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E-commerce in India

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India has an internet user base of about 250.2 million as of June 2014..[1][2] The penetration of e-commerce is low compared to markets like the United States and the United Kingdom but is growing at a much faster rate with a large number of new entrants.[citation needed] The industry consensus is that growth is at an inflection point.[3]

Unique to India (and potentially to other developing countries), cash on delivery is a preferred payment method. India has a vibrant cash economy as a result of which 80% of Indian e-commerce tends to be Cash on Delivery. However, COD may harm e-commerce business in India in the long run [4] and there is a need to make a shift towards online payment mechanisms. Similarly, direct imports constitute a large component of online sales. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.

Market size and growth

India's e-commerce market was worth about $3.8 billion in 2009, it went up to $12.6 billion in 2013. In 2013, the e-retail market was worth US$ 2.3 billion. About 70% of India's e-commerce market is travel related.[5] India has close to 10 million online shoppers and is growing at an estimated 30%[6] CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.

Key drivers in Indian e-commerce are:

  • Increasing broadband Internet (growing at 20%[7] MoM) and 3G penetration.[8]
  • Rising standards of living and a burgeoning, upwardly mobile middle class with high disposable incomes
  • Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers
  • Busy lifestyles, urban traffic congestion and lack of time for offline shopping
  • Lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs
  • Increased usage of online classified sites, with more consumer buying and selling second-hand goods
  • Evolution of the online marketplace model with sites like Jabong.com, Flipkart, Snapdeal and Infibeam.

India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%..[citation needed] According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.[9]

As per "India Goes Digital",[10] a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015.

On 7 March 2014 e-tailer Flipkart claimed it has hit $1 billion in sales, a feat it has managed to achieve before its own target (2015).[11]

Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.[citation needed]

Closures

Though the sector has witnessed tremendous growth and is expected to grow, a lot of e-commerce ventures have faced tremendous pressure to ensure cash flows. But it has not worked out for all the e-commerce websites. Many of them like Dhingana, Rock.in, Seventy MM amongst others had to close down [12] or change their business models to survive. [13]

Infrastructure

There are many hosting companies working in India but most[citation needed] of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting.[citation needed] Cyber security issues of e-commerce business in India would be required to be managed by Indian e-commerce stakeholders in the near future.[14] In fact, Indian government is planning to introduce cyber security breach disclosure norms in India very soon.[15] Recently Target corporation suffered a cyber attack that has put it under litigation threat in multiple jurisdictions.[16] Trends are changing with some of eCommerce companies starting to offer SaaS for hosting webstores with minimal one time costs.

There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll.

India has got its own version Cyber Monday known as Great Online Shopping Festival which started in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day.[17] Most recent GOSF Great Online Shopping Festival was held during Dec 10 to 12, 2014.

In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns.In July, Amazon had said it will invest $2 billion (Rs 12,000 crore) in India to expand business, after its largest Indian rival Flipkart announced $1 billion in funding.[18]

Funding

As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising, Flipkart.com, till November 2014, has raised about USD 2.3 billion.[19] Entertainment ticketing website BookMyShow.com raised ₹100 crores investment by Accel Partners.[1]

On 10 July 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors making up the additional $160 million include Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.[20]

Snapdeal - USD 50 million in 13 April.

In February 2014, online fashion retailer Myntra.com raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for ₹2,000 crores.[21] However, cyber law [22] and e-commerce due diligence are still being ignored by investors and financial institutions while investing in India.[23]

In October 2014, KartRocket, an Indian e-commerce platform, announced granting of a Series A round led by technology investor Nirvana Venture Advisors and 500 Startups, together with Tokyo-based Beenos, previously known as Netprice.com.[24]

Regulatory Violations And Unfair Practices

Legal issues of e-commerce in India are generally ignored by e-commerce websites. This may change in the near future as foreign companies and e-commerce portals would be required to register in India and comply with Indian laws.[25] E-Commerce websites dealing with nutraceuticals,[26] Bitcoin,[27] Ayurvedic products,[28] online pharmacies,[29] online payment,[30] online poker,[31] etc. are violating laws of India.

