HCL Tech nolog ies Key

Growth drivers for the future E-Commerce Industry

The change of Paradigm and its Future

Kanti nath banerjee Digital analyst HCL Technologies

Abstract

hen was the last time you brought a Movie ticket standing long in a queue? When is the last time you booked your travel tickets over the counter? When is the last time you paid your bills offline? These are few questions we need to ask ourselves just to feel the importance of E Commerce in our todays lifestyle. You cant deny the fact that it is slowly but steadily entering into every aspect of our daily transactions. Although Indian ecommerce industry is still in embryonic stage, it grew at a stunning 88% in 2013 to $16 billion, riding on thriving online retail trends and defying loose economic growth and spiraling inflation, (Courtesy-Assocham). The survey also estimates the country's e-commerce market to touch $56 billion by 2023, driven by mounting E-retail. While The Online Travel Industry and its support ecosystem is changing very fast and booming exponentially due to the Internet-savvy urban population, the rest of the segments like-Tailing (online retail), online classifieds and Digital Downloads are still in a nascent stage and holds immense potential for future market growth. India is at the eve of a digital transformation with new young, smart group of netizens and substantially high investments in the e-commerce sector. A significant 63% of e-commerce ventures have been started by budding entrepreneurs, which shows the promises it holds. If we dig deep inside there are few key drivers which holds the future success of this industry. Lets talk about few of them -

Rise of Internet usage

he recent IAMAI (Internet and mobile association of India) data states India has Internet User population of 190 million as of June 2013 with a yearly growth of 28%.India now has the 3rd largest Internet population with 190 million in the world after China at 568 million and USA at 254 million (in 2013).The number of internet users in India is expected to rise 18.53% in the coming months to 243 million by June 2014. Considering the annual rate of growth 41-43% India is expected to cross 375 million unique internet users by end of 2015.

Venture capitalists and private equity players

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umerous VCs are investing in the e-Commerce space sensing its future growth. The sector would continue to receive funding from VC and PE players despite concerns relating to a valuation bubble. Though in Early stage, focused PE players would invest a major part of their funds (40%) in internet-based companies by 201415.Dont forget we are also waiting for FDI green signals too. If the door opens in near future there will be a good amount of capital investment from Global giants.

Online retail segment

etail has grown 43% and reaches 60% penetration among online users, but is still below world averages. This shows the immense potential that the retail category holds in India with online retail filling the distribution and convenience gap. Cashon-delivery has been one of the key growth drivers and contributes for 50% to 80% of online retail sales.

M-Commerce

t is pretty possible for m-Commerce to become even bigger than e-Commerce in future days especially in a country where there are over 930 Mn mobile subscribers against 160 Mn Internet users (Including 86 Mn mobile Internet users). Top reasons behind this includesAvailability of Cheap smart phones and tablets, Mobile Internet connectivity; introduction of 3G/4G with relatively cheap tariffs, Mobile Payments, Personalization; More secured payment gateways like SSL(Secured socket layer) etc.

Online advertisement

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he online advertisement market in India has showcased a CAGR growth of 32.7% from FY2007-FY2012 with the highest growth of 40.3% in FY2011 on account of display and search advertisements. All the digital platforms are getting flooded with SEM campaigns, Contests, Promos etc. The future growth of E-commerce strongly depends on this new kind of interactive, targeted and more measurable form of advertising. The concept of Mobile marketing and in-app advertisements are also on their way.

odays Big players in Indian E-

Social media

ocial media is gaining Dominance in our society and taking center stage in defining how businesses are engaging with potential customers. The terms like Content marketing, Affiliate marketing, social discount/coupons etc are becoming popular with every coming day. The emergence of blogs as an avenue for information dissemination and two-way communication for online retailers and E Commerce vendors is also a sign of its importance. Social commerce will surely contribute heavily to E-commerce success in coming days with India positioning itself as one of the fastest growing Social networked user base.

commerce industry is strategically diversifying their business into related verticals and coming up with more product and service lines to cope up with the stiff competition. Some of the common examples are like Softwares selling, Matrimonial services, Health and beauty products, Home appliances, Gifts, Stock exchange, Career related services etc.

Innovative e-commerce models

roup buying and second-hand sales have led to more and more consumers switch to online shopping. With the rising middle class disposable incomes, global exposure and shifting demographics (Close to half of the population is less than 25 years of age), this pattern also holds true for the Tier II & III cities. Market leaders have already adopted new business models like Try and buy, stock-and-sell, consignment and group buying. E Commerce also puts the power of when and how you will buy products and services into the hands of the buyer.
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Logistics

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ogistics will play a major role in overall growth of e-commerce. It also accounts for customer satisfaction and Brand loyality.The current market players has already solved the initial distribution and delivery hiccups with modern concepts like Localization, Product availability check, Delivery tracking through SMS and mails, more sophisticated currier services and 24*7 customer care etc. Considering the fact that Indian logistics and supply chain market is not yet well organized & almost 40% of E-Commerce companies have their own branded delivery network which will be more efficient in coming days.

Conclusion
he gist of online shopping is set to see greater heights in coming years, not just because of Indias increasing internet consumer community, but also due to recent alterations in the supporting ecosystem. On the other side we should also keep this in mind that although these drivers

may shore up the growth of e-commerce in India in future days, the fledgling industry is faced with significant hurdles. Pitiable last mile connectivity due to missing links in supply chain system is limiting the access to far flung areas where a significant portion of the population resides. Elevated rates of dropout 25-30 percent on payment gateways is the other matter of concern, Trust and feel factor and slow adoption of online payments are forcing e-commerce companies to rely on costlier payment methods such as Cash on Delivery (COD) too .In recent days sit back for some more integrated approach where you may see more integration of social media like Levis showing which social friends of yours ordered the same trouser you are checking out. Few structural changes like a steady shift from mere websites to mobile apps for a particular product or service the provider offering with a more personalized approach is totally on the cards where as dissolution between physical commerce and electronic commerce is also on its way. So the only question we need to ask ourselves is that are we; the Indians ready for Something like Twitter shopping or Virtual merchandising(3d) in coming years or would we lag behind? The change is looking Obvious.

References

http://cci.gov.in/images/media/ResearchReports/AnkitaIntComp080811.pdf http://www.iamwire.com/2013/02/can-online-be-bigger-than-offline-a-power-panel/ http://www.ecommerce.etcetra.co.in/2011/06/29/logistics-and-its-challenges-in-indian-ecommerce/ www.marketresearch.com Times of India reports.

Trends in Indian E-commerce market-By forester. E-commerce in India (Evolution, Growth and Challenges) By MSL groups. 5