From $5 billion in 2009 to $6.3 billion in 2011 and $14 billion in 2012, India’s e-commerce industry is growing at an aggressive pace but the penetration of e-commerce market in India is still low as compared to the markets in the United States and the United Kingdom.
Electronic commerce or e-commerce or e-commerce is a product trading via Internet. It consists of a website with online catalog displaying products, online marketplace for buying and selling these products, process of establishing online customer base, B2B buying and selling through a secured and safe payment gateway.
Slowly India is shifting towards virtual shopping from physical stores or markets. Changing lifestyle, online banking facilities, plastic money in the form of debit and credit cards, tech savvy generation, boom of IT companies and increase in disposable income are few of the reasons for e-commerce boom in India. Apart from technical reasons one of the reasons for this change is the avoidance of all sorts of traffic and mental stress on the roads. To reach at the shopping place one has to travel through jam packed streets. With increase in the number of smartphones, mobile shopping becomes part of e-Commerce boom in India.
It was mid 1990s when the Internet companies started rising in India, but lack of awareness, low penetration of Internet and undeveloped payment system were the bottlenecks. Online classified, matrimonial and job portals were the main e-commerce portals at that time. The dot com started gaining recognition in 2000s which gave a push to the e-commerce industry in India. Along with the developments in dot com sector, India’s retail sector started to excel. With time retail stores opended their virtual stores.
Recently, India’s 14 billion e-commerce industry got a boost with the announcement of a proposal in the Union Budget 2014-15 which will allow foreign retailers to sell their products in the country via e-commerce platform. Brands like Nike, Puma, Marks & Spencer which were selling through licensing agents and franchisees will be benefited a lot with this announcement.
Major Challenges faced by E-commerce in India
Underdeveloped logistics is one of the main hurdles in the development of e-commerce in India. Multinational carriers like DHL and Fed-Ex do operate in India but generally third party services are hired for the delivery in smaller cities. Many a time last mile deliveries are made by bicycle. Because of this, some of the large funded firms like Flipkart have established their own logistics departments for the delivery of goods ordered online. But huge investment in logistics is required to be done.
Though considered good from buyer point of view but for e-commerce companies Cash on delivery (COD) mode of payment is regarded as a drawback. COD delays the payment to e-commerce company because buyer will pay when he or she will receive the product. It will then go to the courier companies which after 2-3 weeks give payment to the actual seller. In the meantime the e-commerce companies have to restock inventory. Also high rate of return is another big problem in this regard. Sometimes address is not found or buyer does not like the product then it has to send back to the company for restocking.
High competition leading to price war is also a hurdle.
Future of E-commerce in India
It is expected that E-commerce industry will grow to become $56 billion by 2023 in India and it will become 6.5% of the total retail market. Cash on Delivery and free return option has definitely given a push to online shopping. Social media is helping e-commerce industry by creating a larger customer base. Mobile apps, improvement in logistics, focus on smaller towns, brand consolidation, and technological innovations can further boost the E-commerce industry in India.
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