Enforcement directorate (ED) of India has already initiated legal actions against companies dealing with Bitcoins in India.[32][33] Tax liability of foreign companies like Google, Facebook, etc. is also under consideration in India.[34]

Similarly, illegal online sales of prescribed drugs [35] by illegal online pharmacies of India [36] are also under scrutiny of regulatory authorities of India.

Myntra,[37] Flipkart [38] and many more e-commerce websites are under regulatory scanner of ED of India for violating Indian laws and policies. US-based transport application provider Uber Inc has also been questioned by the service tax department of India.[39] Recently Kerala Government slammed Flipkart, Jabong and other two Ecommerce trade organizations for doing illegal business in the state with a fine of INR 54 Cr. Flipkart (INR 47.15 Cr) will pay the majority of fine followed by Jabong (INR 3.89 Cr), Myntra (INR 2.23 Cr) and Zovi (INR 36 Lakh). [40]

The Federation of Publishers’ and Booksellers’ Associations in India (FPBAI) has also questioned [41] the predatory pricing tactics adopted by various e-commerce websites in India. The Confederation of All India Traders (CAIT) has also decided to approach the Competition Commission of India to oppose the predatory pricing tactics of Indian e-commerce websites.[42]

Demands for introducing suitable provisions to regulate taxation, anti competitive practices and predatory pricing of Indian and foreign e-commerce websites have also been raised.

