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Business Management

Dan Swinhoe (Asia) - Cashing In On Delivery: eCommerce In India

India's first e-commerce site, Fabmart.com (now IndiaPlaza) was founded in 1999. The internet, both in India and the world over, was a very different place and online shopping was almost non-existent. Today there are around 140 million Netizens in India, and more than 10 million of them are online shoppers.

Fuelled by a young and growing middle class with money to spend, India's eCommerce sector is currently a $10bn market, one that is expected to more than double to over $34 billion by 2015. But the potential for the future is massive.

Firstly, India's already massive online population is still only a tiny percentage (8%) of the country, meaning there's still a huge number waiting to get online. It's early days in terms of online shopping too; e-commerce accounts for just 0.12% of all retail sales in India, compared with over 4% in China and America (who have around 220 million and 150 million eShoppers respectively). According to Mckinsey, 80% of current internet users say they are planning to shop online in the near future - that's a big increase.

Around 4% of mobile web users also shop online, and travel booking is the most popular segment of the market. The country's market differentiates itself from other BRICS markets by having a large rural shopping population [http://blogs.forrester.com/zia_daniell_wigder/12-08-14-trends_in_indias_ecommerce_market]. Due to few people owning credit cards (around 1%), Cash On Delivery is the most widely favoured form of payment - accounting for 80-90% of all eCommerce transactions. Although the sharp increase of debit cards points to a hopeful future for efficient ePayments.

Both eBay and Amazon (via Junglee) have a presence in the country, and Google is also trying to help promote eCommerce to businesses and customers.Things are, however, a world away from the money machines of the eBays and Amazons in the US & UK (even if they proclaim otherwise). A large amount of competition in a sector that's lacking differentiation along with slim profits are squeezing companies, who are jostling for attention by often selling products at a loss just to draw in customers.

Inefficiency is also a problem; the general model in India is to buy in bulk, store and sell it on, requiring large amounts of capital upfront (which is becoming harder to find) and costly due to storage. The preference for COD payment also means consumers often reject goods - estimates point to almost 45% of ordered products are rejected by the customers at delivery. The sustainability of the current model has been rightly called into question - so far barely a handful of India's eCommerce sites have made a profit, and of the 197 eCommerce companies founded from January to October last year, 87 have gone bust.

But on the other hand, the bust has happened and only the serious contenders are now left in the market, which means a concerted push to advertise and move away from cash to ePayments can help bring the people in and improve the bottom line.

By Dan Swinhoe, Editorial Assistant, IDG Connect

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Dan Swinhoe

Dan is a journalist at CSO Online. Previously he was Senior Staff Writer at IDG Connect.

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