The scope of eCommerce Business in India is undoubtedly going to increase year after year. A recent report by the Internet and Mobile Association of India shows that a fast-paced growth of around 50% is to be expected in the coming five years. The primary attribute to this growth is undoubtedly the rise of 3G/4G mobile internet users and large number of smartphone users because the same mobile commerce is expected to change how business transactions happens in India.
The scope of eCommerce business is turning out to be more famous day-after-day according to the market demand. And this requirement is generating innovations worldwide focused on delivery time, ease of transactions and several features served by eCommerce businesses, for example, drone delivery or artificial intelligence. This article is focused on scope, future, application and various critical factors for growth of eCommerce business scope in India.
Scope of eCommerce Business
Another significant contributor to the growth of eCommerce in India in the future is the e-tailing industry which largely deals in providing jewellery, apparel and kitchen appliances online.
Websites like Flipkart, Myntra, Amazon, Snapdeal, Jabong, etc. are all examples of the enormous success of eCommerce in India. Due to these firms, India is one of the fastest growing eCommerce markets in Asia/Pacific with China investing as much. Many analysts believe that the advent of 3G/4G speed in net connectivity has been a major cog in the wheel for such a growth in this market.
As India has been the heart of the e-commerce market in 2016 with the tremendous growth of 70%. The consumer base is expected to hit 100 million in 2017, and this ensures that any e-commerce venture would soon be the best business in India, as far as profits and growth are concerned.
Some market leaders and CEOs of the eCommerce industry have only positives to speak about the e-commerce growth in India.
Kunal Bahl, co-founder and CEO of SnapDeal believes that e-commerce sector has risen tremendously in India and that their success is proof of the rise in interest in online shopping.
Pwc India leader Sandeep Ladda believes that the e-commerce sector in India has seen unprecedented growth due to the advancements in mobile tech and that it will be the go to platform for e-commerce businesses in the future.
PayU co-founder Nitin Gupta also strengthens this point by Ladda as he says that 35 % of all transactions now happen through mobile phones which is triple that of the percentage in the last fiscal. He also added that the brick and mortar businesses will join hands with the e-commerce websites feeding off each other in a win-win situation and with online wallet, cashback and coupon websites becoming more and more popular in India, hassle free functioning is assured which will bring more success to e-commerce in India.
Key factors for growth of eCommerce Business Scope in India:
- Reduction in cost of broadband internet facilities to ensure more people come online.
- Encouraging more domain registrations and letting e-commerce websites maintain them at cheaper rates (at least till they make substantial profits).
- Encouraging innovative schemes such as the COD (Cash on Delivery) in a country where credit card use is not prominent shows how we have eased into this particular niche. A lot of the major e-commerce websites are based in India and consistency, and reliability of these sites have shown the people how hassle free, shopping and availing services are.
- Bringing internet facilities to the rural areas in India as it remains a largely untapped resource and the possibilities are endless for a major boom in the e-commerce industry, as India’s Internet penetration is 0.5% of the population. If these e-commerce businesses can reach to these regions, their net value can only increase from the current values.
- E-commerce can also spread to newer disciplines such as health services in these remote areas in India and help in offering health solutions to people who do not have the luxury of hospitals in their vicinity. This will certainly help once the rural areas are provided with internet facilities and will be a potential business prospect shortly.
Also Read: How to Start Online Pharmacy Store in India
Categorization of eCommerce Business
eCommerce stands for purchasing, selling, and exchanging goods or services using internet enabled devices, where transactions or sale performed electronically. Electronic commerce emerged in the early 1990s, and its use has increased at a rapid rate. For your information, the first secure retail transaction done over the internet was by NetMarket in the year 1994.
Still, the majority of companies don’t have an e-commerce website. In fact, having an eCommerce enable website and operations of business via Internet has become a necessity. As you know, everything from foods, clothing to entertainment and furniture can be brought online.
