It is not very long when something known as personal computers came up on the horizon of the Indian market. A computer back then was an aspirational product. People having a desktop were considered wealthy and laptops were things from across the seven seas. Suddenly the scenario changed. Economies of Scale metamorphosed the entire industry. And then came the internet! It not only revolutionized the way we go information but also the way we interacted with the world around us. Social networking was the next big thing. And now it is the turn of e-commerce. The new age Indian has the moolah, likes to spend and is tech-savvy. Perceiving e-commerce as an assured channel, is the thought correct? Let’s find out.
According to a report by The Internet and Mobile Association of India (IMAI) in association with IMRB International, e-commerce in the country will reach figures of close to INR 45,000 by the year 2011. The industry has grown almost 500% since 2007 which is a promising sign. The online travel industry has been the biggest gainer of all with 80% of the business happening for it. IRCTC, the e-commerce arm of Indian Railways has been the biggest draw while the likes of Yatra.com, MakeMyTrip.com, etc. have also gained much. The customer has shown that he would like to make his travel plans at the comfort of his home, even if it resulted in a miniscule fee from the service providers. This trend has been fostered by the advent of low cost airlines and ever increasing dynamic and always-on-the-move nature of the urban consumer. This justifies the growth rate of above 50% for the industry. Domestic air-travel followed by train-travel and then the rest form the overall composition for this sector.
On the contrary, other sectors such as e-tailing, financial services, digital download and other services account for a mere 20% odd. E-tailing and financial services manage around 7-8% while the rest going to the digital downloads and other services. One is hard-pressed to question the reason for this anomaly. Why are there such a high percentage of sales for the travel industry, while the others still struggle? What are the reasons behind this? Is it going to change in the coming future? Has the Indian consumer embraced e-commerce or is it still a bud?
If the percentage share for each sector is kept out of reckoning and the traffic is taken as an indicator, then the picture does sound rosy for the Indian e-commerce industry. The industry has had a nightmarish experience in the past and has now woken up to the demands. The second coming of the Indian e-commerce has infact been quite profitable for the players. According to K Vaitheeswaran, CEO and founder of Indiaplaza.com, “when we started selling in 1999, the internet population in India was about 3 million, and the market was too small. Today, with about 70 million internet users in India, the market seems to be ready.” The advent of 3G services as well as impetus of banks towards electronic transactions has also heralded a new era and given life to the industry.
In the words of Kunal Bahl, CEO and founder of SnapDeal.com, “with more options available online and with lives becoming busier, the recent years have seen a resurgence of e-commerce in India.” Today, the Indian e-commerce industry is fuelled by the shrinking of available time to the consumer and the added comfort which online purchase brings. Venture Capitalists and Angel Investors have started funding more and more start-ups which focus on the virtual world. “New ventures need to have great partnership between strong professionals and strong incubators, entrepreneurial investors with great ideas and connection with funds”, says Pearl Uppal, CEO and co-founder of FashionandYou.com. Increased trust in credit cards has also bolstered the industry, and with the introduction of other payment facilities like Debit card payment, EMI and Cash-on-Delivery have made it so much easier still.
But even with this tremendous growth rate, why has there been a slow rise in the e-tailing sector? Blame it to the age old perception of t-ouch-and-feel by the Indian consumer. E-Tailing comprises of buying consumer items such as apparels, cameras, computers, home & kitchen appliances, flowers, toys and gifts online. All these products require functional assessment by the customer before decision towards purchase is made. This has resulted in the snail-pace of this sector and has resulted in the market of deal offerings. According to John Kuruvilla, CEO and founder of Taggle.com, “People all over the world love deals. India is no different and Taggle is working hard in making what was once considered decisions by customers into impulse decisions.” On one hand these have brought increase in the sales patterns, it has also reduced margins for these retailers. For the industry where customer acquisition costs are the highest, these low margins do hurt big time.
So what is to be done? Well, the answer is both simple and complex. Increase in global players would add further credibility to the industry. Moreover, with their established operations and logistics, a better structure will come to the business. Another thing to be noted is the fact that continuous focus has to be given to online payments, because without them, e-commerce would cease to be commerce and would become a directory of services.
As of now all growth factors such as demographics, economy, changing lifestyles and exposure to new ideas is in India’s favour. With focus on tier-2 and tier-3 cities in times to come, the picture would become rosier. So is India ready yet? Yes, it is and soundly on course.
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