E-commerce in India & Recent VC activity
Index Content Ecommerce in India Statistics Ecommerce in India: Pitfalls VC activity report Page nos. 03 04 05 06
Ecommerce in India
E-Commerce is one of the most exciting spaces for todays global online community, and Indias young startup economy is along for the ride. In the less than three months of 2011, Indian VCs have already invested over $50 million in seven e-commerce companies, a 400 percent increase over the same period just last year. However, e-commerce in India has a long road ahead, and e-commerce infrastructure and best practices are in their infancy. Indias 7 to 9 percent Internet penetration lags far behind the 30 to 40 percent China and Brazil enjoy, and while Indias estimated 100 million Internet users still comprise the third largest online population, the total Indian e-commerce market was approximately 3 percent of the U.S. market last year ($6.7 billion versus $227.6 billion). A recent report by the Internet and Mobile Association of India reveals that Indias ecommerce market is growing at an average rate of 70 percent annually, and has grown over 500 percent in the past three years alone. Here are some reasons that e-commerce is set to boom in India, after years of false starts:
Critical mass of Internet users: With more than 100 million Internet users (estimated), the country is beginning to achieve a critical mass of users who are familiar with web services. In addition, over the past few years, relatively sophisticated online travel agents (OTAs), such as MakeMyTrip which started turning these initial Web users into Web consumers have dominated Indian ecommerce. While these OTAs have accounted for up to 80 percent of Indian ecommerce in the past, industry giants such as eBay and the new crop of e-tailers expect to participate more heavily in this conversion of Web users to Web consumers, with an estimated 70 percent growth in Indian e-commerce for 2011. Rising middle class with disposable income: The consumers who crave for various brands are are spread across the country. Furthermore, access to many global and domestic brands is limited to major metropolitan regions, such as Delhi, Mumbai, and Bangalore. Therefore, this growing middle class is increasingly turning to e-commerce as the primary outlet for sophisticated consumer products and services. Discounts: Many e-tailers are banking upon various kind of discounts & coupons, which are lucrative enough to attract buyers online. This is cultivating the habit of buying online for Indian consumers. Payment gateways & logistics: One of the largest challenges to e-commerce in India is the lack of infrastructure to support new businesses. Logistics companies have been unreliable, and complex interstate regulations mean that interstate logistics and paperwork is more like international customs. Additionally, Indians have an aversion to credit cards only an estimated 2 percent of the nation has a credit card. However, the new breed of domestic logistics companies recognize the importance of reliable delivery and technology investment, and a number of new payment gateway companies such as CC Avenue, EBS have sprung up to service the growing e-commerce ecosystem. Alternative payment methods such as netbanking and cash on delivery, cash before delivery are being offered by leading e-commerce platforms and can drive as much as 75 percent or more of transactions, and sophisticated technical integrations make the experience seamless.
User Experience: Of course, the primary driver for e-commerce anywhere is the user experience. Customers prefer a trusted relationship with an e-commerce brand, and the conveniences and reliability of e-commerce businesses have to outweigh the benefits of traditional retail outlets. Because there have been a relatively small number of successful consumer Internet companies in India, there has been less competitive pressure to force implementation of global best practices. However, as the number of e-commerce companies has grown, companies have started to place more emphasis on investing in the user experience. Best practices that have driven e-commerce globally are now a key focus of successful Internet companies, including merchandising, customer service, user interface design, and guaranteed delivery and return policy. In this competitive drive to differentiate via user experience, the ultimate winner is the Indian online consumer.
Statistics
E-commerce in India to Hit $1 Billion This Year (source: IAMAI report, 2010)
(Source: IAMAI report: 2010)
(Source: IAMAI report: 2010)
Ecommerce in India: Pitfalls
Besides, the obvious ones mentioned above ones like Computer illiteracy, poor PC & internet penetration, poor broadband connectivity, expensive broadband etc., internet usage pattern of consumers also plays a major role. The scope for Ecommerce in India is no doubt tremendous in the years to come, but still there are some pitfalls in its way of success that should be taken care of, which are as follows: Studies have revealed that 23% of the customers quit even before they register themselves at a particular site because they hesitate to register themselves. The time of delivery stated is unclear. The time taken for downloading is very long. People in India have habit of buying goods only after feeling the goods. This drawback can only be removed if matured companies enter the Ecommerce in whom people have good faith or have an offline medium to convince the consumers. The behavior of the Indian customer is very need driven as compared with the US customers who are impulsive buyers. Most of the entrepreneurs in India lack is sufficient capital or resources and hence cannot wait for a long period of time for positive results.
Also, in an interesting study done by IAMAI, 2009 report, few interesting facts were revealed. The same can be seen in the screenshot attached below.
(Source: IAMAI report: 2009)
Recent VC activity in India
Please find the excel report attached
