovative solutions.

2
 AKNOWLEGMENT

I would like to thank my esteemed supervisor – Dr. Sameer Kulkarni for

his invaluable supervision, support and tutelage. My gratitude extends to
all the faculties of Amity Business School for giving me the opportunity to
undertake my studies at the Department of Business at Amity University,
Mumbai. My appreciation also goes out to my family and friends for their
encouragement and support all through my studies.

3
 TABLE OF CONTENTS

CHAPTER PAGE
PARTICULARS
NO. NO.
EXECUTIVE SUMMARY 2
ACKNOWLEDGEMENT 3
1. INTRODUCTION 6
1.1 General Introduction 6
1.2 Rationale for the Dissertation 6
1.3 Objectives of the Study 7
1.4 Literature Review 7
1.5 Research Methodology 8
1.6 Limitation of the Project 9
2. CONCEPTUAL FRAMEWORK 10
2.1 Growth of E-commerce in India 10
2.2 Growth drivers of E-commerce 11
2.3 Nature of Marketplace 12
3.3 Marketplace Revenue Model 13
3. DATA ANALYSIS AND FINDINGS 16
3.1 Data Analysis 16
3.2 Findings 19
4. CONCLUSION 23
REFERENCES 24
ANNEXURES 25

4
 LIST OF FIGURES

SR.NO TITLE PAGE

NO
1 Indian E-commerce and Internet Market. 13
2 Preference for online shopping 18
3 Price comparison between 18
products/services
4 Subscription/purchase preference 19
5 Additional payment preference 19
6 line vs offline price preference 20
7 Online vs offline quality preference 20

5
CHAPTER 1- INTRODUCTION

1.1 General Introduction

The share of e-commerce in retail has been growing rapidly. In 2018, it was 11.9%,
reaching 13.7% in 2019 and expected to reach 22.5% in 2022 [Statista 2019]. Fashion
items (clothing, footwear, and accessories), as well as electronics and media (personal
electronics, music, and games), are the most common items purchased online.
Customers buy items from both online retailers and marketplaces, with the latter
gaining a lot of momentum. The top 100 largest marketplaces produced USD 1.86
billion in revenue last year. This accounted for more than 95 percent of total revenue
across all platforms and roughly 65 percent of global e-commerce. There are 61
platforms in the United States, 17 in Asia, 14 in Europe, 5 in South America, and 3 in
Africa all among the top 100.

Amazon is the world’s largest marketplace for online shopping with over 25
categories, followed by it is Alibaba. In India there is Flipkart with over 80 million
products with 100 million registered users and Snapdeal with over 300,000 sellers
selling more than 60 million products with 65+ million marketplace visitors.

An online marketplace is a website or an app that is a mediator between the customers

and companies or entrepreneurs offering products or services in the B2B and B2C
sectors. The marketplace doesn’t provide products or services on their own. Their task
is to provide a platform where the participants interact. (Merrick Brain, 2019). There
are basically four types of Marketplace Business Model a. Vertical Marketplace b.
Horizontal Marketplace c. Global Marketplace and d. Hybrid Marketplace model.
Similarly, for revenue collection there are various revenue model, such as commission,
subscription, premium, freemium, etc which has been discussed in this thesis.

1.2 Rational

The way business functions have drastically changed over time, especially in the last
few decades. With the introduction of the internet into the market, the traditional
business shifted to e-commerce and since then there has been a continuous evolution in
the e-commerce sector and today e-commerce is dominated by online marketplace
business models. This thesis aims to understand:

6
 • How marketplace business models have changed the way e-commerce
functions. Its advantage, disadvantages, and benefits
• Gain deeper insight into how marketplace models business models generate
revenue and analyse each revenue model.
• Study consumer behaviour towards marketplace business model.

1.3 Objectives
• Understand the importance of the Marketplace Business Model in the Digital
Era.
• Study and analyse different marketplace Revenue model.
• To identify consumer behaviour towards different Marketplace Revenue
Model.

1.4 Literature Review

With the advent of the new economy, business models have become an increasingly
popular unit of analysis to explain differences in firms’ success (Afuah and Tucci,
2003). Business model research suggests that appropriate business models can lead to
sustainable competitive advantage and superior financial performance (Zott and Amit,
2007). The business model, as a construct, is a layer located between the firm’s
strategic and operational layer (Osterwalder, 2004). While strategy determines the
intended positioning and long-term source of a competitive advantage, the business
model can be seen as the vehicle to achieve these long-term objectives (Casadesus-
Masanell and Ricart, 2010). The motivations for doing research in business models can
be diverse. Baden-Fuller and Morgan (2010) identify three major functions of the
business model construct: a perspective for the classification of existing types of
businesses, a unit of analysis for academic inquiry, and a recipe for practitioners to
copy and further innovate.

