To date, eCommerce is the most exciting and fastest-growing channel for commercial transactions in India. According to the Indian Brand Equity Foundation 2018, the eCommerce market of India is reported to be US dollar 48.5 billion as of 2018 and is expected to grow to US$200 billion by 2026. Also, the growth has been triggered by exponentially increasing smartphone penetration.
The IBEF also publishes some significant approaches as the ongoing digital transformation is predicted to increase the total internet user base form 560.01 million as of September 2018 to 829 million by 2021. Also, India’s internet economy was reported to be US$125 billion as of April 2017 and is expected to grow to US$ 250 billion by 2020. Undoubtedly, all of the high growth in the economy is majorly backed up eCommerce. And lastly, the impact not just ends here; the online shopping revenue of India was reported to be US$ 39 billion in 2017 and is predicted to jump to US$ 120 billion in 2020. Thus, the current annual growth rate is 51%, which is the highest economic growth rate in the world.
Current Market Trends
Due to the rising awareness and increased income levels, there is a growing appetite for better quality foreign products and international brands amongst digitally connected shoppers in India. There are several categories that are doing well for online sales and distribution, including health and beauty, consumer electronics, lifestyle products, jewelry and accessories, clothing, footwear, art and collectibles, household goods, online music, and event tickets. Hence, online retail sales have grown to US$ 32.70 billion in 2018, which is 31% of growth compared led by Amazon India, Paytm Mall, and Flipkart.
As per survey conducted by Mathew Ray, eCommerce Analyst at Australian Master, currently, electronics is the most prominent eCommerce category in India, with a significant share of 48% among the whole, followed by apparel, which is 29% of the whole. Indian eCommerce is classified into cross borders, domestic, B2B, B2C, marketplace, and inventory based distributions for analysis. Thanks to the accessible eCommerce, many of the top international and American brands have reached Indian consumers through the emerging fastest growing trading medium available cross borders of goods and services.
Moreover, innovations enabled by technology, including hyper-local logistics, digital payments, digital advertisements, and analytics-driven customer engagement, have led the eCommerce industry to grow at a faster pace in India. Also, governmental initiatives, including Skill India, Digital India, and Startup India, are contributing potentially to the growth of the eCommerce industry.
Major Developments in Indian e-Commerce
According to IBEF 2018, the eCommerce industry of India has witnessed 21 private equity ventures and capital deals, which were worth US$ 2.1 billion in 2017, followed by US$ 1,129 million in the first half of 2018. After the acquiring of Flipkart in US$ 16 billion by Walmart, they are expected to launch further retail stores to promote private segmented labels, especially in electronics and fashion, as major contributing sectors.
Additionally, the launch of Paytm Payments Bank is India’s first bank with no minimum balance requirement, zero charges on online transactions, and a free virtual debit card has proven to boost e-transactions. Along with that, Google has merged in Indian eCommerce space as Tata Trust, and Google has collaborated in a project ‘Internet Saathi’ for shopping to improve internet penetration among Indian rural Indian women.
The Reserve Bank of India (RBI) has permitted inter-operability among PPIs (prepaid payment instruments), including prepaid cash coupons, digital wallets, and prepaid telephone top-up cards. They have also instructed operating banks and businesses within the country to make all KYC-PPI complaint systems (know your customer-prepaid payment instruments) automated, including mobile wallets that are interoperable via UPI (Unified Payment Interface).
The Indian government has also rewarded one million customers worth US$ 23.8 million for embracing digital payments. Moreover, the government has launched an eCommerce portal named TRIFED along with an m-commerce ‘Tribes India’ that has enabled 55,000 tribal artisans to get access to an international market. Furthermore, the Indian government has hiked the limit of FDI (foreign direct investment) in eCommerce market place models to enhance the participation of giant foreign players in the field for up to a maximum in B2B models.
Hence, the fastest growing Indian eCommerce industry has been impacting micro, macro, and MSME (small and medium enterprises) by providing opportunities for technology, finance, and training with a favorable cascade affecting other businesses and industries as well.
NEW Government Regulatory Landscape for e-Commerce FBI
The Indian Department for Promotion of Industry and Internal Trade under the Ministry of Commerce (the “DPIIT”), has launched strict guidelines to govern and monitor FDIs from December 26th, 2018 onwards in e-commerce firms.
Concerning B2C domestic eCommerce, the presence of international players, including Alibaba, eBay, and Amazon, in constant competition with them for marketplace operations such as Snapdeal, Flipkart, TataCliq, and inventory led e-tailers have made the eCommerce sector a highly competitive place for gauging share and profitable business.
Also, leading B2B companies have started to build their own eCommerce platforms to tap the potential for small businesses and trading. Every minute increasing number of SMEs are trading online, and most of them are planning to shift procurement transactions online. Hence, understanding the untapped potential of the B2B industry in eCommerce, the Indian government has approved 100% of FDI for the B2B eCommerce sector.
With the advancements in e-transactions, cash on delivery has been changed into an instant card on delivery; Academist Help is a perfect example to follow internationally. Since cash transfers were costing high administration costs for eCommerce companies, which were resulting in low margins, that is why there is a consistent evolution of digital payment solutions to address the challenges.
As per the report issued by Reserve Bank of India in June 2018, 944 million Indians have debit cards that can be used for online payments. Also, 61% of users were reported to use debit cards for payments. Thus, the figure clearly reflects the compatibility of users with debit cards for online transactions other than manual withdrawals.
Industry experts are considering digital payments as a game-changer for domestic eCommerce businesses, while the current trend of the dominance of COD has been reserved for the next few years. As per the BCG report claimed by Google India, the increase in the online purchase, including small cities, is expected to reach $100 million by 2020.
Thus, the launch of different payment modes, including UPI (unified payments interface) by the Reserve Bank of India, is proving to boost eCommerce by enabling delivery staff to collect electronically COD transactions.
Claudia Jeffrey is qualified in financial analyst and an avid writer. She has worked with many commercial forums during her professional career. Currently, Claudia is working as Editorial Manager at Crowd Writer.