However, there are different types of e-commerce vertices, and the same can be divided into broad categories like B2B, B2C, C2B, and C2C business model:
- B2B (Business-to-Business): One company doing business with another company using internet enabled devices, such as manufacturers is buying raw material from another raw material manufacturer, or a distributor is buying online from a manufacturer. Such B2B eCommerce business is volumetric, and price varies based on the quantity of the order and is often negotiable.
- B2C (Business-to-Consumer): One company is selling goods or services online to general public typically through an eCommerce website or mobile application, directly to consumers over the Internet. An example of B2C portals includes Flipkart, Myntra or Snapdeal. A B2C eCommerce transaction would be an individual buying a pair of shoes through Flipkart’s website.
- C2B (Consumer-to-Business): A customer posts his requirement on a website online, and several companies review such requirements (RFQ) and quote on the project. The consumer reviews all bids and finalise deal with the enterprise going to complete the project. C2B business involves consumers seeking products or services from a business/company. For example, you can take ref. of indiamart.com.
- C2C (Consumer-to-Consumer): Many sites are offering free classifieds listing where individuals can buy and sell thanks to the site such as OLX or Quikr, where people can buy and sell stuff nearby. Such transactions called consumer to consumer eCommerce. Where users sell products to other prospect customers. An example would be someone selling something that he or she no longer needs, and he listed the same on OLX, and another person who needs the same thing contacts the seller and get the transaction done.
Challenges of eCommerce Business in India
Despite huge opportunity in eCommerce business, eCommerce business presents several particular challenges which are sometimes difficult to handle for any new startup. However, without any doubt, India has been a profitable eCommerce market from the last seven years in a row. Thus many venture capitalists, angel investors, private companies & high-net-worth individuals are investing money in eCommerce, no matter how small or big the business. E-commerce is growing rapidly, but it is still facing several hurdles in operations in India.
The Internet is mandatory is the foundation of eCommerce. However, in India internet penetration is still low at 34.8 percent of the population. However, due to the growth of mobile internet, India is witnessing exception increase in the year 2015 and 2016, allowing eCommerce businesses to reach to masses easily.
Branding & Marketing:
To drive sales and traffic on an eCommerce site involves heavy budget for branding and marketing. This cost is significant and can be calculated as cost per acquisition or cost per sale. As per marketing guru’s the current average CPA for eCommerce business is between INR 500–1000, which isn’t practically sustainable for small startups having less to invest in such high volume marketing campaign.
However, concept or niche eCommerce business can drive sales in very low CPA due to the fact that the customer is limited for such category of products.
With the entry of several players already in Indian eCommerce market, the customer is pampered by offering big discounts, offers, deals and easy return options etc. resulting in low margins. For example in financial, year 2013, major eCommerce players had posted a revenue of Rs 1,195.9 crore and loss of Rs 344.6 crore. But for Flipkart, making losses was a conscious decision. In an interview to Business Standard, Flipkart promoters said that “Profitability is not a focus area for them and they are still looking to acquire more market shares.“.
Logistics & Delivery:
Delivering product to buyers is still a major hurdle for any new eCommerce startup. Keeping in mind that eCommerce logistics is different from traditional deliveries of goods because there are no middle-men involved in the final delivery of the product on customers doorstep. The critical element in an eCommerce logistics is the last mile delivery of the product to the customer. Several eCommerce startup’s failed because of their last mile delivery capability. You can either own or outsource the eCommerce logistics service.
Tax related issues:
Taxation is another big hurdle in India for any startup and its a major factor for less growth rate of eCommerce in India as compared to developed countries like USA and UK. In those countries, tax slabs are uniform for all sectors whereas tax structure of India varies from product to product and region to region. This factor creates accounting problems for any eCommerce business, because eCommerce is not limited to product categories or regions.
Touch and Feel:
Indian customers mindset is more traditional and people are more comfortable in buying products from physical stores rather than eCommerce stores. eCommerce companies selling products like apparel, handicrafts, jewellery have to face challenges to sell their products as the buyers want to see, touch and feel before they make the buying decision.