E Commerce in India
Why in news about E Commerce in India?
The e-commerce industry in India is expected to cross $100 billion (Rs7.16 lakh crore) in sales and be between $125 billion and $150 billion by March 2020, as per CARE Ratings recent note. The rating agency pegs India’s e-commerce market at $38.5 billion currently, these estimates come despite the new FDI norms for the industry which came into effect on Feb. 01.
Opportunities in e-commerce:
- The biggest support for the growth of online commerce in India is the penetration of mobile internet. Each month, India adds around 10 million daily active internet users, according to CARE.
- Internet users in India are expected to increase from 560 million as of September 2018 to about 830 million by 2021 as per estimates from India Brand Equity Foundation, a trust set up under the ministry of commerce and industry.
- The growth will mostly come from rural areas. While internet penetration in India’s urban areas is currently 82.1%, in rural areas it’s just 19.5%, which provides enough room for growth.
- A 2016 report by industry body ASSOCHAM and research firm Forrester pegs e-commerce in India to grow at 51% annually, the highest in the world, to reach $200 billion by 2026.
- With advancements in quality of internet access, payments and computing on mobile platforms and changed consumer behaviour with a large active internet user base, customers have the ever-increasing choice of products at the lowest rates by various retailers.
- Amazon and Flipkart, the two biggest online retailers, said growth in transacting new user growth is at 55-60% which is a leading indicator of the health of the wider consumer internet market, was strong last year. In addition to that the bigger growth is coming from tier-II and tier-III cities.
- There is evidence that the masses are willing to spend if you provide something of value or even for emotional reasons. For example, you will find that a lot of people who have low discretionary income still spend on caller tunes.
- There are opportunities to build mass businesses. For instance in spaces like mass transportation, mass shopping, credit, insurance. There’s large scope for e-commerce in areas where the problems are deep enough.
- The revised FDI norms in online retail are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors. This ensures the level playing field to all e-commerce sellers helping them leverage the reach of e-commerce
Challenges to E-Commerce Industry
- While the growth in new users on e-commerce platforms appears to be strong it is still very low on an absolute basis. Overall, there are only about 15-20 million users who buy from e-commerce sites on a monthly basis, according to e-commerce executives. That’s a paltry number in a country where more than 500 million have access to the internet.
- The revenue per user will be very low compared with bigger markets like China given the relatively lower per capita income in India.
- As a result of the deep discounts offered by big retailers that have a close association with marketplace entities, traders running traditional brick-and-mortar stores, now find it difficult to compete with the large e-commerce retailers.
- Tightening norms recently for e-commerce firms having foreign investment, the government barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price.
The Way Ahead
- There is consuming capacity in the country but what works best to make e-commerce successful is still need to be figured out because of issues like language, payments and reach.
- An Omni-channel strategy and a different organization structure is need of the hour to reach the set of Internet users and to build trust which will justifies the sales force in India.