12/02/2013

IDG Connect Dan Swinhoe (Asia) - Cashing In On Delivery: e-Commerce In India

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Dan Swinhoe (Asia) - Cashing In On Delivery: e-Commerce In India

Posted b y Dan Swinhoe Company IDG Connect 02/13/2013

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India's first e-commerce site, Fab mart.com (now IndiaPlaza) was founded in 1999. The internet, b oth in India and the world over, was a very different place and online shopping was almost non-existent. Today there are around 140 million Netizens in India, and more than 10 million of them are online shoppers. Fuelled b y a young and growing middle class with money to spend, India's eCommerce sector is currently a $10b n market, one that is expected to more than doub le to over $34 b illion b y 2015. But the potential for the future is massive. Firstly, India's already massive online population is still only a tiny percentage (8%) of the country, meaning there's still a huge numb er waiting to get online. It's early days in terms of online shopping too; e-commerce accounts for just 0.12% of all retail sales in India, compared with over 4% in China and America (who have around 220 million and 150 million eShoppers respectively). According to Mckinsey, 80%of current internet users say they are planning to shop online in the near future - that's a b ig increase. Around 4% of mob ile web users also shop online, and travel b ooking is the most popular segment of the market. The country's market differentiates itself from other BRICS markets b y having a large rural shopping population [http://b logs.forrester.com/zia_daniell_wigder/12-08-14-trends_in_indias_ecommerce_market]. Due to few people owning credit cards (around 1%), Cash On Delivery is the most widely favoured form of payment - accounting for 80-90% of all eCommerce transactions. Although the sharp increase of deb it cards points to a hopeful future for efficient ePayments. Both eBay and Amazon (via Junglee) have a presence in the country, and Google is also trying to help promote eCommerce to b usinesses and customers.Things are, however, a world away from the money machines of the eBays and Amazons in the US & UK (even if they proclaim otherwise). A large amount of competition in a sector that's lacking differentiation along with slim profits are squeezing companies, who are jostling for attention b y often selling products at a loss just to draw in customers. Inefficiency is also a prob lem; the general model in India is to b uy in b ulk, store and sell it on, requiring large amounts of capital upfront (which is b ecoming harder to find) and costly due to storage. The preference for COD payment also means consumers often reject goods - estimates point to almost 45% of ordered products are rejected b y the customers at delivery. The sustainab ility of the current model has b een rightly called into question - so far b arely a handful of India's eCommerce sites have made a profit, and of the 197 eCommerce companies founded from January to Octob er last year, 87 have gone b ust. But on the other hand, the b ust has happened and only the serious contenders are now left in the market, which means a concerted push to advertise and move away from cash to ePayments can help b ring the people in and improve the b ottom line. By Dan Swinhoe, Editorial Assistant, IDG Connect

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