The increasing digitization and the development of internet-based technologies have a

strong impact on all aspects of the economy. Digitization generally describes the
gathering and preparation of data for processing or storage in an electronic (i.e. digital)
system (BMWi, 2012). With the information and communication (ICT) industry, an
entirely new industry has arisen in the process of digitalization. However, the impact
of digitization reaches far beyond the ICT industry. Companies from all industries face
7
rapidly changing opportunities and challenges due to the emergence of new internet-
based technologies. Westermann. (2014) propose three areas in which managers can
utilize new digital technologies:

• Customer experience: firms can apply the digitalization of information and

communication to engage their customers in novel ways. For instance, they can
establish digital user communities to provide additional value.
• Operational processes: digital technologies enable large gains in operational
efficiency in processes along all steps of the value chain.
• Business models: digitization enables the development of entirely new forms of
creating and capturing value. This includes, for example, the entire
reconfiguration of a value delivery model and entirely novel value
propositions.

Study reveals that perceptions toward online shopping and intention to shop online are
not only affected by ease of use, usefulness, and enjoyment, but also by exogenous
factors like consumer traits, situational factors, product characteristics, previous online
shopping experiences, and trust in online shopping. (Benedict et al 2001). K.
Vaitheesewaran (2013) examined the convenience of online shopping “With product
getting standardized, specifications getting fixed and the concept of service getting
eroded, the post-sale responsibility of the retailer has come down drastically. Hence
customers go to stores to explore the product physically detail but buy online at a
cheaper rate. Heavy discounts of e-commerce firms are possible because of their no
warehouse model.”

1.5 Research Methodology

Through secondary data collection such as reports, articles, working papers and
internet sources, this research analysis different marketplace revenue model and
attempts to understand the importance of the marketplace business model in the digital
age. Primary data is collected using a questionnaire to identify consumer behaviour
towards different marketplace revenue model. Both qualitative and quantitative
method is used for the preparation of the report. The response of the respondents is
segregated into different categories based on their age (16 to 24, 25 to 36,37+) to
effectively understand consumer behaviour.

8
1.6 Limitations

• The basic limitation of my secondary data collection is that there is a lack of

research from the e-commerce’ perspective when it comes to the marketplace
business model.
• Limitation of sample size, as I was unable to assess the larger population
because of the limited resources
• Few respondents are not comfortable disclosing their purchase choices or
purchase-related information.
• Secondary data may not be accurate or outdated
.

CHAPTER 2- CONCEPTUAL FRAMEWORK

2.1 Growth of E-commerce in India

9
The Indian E-commerce industry has been on an upward growth trajectory and is
expected to surpass the US to become the second largest E-commerce market in the
world by 2034. The E-commerce market is expected to reach US$ 200 billion by 2026
from US$ 38.5 billion in 2017. India’s E-commerce market has the potential to grow
than four folds to US$ 150 billion by 2022 supported by rising incomes and surge in
internet users. With growing internet penetration, internet users in India are expected
to increase from 445.96 million in 2017 to 829 million by 2021. As of December 2018,
Internet subscribers in India stood at 604.21 million people. The total internet
subscriber base in India stood at 636.73 million subscribers in FY19.1

Each month, India is adding approximately 10 million daily active internet users to the
internet community supporting the ecommerce industry which is the highest rate in the
world. Online shoppers in India are expected to reach 220 million by 2025. India’s
Internet economy is expected to double from US$ 125 billion as of April 2017 to US$
250 billion by 2020, majorly backed by E-commerce. Digital transactions are expected
to reach US$ 100 billion by 2020. Though its Digital India Campaign the government
of India is aiming to create a trillion-dollar online economy by 2025. Propelled by
rising smartphone penetration, the launch of 4G networks and increasing consumer
wealth, the Indian E-commerce market is expected to grow to US $ 200 billion by
2027 from US $ 38.5 billion in 2017. E-commerce is increasingly attracting customers
from Tier 2 and Tier 3 cities, where people have limited access to brands but have high
aspirations.

