By Aishwarya Mohapatra

Edited by Namitha Sadanand, Associate Editor, The Indian Economist

Gone are the days when perhaps, only a decade ago, the Indian customer had to trudge around town to buy anything and everything, a “touching-is-believing” attitude was employed for purchases and you just had to be content with what you get. The almost-a-decade old e-commerce industry in the country has radically changed the face of shopping in the country. We sit in our chairs, coolly sipping coffee and with the click of a button, buy all that we want.

Welcome to India’s E-commerce — the new party in town, a rising tidal wave in the country that’s bringing cheer for everyone involved : the players, the investors, and of course, us, the aam junta. Retail e-commerce is growing at 40% per year1, and the high growth rate and increasing trust among consumers towards shopping online ensures there are more and more entities entering the Indian e-commerce market worth 13000 crore, all fighting for a slice of the pie. According to a survey by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), the Indian e-commerce industry grew at a staggering 88% last year, and the growth rate suggests that there is still space for new entrants.

The two largest firms in the country Flipkart and Snapdeal, as well as other players like Jabong and Limeroad, have announced funding worth hundreds of millions of dollars in the last few months. DST Global, a Russian investment group which has invested in successful companies like Twitter, Zynga, Alibaba and Facebook, poured in 210 million USD in Flipkart, India’s leading e-commerce company and valuation is said to exceed USD 200 million with the participation of Flipkart’s existing investors in the latest funding rounds. Snapdeal has reached 1 valuation of 1 billiom USD after it recently raised a 100 million USD from investors like Premji Invest and Hong-Kong based Myriad and hedge fund Tybourne. Where in late 2011, investors were sceptical about the chances of e-commerce becoming a permanent part of Indian corporate tapestry, now they seem to have a rock – solid belief in having a definite payback. So what seems to have changed the game?

For one, the Indian consumer’s mind- set has simply changed. The time is long past when money was only spent online for buying tickets, or even books or music. With greater purchasing power and changing lifestyles where spending is therapeutic, consumers now can buy mobiles, laptops, cameras, clothes, jewellery, accessories and so many other things. “E-tail” companies, a term used to refer to online retailing companies nowadays, have fought tooth-and-nail to build trust among their consumers with quick and efficient deliveries, ensuring varieties with them that cannot be found in the brick-and-mortar stores at times.

India’s internet user – base has expanded. According to Flipkart’s co-founder and CEO Sachin Bansal, e-commerce may reach the 70 billion dollar mark by 2020 due to a fast – growing internet – connected population and improvement in payment and delivery systems. India had 213 million internet users in 2013, and with further increase this year will claim the distinction of being the country with the second largest number of internet users, right after China’s 600 million. According to a January 2014 report by Internet and Mobile Association of India (IAMAI) and IMRB international, the number of users accessing the internet through their mobiles was estimated to be around 155 million in March 2014 and 185 million in June 2014.3 Smartphones are being increasingly sold in the country, and with expanding 3G and 4G services, their penetration ensures connectivity to the internet across Tier 2 and Tier 3 cities as well, which are somewhat under-penetrated markets for the e-tail firms, with about 60% of the sales coming from the 10 biggest metros in the country and 40% from Tier 2 and Tier 3 cities. 1

India has a high percentage of its population in the working age, and by 2020 is set to have 64% of its population in this category. This is important in the light that most online shoppers in the country belong to this category, with an estimated 50% of all online shoppers between the ages 26 and 35.

International giants like Amazon, Walmart and eBay, even UK – based Tesco are all vying for a significant market share of the e-com market in the country, and if Modi’s government allows for FDI in this sector, it’s just going to get more competitive. In such a scenario, the strategy of surplus liquid cash works well for the Indian counterparts. The recent acquisition of Myntra is a double – edged weapon for Flipkart, allowing it to have a dominant size needed to flourish in these times while providing Flipkart a consumer base that is very loyal to Myntra’s apparel and accessories line. In an industry where none of the players have made a profit yet, the name of the game is to cut costs and what is termed as the consignment model is hugely popular, where the e-tail firm doesn’t own inventory warehouses but only ships the purchase from vendor to buyer. The focus is to bring as many sellers on board as possible to only make this model stronger.2

As all players are fighting to win consumer trust and loyalty, better experiences are sure to be ensured to buyers by the key players. Some noteworthy examples are same-day delivery by Amazon, eBay’s 9 – hour delivery model in Mumbai and Flipkart’s launch of “Flipkart First” service, with benefits like priority customer service and more. This is quite similar to Amazon’s Prime Subscription which isn’t present yet in India, but Amazon offers a bigger bouquet of services including access to songs, movies, TV shows and books.2Now even Reliance Industries will be entering this race with an introductory “online grocery venture” in Mumbai by the end of 2014, and also expand soon after with a range of goods that aims to give long – established e-tail companies a run for their money.4

For now, the new avatar of Indian e-tail has a mantra that they have gotten right – to keep them coming back for more, make their shopping the stuff of dreams!


References:

1. http://www.deccanherald.com/content/210955/e-commerce-dream-india-inc.html

2.http://retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/life-after-flipkart-myntra-deal-will-these-3-trends-rule-e-commerce-in-india/37080344

3.http://articles.economictimes.indiatimes.com/2014-01-01/news/45764553_1_mobile-association-iamai-rural-india

4. http://articles.economictimes.indiatimes.com/2014-06-30/news/50974213_1_reliance-retail-e-commerce-marketplace-model


Aishwarya is a Graduate in Manufacturing Science and Engineering from IIT Kharagpur. She is a hardcore rebel through and through, and loves taking the not-much-thought-of side of things. Her philosophy is “A good laugh a day keeps the doctor away.” A keen lover of books, she writes – whether it is logical prose or irrational poetry. She is passionate about theology, spirituality and women’s rights. She likes meeting new people and learning about new cultures. She can be reached at her email (ash.kgp@gmail.com) or her blog (aishwarya-23@tumblr.com)

Posted by The Indian Economist | For the Curious Mind