Impact of Ecommerce on Indian Economy (2011-2015) – Excerpts from Economic Times, PwC Report, ASSOCHAM Report and ICICI Insights from Firstdata.

According to Goldman Sachs estimate, Ecommerce in India is expected to breach $100 billion mark by FY 20.

Excerpt from Economic Times:-

Higher growth in this space is due to the higher-than-expected internet and smartphone penetration, digital wallet adoption, last-mile logistics investments, continued discounting and better execution” analysts Rishi Jhunjhunwala, Venkat Surapaneni and Piyush Mubayi wrote in the Goldman Sachs report.

There’s been a strong push in the key ecosystem enablers for ecommerce growth —

  • Bharti AirtelBSE -0.37 % launched its 4G service in about 300 cities and
  • Reliance Jio Infocomm is set to launch the high-speed data service in the fourth quarter.
    Taiwanese electronics maker Foxconn Technology Group announced an investment of $5 billion in India over the next five years
  • While Uber said it will invest $1 billion in the country in six-nine months to expand and improve operations, according to the report.
  • The Reserve Bank of India issued 11 payment bank licences, which are expected to catalyse the e-payment landscape.

According to Sandeep Ladda (Leader, Technology Sector Practice PwC India), in PwC PDF on ecommerce-in-india-accelerating-growth:-

The e-commerce sector has seen unprecedented growth in 2014. The growth was driven by rapid technology adoption led by the increasing use of devices such as smartphones and tablets, and access to the internet through broadband, 3G, etc., which led to an increased online consumer base. Furthermore, favoured demographics and a growing internet user base helped aid this growth.

 In terms of highlights, the growth shown by home grown players such as Flipkart and Snapdeal and the huge investor interest around these companies displayed the immense potential of the market. With the entry of e-commerce behemoths such as Amazon and Alibaba, the competition is expected to further intensify. Both these international players come with deep pockets and the patience to drive the Indian e-commerce market. Also, their strong domain knowledge and best practices from their international experience give them an additional edge. Additionally, these companies have been part of markets where they have seen the e-commerce market evolve and are aware of the challenges and strategies to address issues thereof. Indian companies realise this, and are therefore aiming to continue their focus on expanding sellers and selection on their platforms, innovating on multiple customer touch points, and providing seamless and rapid delivery services in order to compete with the international entities. Competition is expected to continue, with these e-commerce companies experimenting with different ways to attract customers and increase online traffic.

The Indian government’s ambitious Digital India project and the modernisation of India Post will also affect the e-commerce sector. The Digital India project aims to offer a one-stop shop for government services that will have the mobile phone as the backbone of its delivery mechanism. The programme will give a strong boost to the e-commerce market as bringing the internet and broadband to remote corners of the country will give rise to an increase in trade and efficient warehousing and will also present a potentially huge market for goods to be sold.

For India Post, the government is keen to develop its distribution channel and other e-commerce related services as a major revenue model going ahead, especially when India Post transacted business worth 280 crore INR in the cash-on-delivery (CoD) segment for firms such as Flipkart, Snapdeal and Amazon. Both these projects will have significant impact on increasing the reach of e-commerce players to generally non-serviceable areas, thereby boosting growth. India’s overall retail opportunity is substantial, and coupled with a demographic dividend (young population, rising standards of living and upwardly mobile middle class) and rising internet penetration, strong growth in e-commerce is expected.

From an investment perspective, the market is a primarily minority stake market, with maximum traction in early-stage deals. Such early stage funding will help companies develop a strong foundation to start from. With such strong market prospects and an equally upbeat investor community, we look forward to many more e-commerce companies from India entering the coveted billion-dollar club.”

Excerpt from E-commerce – Boon for India (ICICI Insights):-

The growing reach in terms of internet connectivity to the interiors of India coupled with the positive experiences of end consumers when buying online beyond the metros and big cities are key drivers of the e-commerce boon in India. Businesses in even the smallest towns and villages are becoming increasingly aware of e-commerce and are excited by the growth potential.

The growing penetration of e-commerce along with positive consumer experiences is reflected in a trend towards higher value online purchases. Today, consumers across urban India are confident enough to make purchases that exceed Rs 20,000-25,000. Earlier, the same shoppers stayed in the Rs 2,000-5,000 ranges. According to a study** almost 57% of business for e-commerce product sites came from tier I, tier II and tier III cities while the eight metros accounted for the remainder 43%. The same pattern was visible in the service sites too, with tier I, tier II and tier III cities contributing 54% of revenue versus 46 % by the eight metros. Seeing the immense growth e-commerce can offer, merchants across the country are increasingly keen to find out how their businesses can capitalise on the online business model. With entry and operational costs being comparatively low, the second half of 2011 and the beginning of the current calendar have seen the launch of a good number of new e-commerce sites spanning across a variety of businesses.

The growth opportunity is being closely examined by angel funds and venture capital firms who are looking for opportunities to invest in e-commerce start-ups. The e-commerce landscape will continue to evolve rapidly as even more new start-ups are launched addressing existing and new market opportunities.

E-commerce has already rapidly evolved to encompass sectors including women’s fashion, men’s fashion, shoes, followed by accessories, groceries, sports, toys, home furnishings, jewellery, automotive, bicycles, electronics and electrical equipment etc. It is becoming increasing difficult to identify consumer needs that are not now served to some extent online. Innovative merchants will however find new ways to add value to the online experience and offer an increasingly personal service to the growing volume of online consumers.

According to a report by the IAMAI, the current e-commerce market in India is around US$ 10 billion. But with different levels of adoption, the market has the potential to grow anywhere between US$ 70 billion – US$ 150 billion under one scenario and at another level it can grow between US$ 125 billion – US$ 260 billion by 2024-25.”