Average online retail spending in India was US$ 224 per user in 2017. The
government e-marketplace, three years after its inauguration saw a cumulative
procurement by the central and state governments of Rs. 24,183 crores (US $3.46
billion) in FY19 and has a target of Rs 50,000 (US $ 7.15 billion) crore in FY20. By
2022, smartphone users are expected to reach 476 million and E-commerce sector

1
“India to overtake US as world's largest e-commerce market: Study”- The Economic Times-Industry,
Dec 09, 2018

10
expected to grow 1200 per cent by 2026.2

1. Indian E-commerce and Internet Market. (source: IBEF)

2.2 Growth drivers of E-commerce

a. Increasing awareness
As the awareness of using internet is increasing, more and more people are
being drawn to E-commerce. Whether it be sellers, buyers, users or investors,
people have started getting used to online mode or commerce.
b. Government Initiatives
Government initiatives like Digital India are constantly introducing people to
online modes of commerce. Favourable FDI policy is attracting key players.
Government proposed the National E-commerce policy set up the lawful
agenda on cross border data flow, no data will be shared with foreign
government without any prior authorization of Indian government.
c. Investment
Increasing FDI inflows, domestic investment, support from key industrial
players is helping in the growth of E-commerce.

2
Indian Ecommerce Industry Analysis- Indian Brand Equity Foundation, July 2018

11
2.3 Nature of Marketplace

A marketplace is a platform that gives products and services of various sellers,

which are bought by clients. Most of the products come from different external
companies, there are some platforms who also offer their own products. Other
businesses must be ready to sell their products to make the platform a marketplace,
otherwise it is just an online shop.

Most often, the marketplace business model is based on gathering fees for sales
made through them. Some marketplaces collect fees for listing the merchandise
(e.g., Allegro). The sellers agree to such fees, because marketplaces permit them to
enter the market with little financial outlays. Consequently, such platforms are key
selling venues for several sellers.

Some marketplaces seek ways of making extra revenues other than from sales
commission. One such example may be fulfilment services, consisting in the
marketplace taking over processes related to warehouse logistics, i.e., receiving
goods, storage, picking, packing, shipping and handling returns. (E.g., Amazon)

The foremost marketplace sellers owe their achievement to their unique approach
to customers. They draw on clients’ feelings and offer them with a product- and
delivery-related experience.

Largely due to customization, the Internet has made it possible to know clients
better, in specific their shopping experience, and consequently to adapt the offer to
their preferences and to rise up to their loyalty. knowing the needs of their potential
clients allows sellers to offer their products more consciously. Add-on sales are
used for present clients. This has taken the form of cross-selling, where products
from different categories are sold, selling more expensive or more advanced
products from the same category. There are both advantages and disadvantages to
the use of marketplaces, and both for sellers and the buyers.

12
 Advantages for Seller Disadvantages for Seller

Marketplace brand recognizability Strong competition from many sellers in

More number of clients at one place
Low entry barrier
Extra channel of sales and a source of
revenue
Capability to reach clients abroad etc.
one place
Becoming dependent on this sales
channel and neglecting the growth of the
seller's own online shop
Everyday changes to the sales and
payments policy
Service costs
Restrictive requirements concerning
product descriptions and images,
customer service etc.

Advantages for Buyer Disadvantages for Buyer

Access to numerous products in one
place.
Possibility to compare prices of products
offered by various suppliers.
High credibility of sellers and safety of
transactions.
Feedback on sellers from other users etc.
Becoming dependent on one marketplace
Difficult contact with the seller
No individual is approach from the
marketplace
Shipments from different sellers divided
etc.

2.4 Marketplace Revenue Models

a. Commission Revenue Model

It is by far the most common business model for online marketplaces. The
marketplace charges a percentage or a fixed price for its product when the
consumer pays the supplier. Either the seller or the buyer will be paid by the site.
Taking a fee from both of them is another example.

13
Because the fee is justified, this marketplace revenue model is the most common.
Only when they get some benefit from using the platform can the parties work for
free and pay. At the same time, the marketplace also earns income from each
conversion.

Examples: Airbnb, Amazon

Do you prefer to shop online (Amazon,Flipkart,Myantra)

b. Subscription Revenue Model

The subscription model is a business model in the marketplace where a monthly

fee for access to the platform is paid by the user. The online marketplaces' value
proposition that uses a subscription model helps suppliers find new customers or
gain access to the database of potential customers or partners. In general, online
markets that charge subscription fees do not engage in user-to-user transactions.
For instance, with a credit card, the parties may pay directly.

