India: The Land of E-commerce Opportunity

“Why on earth would I buy something off the internet?”. If there was a question that summarised E-bay’s foray into the Indian retail market in 2004, this would be it.

For the outside world, India’s market was a cookie they couldn’t crumble. Brick-and-mortar shops ruled the fragmented market, boasting of patronage spanning over generations of families. The reason was simple: the Indian customer needs to hold the product in his hand before he loosens his purse strings. Even if you could convince the customer to change that mentality (That was a big ‘If’), there was another problem in the form a measly 2% internet penetration.

So when E-bay entered the $500 billion retail market, claiming India was the ‘next big thing’ in e-commerce, there was a lot of laughter. 13 years and nearly $40 billion dollars later, India had the last laugh. After seeing the success of E-bay, and local players like Flipkart and Snapdeal, a lot of global players have come to terms with India’s ‘Golden Hen’ status. Here’s what makes India a unique e-commerce proposition:

Market Size and Potential

Calling India’s retail market ‘big’ would be downplaying its size. ‘Humongous’ fits it better. Come 2020, the retail market evaluation will be a cool $ 1 trillion, with e-commerce expected to contribute 70% of it. The major chunk comes from Tier 1 cities, but Tier 2 and Tier 3 cities are not behind, as e-commerce offers them access to brands like never. With per capita income estimated to double by 2025, India’s customers will have more cash to burn.

E-commerce Readiness

From 2% in 2014, to 35% in 2016; India’s penetration in its 1.3 billion population has come a long way in a short span. Mobile subscriptions have jumped up to 976 million, with India adding 3 internet users per second. The mobile-friendly status comes really handy, as 60-65% e-commerce sales are generated through mobile phones.

Barriers to Entry

The biggest barrier that global players are apprehensive of is language. With 29 states and hundreds of regional languages, anybody would get intimidated. But what makes India unique is the uniform usage of the English language. Widely used for official purposes, global players can breathe easy, as this means smoother communication with customers, as well as for hiring workers.

Competition

Before 2013, Flipkart was the undisputed market-leader in e-commerce, with Snapdeal the only contender to its throne. Enter Amazon, and the market dynamics changed. Flipkart still may be numero uno, but Amazon has shown that global players can play the game too, and maybe win.

Market Regulations

India’s policy change in foreign investment allows 100% foreign investment, though in a ‘Marketplace’ model. This renders e-commerce players more as platforms for sales, and less as retailers. This opens up the door for a lot of small players to cash in, both local and global.

Somewhere between “Why on earth should I buy it off the internet” to “I should probably buy it off the internet”, India’s e-commerce scene has come a long way. But the best part is that; the journey has just started. Get on board!

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