In the US, it took well over six decades for shopping to transform from traditional purchasing, to catalogue shopping, to television shopping, and finally to e-commerce as we know it today. India has skipped most of the above and is in the process of graduating from traditional shopping to computer and mobile based e-shopping, all in a short span of a decade and a half.
Numbers going north
According to the Internet and Mobile Association of India (IAMAI), the number of users accessing the Internet is expected to touch 185 million by June 2014. Out of this, rural India will comprise of around 32 million by June 2014. There are over 1 million retailers selling products online across product segments. These are very significant numbers that have acted as a catalyst to the rapid growth of e-commerce in India. Numbers enough to attract several international PEs to pour significant investments into emerging e-commerce companies.
In 2013, investors collectively invested $602 million spread over 57 companies. According to VCCEdge, 2014 has seen 10 transaction totaling $ 288 million, so far. Beenos, the Japanese investment arm of Japan’s largest e-commerce company Netprice.com, has already invested in two start-ups; Mumbai based Citrus Pay and Gurgaon based ShopClues.com. Beenos is extremely bullish on India and plans to invest in more companies this year. Companies like Hitachi and JAFCO Ventures (a subsidiary of Nomura) have invested in Indian companies and the trend will continue.
Given growing aspirations of a young and upwardly mobile India, the mobile is transforming from a device for communicating to a platform for information, transaction, validation and acquisition. People are using the mobile device for more tasks than ever before.
Railway’s story
The most significant transformation from traditional to online sale in India can be seen in the purchase of Railway tickets. From selling 32,000 tickets online per day in 2007, Indian Railways is now selling 463,000 tickets online per day, in 2014. Such has been the response that the Railways is contemplating raising the cost of tickets sold from ticket counters in order to push online sales, as they have seen the cost savings, efficiency of delivery and quantum of transaction being far superior using the online model.
Innovative companies have opened up new vistas in e-commerce experience. Companies like Redbus (online bus ticket), Bookmyshow (online movie ticket), Ferns N Petals (flowers, cakes & gifts), Ola Cabs (taxi booking) have all entered niche spaces and are now well positioned to grow wide and deep as more Indians take to the net. This is being further supported with more companies entering the ‘Payment Gateway’ space. This is a vital link in the success and growth of e-shopping. In a country where online transaction is still seen with relative mistrust, the key lies in the development of a safe and secure transaction platform. Major investments have been made in this area and India will be developing various platforms in keeping with the Indian business requirements.
Home grown companies like Flipkart that started out selling books online have diversified their product portfolio and are now competing with Snapdeal, Jabong, Myntra, and Quikr, amongst several others. All companies are attracting good valuations and are raising investments to fund the backend infrastructure in technology, logistics and people.
International players in the e-commerce space have made India a priority market with companies like eBay that was one of the early movers in India, and have been followed by Amazon and Overstock, all having major plans to invest and grow in India.
The services area is well poised to grow significantly in a country that has traditionally been under served. Areas like financial services, insurance, e-learning, matrimonial, and product training are opening up opportunities for further investments and several companies are poised for growth in these areas.
So what’s holding back?
Given the rapid growth India is witnessing, the country has not kept pace with developing infrastructure that is so vital for the overall development and e-commerce, in particular. Investments and project implementation for building, expanding and maintaining National and State Highways is woefully behind schedule. This along with lack of well distributed logistic hubs, warehouses and cold chains, is holding India back from unleashing and optimizing the power of e-commerce.
Another critical area that requires immediate attention is the forming and further defining of Cyber laws relating to direct and inter-state taxation, revenue sharing between stakeholders, insurance ownership and responsibility, logistics, claims and refunds and FDI.
The road ahead
Shopping experience and shopping expectation is changing in India. While organized retail through upmarket malls will continue to grow and create its own niche, e-commerce is likely to continue offering its own unique experience to a young and growing nation. Companies that can keep pace with growing user demands and back it up with efficient cost control and profit maximization, will survive the next wave of M&A that is inevitable. Its exciting times for all stakeholders.
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