Examples: okcupid, couchsufing

c. Listing Fee Revenue Model

If a marketplace charges customer for placing advertising on the site, the listing fee
model is an online marketplace revenue model. Although online marketplaces
based on commissions charge a fee only when the product is sold, they may lose
the revenue from the less popular merchandise. The listing fee model makes it
possible to fix this issue and benefit from each and every ad on the site.

Examples: Esty, Meesho

d. Freemium Revenue Model

Freemium is a revenue model where there are both free and premium features in a
marketplace. As the marketplace needs to provide very appealing premium features
for consumers.

Examples: Dropbox, Hootsuite

e. Featured Listings and Ads

14
 The featured listings and advertisement model is a revenue model for the online
marketplace in which sellers purchase advertising rights to improve exposure on
the website. Provided that all other listings are free to publish, vendors or service
providers pay to have a featured listing higher than others or be at the top of a
certain tier.

Examples: OLX, Magicbricks

f. Mixed Revenue Model

As the name suggest it is mixture of more than one revenue model.

Examples: Amazon, Alibaba

15
CHAPTER 3- DATA ANALYSIS AND FINDINGS

3.1 Data Analysis

Preference for online shopping

2. Preference for online shopping

More than 50% of the respondents prefer to shop online, among which the majority of
the respondents belong to the age group of 20 to 37.

3. Price comparison of products/services

16
Respondents above the age of 37 mostly engage with in-store comparison before
making a purchase decision. While other age groups 20-37 mostly compare the prices
online via google search and/or Amazon, etc.

4. Subscription/purchase preference 5. Additional payment preference

As per the data collected it was found that respondents between the age group of 24 to
37 often subscribe or purchase applications/services after their trail period expires,
whereas millennials often switch to other similar applications or services which are
free of cost.

Preference of the applications also varies depending on the age factor, respondents
between the age of 16-35 often subscribe, purchase and even pay premium price for
OTT platforms like Netflix, Amazon Prime, Hotstar, music applications like Spotifiy,
Saavan, Gaana, etc, educational applications like Biju’s, Unacademy, Coursera, dating
sites, gaming applications, property listing applications or other official use
applications like Hootsuite. Whereas respondents above the age of 35 mostly subscribe
to online newspapers or magazines, listing services, few subscribed to music or other
entertainment related applications.

17
6. Online vs offline price preference 7. Online vs offline quality preference

73% of the respondents find an online model to be cost-effective but when it comes to
quality only 27% of the respondents think online models like Amazon, Flipkart, etc
provides better quality products or services while 33% think better products or services
can be found offline and 40% of the respondents think better quality products can be
found both online and offline.

Marketplaces provide many advantages, like prompt access to a lot of clients, high
recognizability, 1st contact venue, ready technical keys, a payment system and
logistics. It provides great venues for testing products and new sales markets and for
collecting information from clients. A small batch of pilot goods can be launched to
check demand and obtain feedback from clients, all without making big investments in
sales and distribution channels. Some of the restrictions are very strong competition,
listing systems, communication with clients from abroad, and fees.

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3.2 Findings

3.2.a. Importance of Marketplaces in the E-Commerce Business

Based on our observation and research we have identified the following

benefits\importance of having marketplace in digital era:

• Access to huge customer base: Usually the consumers visit a marketplace

more than a actual retail store, for instant to check price or look at the features
or attributes of a product or product comparison. Even if the customer is not
searching specifically for your product with proper targeting your product may
come across them. This could lead to impulsive buying and your brand is
accessible to new customer base and location is no more restricted.
• Easy management of promotional deals: Marketplaces make providing
coupons and bargains to clients easy. It also shortens the time for response. For
the seller and the buyer, this is beneficial. Quicker responses allow sellers, if
necessary, for their campaigns, to make changes.
• Loyalty programs: In regards to e-marketplaces, Amazon Prime is one of the
most popular loyalty services. It's fascinating to notice that Prime subscribers
spend about twice what they spend online with non-Prime subscribers, which is
an perfect example of loyalty program.
• Access to huge data: Marketplaces often offer marketers information about
their sales, in addition to expanded exposure to new consumers. To enhance
their product, brands can use data such as click data, ratings, etc. Knowing how
a prospective buyer looks for items often encourages marketers to advertise
themselves in better ways. For instance, understanding what search words
clients enter will help name products when looking at items to keep in mind
when uploading a product to amazon, ebay, walmart, etc.
• Finding potential customers: There are far more clients for a marketplace
than an individual e-commerce website. Effectively, this ensures that you will
be made available to far more individuals by investing the same amount of
money on promotions. This lowers the price associated with acquiring a new
client.
• Reduced Marketing cost: It's much better to run a marketplace promotion
than to run one individually. You will engage as a brand in advertising

19
 promotions that are handled by the marketplace. Therefore, to run this, you do
not need to commit as many resources. It also helps to realize that these
networks are capable of serving more potential clients than any individual
brand.
• Higher conversion Rate: As the consumers visiting your marketplace is
higher, so would be the conversion rate at competitively lower cost.

