Driven by the availability of highly affordable smartphones for the Indian consumer, the internet user base in India has grown multifold in the recent past. As India raced past the USA to become the second largest smartphone market after China, users migrated en masse from laptops and desktops to mobile devices for activities such as checking emails and shopping. The proliferation and acceptance of smartphones resulted in a concomitant growth for the Indian e-commerce industry, which emerged as a vital segment of the country’s economy. Even though it currently accounts for less than 2 percent of India’s total retail spending, e-commerce has become a key driver to create new markets in areas that are otherwise unreachable. Economists predict that the e-commerce industry may form the largest part of the Indian internet market by 2020, with a massive projected value of $100 billion.
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However, at present, only 40 million unique users out of an approximate 400 million internet users currently active in India have ever bought anything online. This situation exists despite online shopping being very convenient, with deep discounting, cash-on-delivery, and a 30-day return policy across most platforms. In 2014, while the global average digital-buyer penetration was 41.6 percent, India’s stood at a lowly figure of 24.4 percent. This demonstrates that the Indian e-commerce industry still has a long way to go.
Retail and e-commerce
Efforts to channelise India’s e-commerce potential must be based on an understanding of the country’s unique context. Every nation is singular, be it in terms of consumer behaviour, ethos, retail backdrop, or social fabric. In India, the retail landscape is largely fragmented. Nearly 90 percent of the sector is currently unorganised, while organised retail and e-commerce account for 8 percent and 2 percent of the total retail respectively. Also, while e-commerce across the world is viewed as a paragon of availability and convenience, Indian consumers — especially those in metro cities — tend to look at online shopping as the ultimate discount platform. The attempt at consumer acquisition through deep discounting has not been very successful and has instead resulted in a distinct lack of customer loyalty. It must also be noted that the internet connectivity infrastructure in India is very poor, especially outside city limits, which also acts as a major deterrent for buyers. Moreover, there is a lack of customer support and good service when compared to other countries.
Another area where India is currently lacking is online grocery retail. Unlike the USA, India took a very long time to warm up to the idea of buying items like vegetables online. Even today, very few startups are able to monetise their ideas in this field. The concept of online ‘mega sales’ does not have many buyers in India either, as Indians generally indulge in considerable spending during festive seasons such as Diwali. E-commerce firms need to understand the specific background of Indian buyers to be able to excite them.
In China, Japan, and the USA, e-commerce became popular as early as 2002. For the Indian retail industry to become widespread, companies have to develop India-centric models instead of trying to blindly replicate business practices which have been successful in other countries. There is, in India, a need for a framework that marries the convenience of online shopping with the trust and instant gratification of offline shopping — a model that connects local buyers and local sellers.
Therefore, going asset-light and hyperlocal is the perfect approach in India, as the country already has a well laid-out infrastructure in the form of 11 million retail outlets. It is logically much more cost-effective and easier to empower the existing system with data, analytics, and strong marketing platforms. Enabling offline Indian merchants to participate in the digital boom is the innovation Indian e-commerce needs to unlock its full potential.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)