See also

References

  1. ^ a b "Online shopping touched new heights in India in 2012". Hindustan Times. 31 December 2012. Retrieved 31 December 2012.
  2. ^ "Internet World Stats". Internet World Stats. Retrieved 4 July 2013.
  3. ^ "Indian e-commerce at inflection point?". Vccircle.com. 19 August 2010. Retrieved 4 July 2013.
  4. ^ "Cash On Delivery May Harm E-Commerce In India". E-Retailing Laws And Regulations In India. 13 March 2012. Retrieved 19 August 2014.
  5. ^ Evolution of e-commerce in India, PwC, 2014.
  6. ^ Consumer E-commerce in India
  7. ^ "India broadband penetration growth". Internetworldstats.com. Retrieved 4 July 2013.
  8. ^ PTI 29 August 2010, 02.22pm IST (29 August 2010). "E-commerce growth with 3G". Economictimes.indiatimes.com. Retrieved 4 July 2013.{{cite web}}: CS1 maint: numeric names: authors list (link)
  9. ^ "Asia Pacific Online Retail Forecast, 2011 To 2016," Forrester Research Inc. Zia Daniell Wigder, with Steven Noble, Vikram Sehgal and Lily Varon.
  10. ^ http://www.avendus.com/Files/India_goes_Digital.pdf
  11. ^ http://www.thehindu.com/business/Industry/flipkart-hits-1-billion-in-sales/article5757634.ece
  12. ^ "Discounts backfire; many e-com ventures shut shop". Business Standard. 26 February 2014. Retrieved 9 December 2014.
  13. ^ "Latest e-commerce shut downs and acquisitions in India". 17 May 2014. Retrieved 4 January 2015.
  14. ^ "Cyber Security Issues Of E-Commerce Business In India". E-Retailing Laws And Regulations In India. 13 August 2014. Retrieved 19 August 2014.
  15. ^ "Indian Government Is Planning A Legislation Mandating Strict Cyber Security Disclosure Norms In India". Centre Of Excellence For Cyber Security Research And Development In India (CECSRDI). 27 March 2013. Retrieved 19 August 2014.
  16. ^ "Indian Government Is Planning A Legislation Mandating Strict Cyber Security Disclosure Norms In India". Cyber Laws In India And Technology Laws And Regulations In India. 16 March 2014. Retrieved 19 August 2014.
  17. ^ "Google partners e-commerce sites for 'Cyber Monday' on December 12". Economic Times. 4 December 2012. Retrieved 31 December 2012.
  18. ^ "Amazon adds India to its risk factors". PTI. 3 November 2014.
  19. ^ "Fund-raise values Flipkart at $10 billion". Times of India. 24 November 2014.
  20. ^ "Flipkart raises $160M more from Morgan Stanley, Vulcan Capital, Tiger Global, others". VCCIRCLE.
  21. ^ http://timesofindia.indiatimes.com/tech/tech-news/Flipkart-acquires-Myntra/articleshow/35472797.cms
  22. ^ "Cyber Law Due Diligence Must For Foreign Investors In E-Commerce And Technology Ventures Of India". E-Retailing Laws And Regulations In India. 8 February 2014. Retrieved 19 August 2014.
  23. ^ "E-Commerce Due Diligence In India Is Neglected By Investors And Financial Institutions". E-Retailing Laws And Regulations In India. 13 March 2014. Retrieved 19 August 2014.
  24. ^ Ikeda, Masaru (23 October 2014). "Japan's Beenos joins $2M investment round in India's e-commerce enabler KartRocket". The Bridge. Retrieved 5 December 2014.
  25. ^ "Foreign Companies And E-Commerce Portals Would Be Required To Register In India And Comply With Indian Laws". E-Retailing Laws And Regulations In India. 5 June 2014. Retrieved 12 October 2014.
  26. ^ "Nutraceutical E-Commerce Legal Issues In India Are Ignored By Entrepreneurs". E-Retailing Laws And Regulations In India. 17 March 2014. Retrieved 12 October 2014.
  27. ^ "Bitcoin Exchanges Operating In India Must Comply With Indian Laws To Be Legal". E-Retailing Laws And Regulations In India. 12 January 2014. Retrieved 12 October 2014.
  28. ^ "Ayurvedic E-Commerce Legal Issues In India". E-Retailing Laws And Regulations In India. 7 February 2014. Retrieved 12 October 2014.
  29. ^ "Online Pharmacies In India: Legal Requirements". E-Retailing Laws And Regulations In India. 7 February 2014. Retrieved 12 October 2014.
  30. ^ "Online Payment Market Of India And E-Commerce And Online Business Legal Compliances". E-Retailing Laws And Regulations In India. 8 February 2014. Retrieved 12 October 2014.
  31. ^ "Online Poker Laws In India Are Flouted By Poker Websites". E-Retailing Laws And Regulations In India. 1 March 2014. Retrieved 12 October 2014.
  32. ^ "Enforcement Directorate (ED) Searched Seven Digital Cash LLP Office And Website For Selling And Buying Bitcoins In India". Exclusive Techno Legal Centre Of Excellence For Cyber Crimes Investigation In India. 27 December 2013. Retrieved 12 October 2014.
  33. ^ "Bitcoins Money Can Be Used For Hawala Transactions And Funding Terror Operations: Enforcement Directorate". Exclusive Techno Legal Centre Of Excellence For Cyber Crimes Investigation In India. 29 December 2013. Retrieved 12 October 2014.
  34. ^ "Indian Tax Liability Of Google, Facebook, Twitter, Etc For Online Business And E-Commerce". E-Retailing Laws And Regulations In India. 2 February 2014. Retrieved 12 October 2014.
  35. ^ "Online Sale Of Prescribed Drugs In India Under DGCA Scanner". E-Retailing Laws And Regulations In India. 9 April 2014. Retrieved 12 October 2014.
  36. ^ "Maharashtra FDA Approaches DCGI For Regulating Illegal Online Pharmacies Operating In India". E-Retailing Laws And Regulations In India. 9 April 2014. Retrieved 12 October 2014.
  37. ^ "Myntra Comes Under Regulatory Scanner Of Enforcement Directorate Of India For Possible Violations Of FDI Norms Of India". E-Retailing Laws And Regulations In India. 5 May 2014. Retrieved 12 October 2014.
  38. ^ "Enforcement Directorate Likely To Send Show Cause Notice To Flipkart For Violating Indian FDI Rules". E-Retailing Laws And Regulations In India. 1 May 2014. Retrieved 12 October 2014.
  39. ^ "After RBI diktat, Uber under the scanner of Services Tax Department". DNA India. 12 October 2014. Retrieved 12 October 2014.
  40. ^ "For Doing Illegal Business in Kerala, Flipkart and Jabong will pay fine of INR 54 Cr". Techebizz. 29 January 2014. Retrieved 29 January 2014.
  41. ^ "FPBAI Questions The Predatory Pricing Tactics Of E-Commerce Websites Of India". E-Retailing Laws And Regulations In India. 9 October 2014. Retrieved 12 October 2014.
  42. ^ "Traders body to approach CCI against e-commerce players". The Hindu Businessline. 10 October 2014. Retrieved 12 October 2014.
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