3.2.b Marketplace revenue model

Model Description Pros Challenges

Commission User is charged a Attracts more Providing enough
Revenue Model fee for every vendors as the user vale to both the
transaction. pays only when the parties (buyers and
product is sold. sellers).
With every Setting appropriate
transaction you are price to generate
able to monetize profit.
Subscription User is charged a Easy to predict Maintaining the
Revenue Model fee in order to monthly revenue customer base by
access the Easy to attract proving enough
platform. more client. values.
Listing Fee User is charged a Cheaper price as Listing is
Revenue Model fee for posting ad compared to comparatively very
on the platform. subscription model less, hence it’s
User pays for ad difficult to generate
hence they revenue with less
maintain the customer base.
quality which is
beneficial for both.
Freemium Marketplace with Faster in terms of Converting free
Revenue Model both free and lead generation. users to paid ones
premium features. No limitation in by proving enough
terms of using. features

20
 Featured Listings When sellers buy It is the best Difficult to get
and Ads advertising revenue when you enough users to
privileges to have want to introduce a pay for the
more visibility on new flow of premium features.
the platform revenue. Providing enough
values.
Mixed Revenue Mixture of more Several revenues Maintaining a
Model than one revenue stream. balance between
model charging both the
parties

3.3.c Consumer behaviour towards different Marketplace Revenue Model

Age Group Preferences

16-24 • Prefer to shop both online and
offline, mostly online.
• Look for cheaper subscription
plans as compared to other age
groups.
• Mostly tend to switch to other
cheaper alternatives rather than
paying a premium.
• Mostly subscribe to educational,
entertainment,
applications/services.
25-36 • Prefer to shop both online and
offline, whichever option is
cheaper.
• Looks for quality, benefits and
cost before subscribing.
• They tend to pay a premium price
if they like the service provided.

21
 • Mostly subscribe to entertainment,
feature listing and other
informational
applications/services.
37+ • Prefer to shop both online and
offline, mostly offline.
• Least like to subscribe to any
online services.
• Mostly prefer offline mode for
better quality products and
services.

22
CHAPTER 4- CONCLUSION

This thesis expands existing awareness of the nature of e-commerce marketplaces

to promote a deeper understanding of their broad variety, it provides an original
approach to marketplace classification. Besides, it reveals their benefits and
challenges. Trade-in India has become simpler and more convenient than ever,
thanks to market places. Both enterprises and consumers are its beneficiaries.
Nearly every company has the opportunity to become a profitable trader.
Marketplaces provide new possibilities for existing organizations to grow on a
larger scale and provide emerging entities with potential for rapid growth.
Companies can save on both fixed and variable costs associated with their presence
on their websites, such as leasing, labour and other overheads.

In the case of cross-border trade, it is especially relevant because businesses do not

have to spend a lot of money on foreign expansion. Besides, they have access to
creative solutions (new tech, marketing and logistics solutions used by
marketplaces). Obviously, in e-commerce, there are many dark sides of markets,
such as very strong competition from many vendors in one location, being
dependent on this sales channel and neglecting the growth of the online shop of the
seller itself. While this thesis provides new insights into understanding
marketplaces, it is limited to the theoretical character.

23
References

Fareeha Ali. Jul 9, 2020. Infographics – what are the top online marketplaces?
https://www.digitalcommerce360.com/article/infographic-top-online-marketplaces/

E-commerce Foundation, 2016. The Rise of The Global Market Places,

https://www.ecommercewiki.org/reports/526/the-rise-of-the-global-marketplaces-
online-version/download

Zachary Wolf. Aug 2016. Marketplaces: The Evolving Landscape.

https://www.markmonitor.com/mmblog/marketplaces-evolving-landscape-part-1-2/

Anand Daniel. Nov 2017. Rise of the Indian marketplaces, and what the future holds.
https://medium.com/accel-india-insights/rise-of-the-indian-marketplaces-and-what-
the-future-holds-614d6219fbf7

Indian Brand Equity Foundation, E-commerce Industry in India.

https://www.ibef.org/industry/ecommerce.aspx#:~:text=Online%20retail%20sales%20
in%20India,smartphone%20vendors%20in%20the%20market.

