Is mCommerce the new mantra for India?

How mCommerce will dominate India in future

According to a research study conducted by market research firm, Zinnov, smartphone sales continue to surge by 51% in India every three months. Due to this, mobile commerce may grow by 55%, from its present size of $2 billion, to $19 billion by 2019.

Of course the fact that mobile eCommerce would possibly be the next big thing is not a secret anymore. In fact, eCommerce companies are betting big on the mCommerce platform. Myntra, an online fashion retailer will shut its website from May 1st and go solo on mobile. Flipkart, another big name in Indian eCommerce, plans to follow suit. Myntra already draws 80% of customers while Flipkart seems to ring in 60% of its traffic from its mobile app. Other etailers are following suit.

Many innovative ideas have sprouted to cater to this huge mCommerce market. A major hurdle in conducting eCommerce transactions on mobile has been the lack of payment options online - many Indian buyers don’t have credit card facilities. Moreover, people look upon online transactions with suspicion. To avoid such issues, the concept of cash-on-delivery (CoD) was initiated by Indian eCommerce firms. Buyers could pay for the purchase by cash on receipt of items.

Cash-on-delivery accounts for up to 60% of transactions, according to a study by Internet and Mobile Association of India and audit firm KPMG. But CoD has pitfalls. The return rates in online shopping in CoD transactions averages around 40%, an E&Y report says. The courier company providing CoD charges 3-4% of the transaction amount and sits on the cash for two to three weeks. To obviate this problem, eCommerce platforms are now actively looking at other solutions like e-wallet. This sudden surge in interest in e-wallet providers is not happenchance but a calculated move to dominate the burgeoning mCommerce market.  

Snapdeal has concluded the biggest M&A deal with the acquisition of online mobile recharge platform FreeCharge for $480 million in stock and cash. Earlier,  Jack Ma-led online retailer Alibaba’s affiliate, Ant Financial Services,  acquired a 25% stake in Paytm which raised around $575 million from the deal. Paytm parent One97 Communications plans to raise another $500 million from private equity players.

There is another reason why eCommerce platforms are looking at the mobile customer. According to data from Telecom Regulatory Authority of India (TRAI), the number of active mobile connections was around 944 million in 2014 and is expected to cross one billion this year. In 2014 alone, some 70 million mobile data connections were added, with around 180 million of these subscribers cumulatively.

At the same time broadband usage is predicated to only grow marginally and even shrink in the coming years. Many of these mobile subscribers will be coming from rural backgrounds which means that there is a huge opportunity for eCommerce companies to tap into a massive customer base which has hitherto been out of their reach. The expansion to rural areas also means that a slew of new initiatives in the form of services will emerge - from real-time weather updates to doctors’ consultations and virtual teachers.

If the recent sale of mobile spectrum is an indicator of things to come, there is likely to be an explosion of mobile users in coming years. The spectrum sale has ushered the 4G era in a country which is the third largest smartphone market in the world. The Indian government made a whopping $18 billion from the auction of spectrum to mobile carriers. It’s obvious that the mobile carriers having invested huge sums will now go ballistic in their attempt to increase their subscriber base. All these developments indicate that mobile users will dominate the eCommerce scene in future.

The interest shown by investors in the mCommerce space therefore does not come as a surprise. The excitement in this sector is palpable. Startups are mushrooming. The latest to enter the fray is China’s Alibaba Group. It has joined hands with Bengaluru-based mobile and analytics solutions company, Globals. Together they plan to establish a startup incubator in Bengaluru that will focus on mobile internet and mobile commerce. Jack Ma, founder of Alibaba group expressed his desire to build B2B eCommerce platforms that can take farm goods, handicrafts and products of small enterprises to global buyers, when he met the Indian prime minister. This is indicative of how keen the Indian government is to boost eCommerce in the country, and it has launched several projects in the mobile space.

There can be no doubt that mobile commerce will dominate the eCommerce scene in India. But the truly interesting part will be to see the spread and use of this platform by the people in the hinterlands. Given that 80% of Indian population live in villages, mobile technology will certainly create a massive new market and take India to the next level.