Excerpts from ASSOCHAM Report:-

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Source: www.assocham.org-Background_Paper_Future_of_e-Commerce_web.pdf

India is at the cusp of an e-commerce revolution. Although e-commerce has been making rounds in the country for over a decade, it is in the recent years that the appropriate ecosystem has started to fall in place. Factors like accelerating internet access, staggering penetration of mobile phones and robust investment have driven the growth of this industry and if current projections are anything to go by, India is on route to becoming the world’s fastest growing e-commerce market.

Over the last decade, the Internet has changed the way people buy and sell goods and services. Online retail or e-commerce is transforming the shopping experience of customers. The sector has seen unprecedented growth especially in the last two years. The adoption of technology is enabling the e-commerce sector to be more reachable and efficient. Devices like smartphones, tablets and technologies like 3G, 4G, Wi-Fi and high speed broadband is helping to increase the number of online customers. Banks and other players in e-commerce ecosystem are providing a secured online platform to pay effortlessly via payments gateways. The home grown players have shown tremendous growth and attracted some big investors. The entry of global biggies like Amazon and Alibaba has taken the competition to a new level. E-tailers are differentiating themselves by providing innovative service offerings like one-day delivery, 30-day replacement warranty, cash on delivery (CoD), cashback offers, mobile wallets, etc. The supply chain has improved significantly and e-tailers are even leveraging on the services of Indian Post for greater reach across the country. In 2014, Indian Post collected ` 2.8 billion through CoD option of payment.

Vertical specific e-tailers on the rise: Vertical specific e-tailers find it motivating to focus on a niche product or service as they can differentiate their services from mainstream e-commerce players. The value proposition of these ventures helps them raise funds easily and also helps in customer acquisition as they generally try to solve the challenges faced by people daily. The critical aspect of these industry specific ventures is offering a compelling and user-friendly experience, mostly driven by convenience, richness of information, and cost effectiveness.

Big Basket, an online grocery store, is marketing to deliver groceries at home without the hassles of traffic and saving time to do better things. Ola Cabs, a cab service provider, differentiates its offerings by providing a great user experience to people looking for car rentals and cab service. There are many innovative start-ups coming in the service industry trying to organize the unorganized sectors in India. For example, Urban Clap, an online platform for customers to scout for the best professionals in the service industry—architects, wedding photographers, yoga teachers, educational counsellors or lawyers. Similarly, innovative start-ups like Timesaverz provide online platform for home services – plumbing, repair, electrician, or cleaning to the urban people who are ready to pay a price for convenience. According to Deloitte prediction, Massive Open Online Courses (MOOCs) could be successful for test preparation in Freemium model, where the basic content would be free while advanced content and tutoring would be a paid service. It was predicted that MOOCs could represent about 10% of all the courses taken globally in tertiary and enterprise continuing education by 2020. The eVisits have proven in developed world, and as the necessary infrastructure is deployed in the developing world, they are likely to offer affordable primary medical and diagnostic care to very large populations that do not have access today. Deloitte had predicted that in 2014, there will be 100 million eVisits globally, potentially saving over $5 billion when compared to the cost of in-person doctor visits.

Excerpts from what Hemant Joshi stated in ASSOCHAM report:-

Increasing mobile and internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and the push into new international markets by e-businesses are the major drivers of this unprecedented growth.

The big retailers are increasingly focusing on their digital strategies in order to gain the obvious benefits of online platforms – wider reach, always on, personalization to name a few. The e-commerce companies are concentrating their efforts on increasing the penetration of their mobile apps for higher growth. Big players in this space claim to have more than 50% of their revenue coming from mobile apps. Newer technologies that could significantly bring a paradigm shift in the online businesses are analytics, autonomous vehicles, social commerce, and 3D printing.

Companies have started to invest in data analytics to gain real-time insights into customer buying behaviour and thus offer personalized user experience. The e-commerce companies are building communities on social media networks to better understand customer needs and to drive effective marketing strategies. The future of e-commerce is bright and growth will come from mobile platforms, personalization, social media analytics, Omni-channel service, and sharing economy business models.

The e-commerce industry is an exciting place with the interplay of social, mobility, analytics, cloud (SMAC), digital, 3D and, virtualization.

An excerpt from Message from ASSOCHAM by Rana Kapoor:-

“The Government’s ambitious ‘Digital India’ project that aims to offer a one-stop shop for Government services will further bolster the sector by introducing internet and broadband to remote corners of the country and increase trade. This initiative through a targeted investment of nearly $17 billion will transform India into a connected economy and also attract investment in electronics manufacturing and create millions of jobs.

It is therefore important to overcome challenges in Financing, Infrastructure, Logistics and focus on building Customer Loyalty to usher in the next wave of sustainable growth in e-commerce”.

Thus from all the above excerpts, one thing we can conclude that Ecommerce is bringing a paradigm shift to way in which business is done in India. To support that Indian Government has introduced many ambitious projects like Digital India and Make in India to ensure growth in Indian Economy by taking advantage of all the latest enabling technologies and business models.

References:

https://www.firstdata.com/icicimerchantservices/icici-insights/ecommerce-boon-for-economic-downturn.pdf

http://economictimes.indiatimes.com/industry/services/retail/indias-ecommerce-market-to-breach-100-billion-mark-by-fy20-goldman-sachs/articleshow/49532128.cms

http://www.pwc.in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf

http://www.assocham.org/upload/event/recent/event_1113/Background_Paper_Future_of_e-Commerce_web.pdf

 

Author: blogmart2web

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