Sandhya Keelery, Aug 4, 2020. E-commerce in India - statistics & facts.

https://www.statista.com/topics/2454/e-commerce-in-india/

Tracey Wallace. Big Commerce. Infographic- Modern Consumer Behavior in the New
Omni-Channel World. https://www.bigcommerce.com/blog/consumer-behavior-
infographic/#is-it-that-shoppers-arent-shopping

Anastasia D. May 2019. Ruby Garage. Types of Online Marketplaces: Complete

Categorization with Examples. https://rubygarage.org/blog/types-of-online-
marketplaces.

Productmint. Dec 2020. The Marketplace Business Model – A Complete Guide.

https://productmint.com/the-marketplace-business-model-a-complete-guide/

The Economic Times, ET Retail. Jan 2020. Trends to watch out for in the e-commerce
sector. https://retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/trends-
to-watch-out-for-in-the-e-commerce-sector-2020/73422007

24
Annexures

A. Questionnaire

25
26
27
B. E-Commerce in India

The e-commerce sector has seen a boom in the Asian region in the recent years. India,
the south Asian country, had the fastest growing online retail market in 2019. The
number of digital buyers across the country was estimated to be approximately 330
million in 2020. The figure suggests that almost 71 percent of internet users in the
region will have purchased products online for the mentioned time period. The sector
is driven by personalized advertisements, attractive discounts, quick delivery and
return infrastructure and a high penetration rate of smartphones. This retail ecosystem
combined with the comfort of being at home and getting all your choices delivered to
your doorstep has turned the tables for the e-commerce sector quite significantly.3

Internet penetration rate in India went up to nearly around 50 percent in 2020, from
just about four percent in 2007. Although these figures seem relatively low, it meant
that around half of the population of 1.37 billion people had access to internet that

3
Statista Research Department, “Number of digital buyers in India 2014-2020”, Statista, Aug 15, 2016.

28
year. This also ranked the country second in the world in terms of active internet
users.4

The broader ecosystem of connectivity that has led to the emergence of the new
Internet economy also has other components ranging from the tremendous smartphone
penetration to social media engagement among India’s younger demographics. There
is, therefore, a huge opportunity to remake the first generation of Internet marketplaces
(across industries) and make them more responsive to the needs of the young Indian
mobile consumer. In particular, the demands of the smartphones would place greater
emphasis on the User Interface (UI) and User Experience (UX) of the product so that it
meets the experiential demands of the discerning Indian consumer.5

Market size of e-commerce industry across India from 2014 to 2018, with
forecasts until 2027.

4
Sandhya Keelery, “Internet penetration in India 2007-2020”, Statista, Feb 3, 2021
5
Anand Daniel, “Rise of the Indian marketplaces, and what the future holds”, Accel, Nov 6, 2017.

29
 Owing to the increasing internet user base and favourable market conditions, India has
a lot of potential in the e-commerce industry. Growing at an exponential rate, the
market value of the e-commerce industry in India was approximately 50 billion U.S
dollars in 2018. This number was estimated to reach 200 billion U.S. dollars by 2027.

E-commerce platforms in India

The competition in the e-commerce business in India is fierce. The market is filled
with many local and foreign companies trying to hold the maximum market share. As
of April 2017, Amazon India was the leading online market place in the country with
more than 500 million U.S dollars in the sale. Flipkart and Myntra were the prominent
players in the local market. In a survey conducted in May 2020 about permitting e-
commerce platforms to deliver goods in India after coronavirus lockdown, the majority
of respondents voted in favour.

Growing trend of e-commerce in India

Increasing growth in the e-commerce industry is attributed to a number of reasons.

Digitizing the economy and providing cheap internet to the people are a few of many
reasons that boosted the growth of digital sales in India. In 2018, the e-commerce sales
across India were estimated to increase by 25 percent. The growth rate, however, was
predicted to observe a slight dip in 2022. Consequently, the revenue-generating
potential has also increased. The average retail e-commerce revenue collected per user
in India in 2018 was more than 50 U.S dollars. It was estimated to cross 75 U.S dollars
by 2024.6

6
Sandhya Keelery, “E-commerce market value India 2014-2027”, Statista, Jan 14, 2021.

30

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