E-commerce in India

India has an internet user base of about 137 million as of June 2012.^[1][2] The penetration of e-commerce is low compared to markets like the United States and the United Kingdom but is growing^[3] at a much faster rate with a large number of new entrants.^[4] The industry consensus is that growth is at an inflection point.^[5]

Unique to India (and potentially to other developing countries), cash on delivery is a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash on Delivery. Similarly, direct imports constitute a large component of online sales. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.

Market size and growth

India's e-commerce market was worth about $2.5 billion in 2009, it went up to $6.3 billion in 2011 and to $14 billion in 2012.^[1] About 75% of this is travel related (airline tickets, railway tickets, hotel bookings, online mobile recharge etc.). Online Retailing comprises about 12.5% ($300 Million^[6] as of 2009). India has close to 10 million online shoppers and is growing at an estimated 30%^[7] CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.

Key drivers in Indian e-commerce are:

• Increasing broadband Internet (growing at 20%^[8] MoM) and 3G penetration.^[9]
• Rising standards of living and a burgeoning, upwardly mobile middle class with high disposable incomes
• Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers ^[10]
• Busy lifestyles, urban traffic congestion and lack of time for offline shopping
• Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs
• Increased usage of online classified sites, with more consumer buying and selling second-hand goods^[11]
• Evolution of the online marketplace model with sites like eBay,Flipkart, Snapdeal, Infibeam,qnetindia.in and Tradus. The evolution of ecommerce has come a full circle with marketplace models taking center stage again.

India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%.^[12] According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.^[13]

As per "India Goes Digital",^[14] a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015.

Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$ 24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.^{[citation needed]}

Infrastructure

Many open source ecommerce software and platforms are growing in prominence including Magento. There are many hosting companies working in India but most^{[citation needed]} of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting.^{[citation needed]} Trends are changing with some of eCommerce companies starting to offer SaaS for hosting webstores with minimal one time costs.

There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll.

India got its own version of the so-called Cyber Monday known as Great Online Shopping Festival in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day.^[15]

In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns.

Funding

As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising, Flipkart.com, in August 2012, raised about 8.22 billion (US$130 million). Entertainment ticketing website BookMyShow.com raised 1 billion (US$16 million) investment by Accel Partners.^[1]

On July 10, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors making up the additional $160 million include Dragoneer Investment Group, Morgan Stanley Investment Management, Sofina and Vulcan Capital, and more from Tiger Global.

Snapdeal - USD 50 million in April 13.

See also

• Direct imports
• Disintermediation
• Electronic Commerce

References