E-Commerce in India: The way forward

Future Perfect

E-commerce is valued at $13 billion in India. Set to become a $15 billion industry by 2016, e-commerce in India seems to have a bright future ahead. No one can deny the positive signs that are there. In the last 10 months, e-commerce has been able to garner deal value of $2.96 billion from investors. Around $2.3 billion of this amount has been bagged by heavyweights Flipkart, Snapdeal and Ola alone. Fund managers suggest that this rise in valuations is in anticipation of Internet commerce setting off in India. Although there might be speculations regarding this unprecedented inflow of private equity, there is no questioning the fact that e-commerce is here to stay. Fuelled by the record IPO ($21.9 Bn raised – largest IPO in technology sector) of Chinese e-commerce giant Ali Baba recently, e-retailers in India is being seen as the next best thing. 

Google India reports that by 2016 India shall have an online shoppers’ base of 100 million. With increasing internet penetration in India, 50 million of this would be from Tier-I and Tier-II cities, while female buyers shall comprise 40 million of the total. Nearly 71 per cent non-buyers from Tier 1 and Tier 2 cities said they plan to shop online in next 12 months, which augurs very well for the future ahead.

90% of all the new internet subscriptions in 2013 were mobile based. Enhanced customer experience along with easy-to-use mobile apps has added to the positive trend of people buying online. Taking this into consideration Amazon, which has 35% of its traffic in India through mobile phones, has upped the ante with the promise of a $2 billion investment with a view to leapfrog ahead of the existing duo of Flipkart and Snapdeal.

Challenges

India is expected to grow to about a $30 billion industry in 6 years. It, however, lags far behind the likes of China which had around $300 billion in online sales last year. A variety of things might be impediments in India’s chase of its neighbour.

In a recent poll conducted by Google India, 62 per cent buyers said they were not satisfied with their online shopping experience, while 67 per cent said the current return process was too complicated and expensive. Among non-buyers, trust was a major issue with 55 per cent saying they did not trust the quality of products sold online. Respondents even raised concerns about the safety of online transactions.

Apart from the consumer-oriented problems, there are a lot of infrastructural problems haunting the e-retailers. Although companies have managed to dish out certain offers of same-day delivery in limited geographies, lack of a proper logistic groundwork in most parts of the country has restricted growth in sales.

These are fundamental issues that should be looked into a high priority. Nevertheless, e-commerce in India is still in its infancy and has a long way to go ahead to reach out to the underserved potential of shoppers in the country. With e-tailers still reporting losses, to what extent the faith of investors in these sites is vindicated, only time will tell.

References

1.http://www.livemint.com/Industry/zUqiLcNSGAUgAY7SdrPtRM/Ecommerce-trumps-realty-in-investments.html?utm_source=ref_article

2.http://www.livemint.com/Companies/rWvNCP4WFr5b7yDQMMLJvI/Are-ecommerce-valuations-rising-too-fast.html

3.http://www.thehindubusinessline.com/features/smartbuy/tech-news/indias-online-shopper-base-to-touch-100-mn-by-2016/article6617951.ece

4.http://online.wsj.com/articles/amazon-takes-a-long-view-with-2-billion-india-investment-1407474521

This article is written by Soumyadipta Dhal who is a first year PGDM student at IIM Calcutta. He can be reached at soumyadiptad2016@email.iimcal.ac.in

How did Amazon turn the tide in India?

The biggest democracy in the world is notorious for being one of the least business friendly nations in the world. With ever changing political scenarios, policies, rampant corruption and high bureaucratic costs involved, doing business in India is a daunting task for everyone. Many corporate big shots have found it really difficult to do business in India and some even have shut down their shops. So how did Amazon

not only survived but flourished in this hostile
environment?

Challenges faced by Amazon

Amazon entered India quite late in the month of June 2013 with Flipkart having already consolidated its position as the leading player in the Indian e-commerce market. Amazon faced many obstacles in their path. With government restrictions on the FDI in ecommerce in place, Amazon had to change their existing inventory-led model. Penetration of internet and plastic money like Credit Cards and Debit Cards is very low in India. Moreover, people here don’t prefer making online payments. Another challenge that Amazon had to face was the presence of competitors like Flipkart and Snapdeal who had first mover advantage and better understanding of the nitty-gritties of doing business in the country.

Steps taken by Amazon

      1.       Amazon entered India with a long term commitment in mind. “In every country that we are present in, we don’t look at one year or two years from now. Everything we are doing is so that we are happy five to seven or 10 years from now,” Diego Piacentini, Amazon’s senior vice president for the international division once said. Amazon is more patient and is ready to keep a long-term vision in mind and invest heavily in India which might help it to win the race in the future.

      2.       Amazon understands that to succeed in a foreign country, you have to respect its local rules and demographics. On his maiden visit to India, global CEO and founder Jeff Bezos said, “Our job is to adapt to the rules, India is no different.” Amazon has adopted marketplace model to ensure that FDI rule is not broken. Amazon works as an enabler between third party sellers and the consumers. It doesn’t hold any inventory of its own and merely provides its online platform for the transactions and ensures timely delivery and services to its customers. It has joined hands with Indian postal service for logistics. It has partnered with many small grocery stores to be their shipment pickup and delivery points to overcome failed deliveries. It offers an online comparison website Junglee.com to woo price sensitive buyers.

      3.       Amazon has kept a flat and simple organization structure and has complete faith in its local leadership. India manager Amit Agarwal is a seasoned, trusted senior executive and has been provided with complete authority and accountability to ensure that not every trivial decision has to be approved by someone at the global headquarters.

Conclusion

India is one of the top performing businesses of Amazon in the world. It is the fastest country to record $1 billion sales in just over a year of operations. While others have struggled, Amazon has performed beyond their expectations. All this has been the result of the patience, trust and willingness to adapt that Amazon has shown. However, with the new found financial backing of Flipkart and Snapdeal and with another heavyweight Alibaba lurking around the corner, Amazon faces a challenging time ahead. Whether it will be able to thwart the challenges posed by the authorities and the customers and continue on their path of excellence or not? That needs to be seen, however, with their ability to innovate and adapt there is little doubt that they will win the race in the end.

References

1.       http://qz.com/262018/three-reasons-why-amazon-is-winning-in-india-and-what-other-global-retailers-can-do-to-succeed/

2.       http://businesstoday.intoday.in/story/how-amazon-is-faring-in-e-commerce-online-space-in-india/1/202613.html

3.       http://articles.economictimes.indiatimes.com/2014-09-05/news/53602238_1_amazon-india-fdi-rules-marketplace-model

4.       http://articles.economictimes.indiatimes.com/2014-09-29/news/54437474_1_binny-bansal-biggest-online-retailer-flipkart-team-india

This article is written by Dhruv Bhandula who is a first year PGDM student at IIM Calcutta. He can be reached at dhruvb2016@email.iimcal.ac.in

New features to increase sales at Flipkart

In spite of high popularity of COD (Cash on delivery), E-retailers prefer online payment due to its profitability. To improve online payment, Flipkart has come up with Payzippy (the payment gateway service).

With Payzippy, users can store their card info only once and use it ofr future payments. The time taken to make an online payment has reduced by 50%. Flipkart provides this service across the merchant sites including MakeMyTrip, LensKart, etc.

            After Amazon, Flipkart has also come up with next day guaranteed delivery in selected cities in December 2013. For this, they would have to incur high cost to streamline their supply chain. They expect 5-15% of their customers to use this service. The service would be available only with WS retailer and not with their marketplace platform.