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E-Commerce in India: Wheel of Change

Via I Am Wire : Today, before we move out to shop, we do ensure to check out things online, compare prices, read reviews and even make purchase decisions. Welcome all to this new state of bewildered but well informed consumerism in India.

The advent of this disruptive revolution among Indian consumers has led to a new wave in organized retail.

Yes, I am talking about this big E word E- commerce.

Though e-commerce in India is still in it’s infancy but it is growing at a frantic pace and has started to make some impact in metros. At $6 billion, we are still minnows in global e-commerce markets where USA ($250 billion) and China($70 billion) are at their prime. Even in $600 billion Indian retail industry, e-commerce contributes mere 1% which is miniscule compared to the some of the European markets boasting of as high as 20%. However, the silver lining is we are growing at a rate of 35-40% CAGR and slated to touch around $60 billion by 2020.

Opportunities Galore

We are billion people country with a mobile penetration of almost 80% and now 40% of them are on smartphones which means a sizeable population is internet ready.

Currently internet penetration in the country is at 250 million growing at the rate of 60-80%.So, in next couple of years we will be seeing almost everyone on the Net which is a perfect stage for commerce to move online.

Secondly, majority of our population is very young which demonstrates exuberance to build and adopt anything new coming their way so this new retail form is expected to have a very fast adoption rate.

Thirdly, big media attention has created right environment for the ecosystem to evolve around it.

What it Means for Offline Business

Many people raise the question: Is offline retail going to die ?

No, ofcourse not. But they will certainly lose some market share.

Currently, we are witnessing a transitory period where a new form of consumerism is trying to change the customer buying behavior and in the process doling out all sort of freebies. This is getting a lot of media attention and creating a buzz, which sounds claustrophobic for offline industry. So, the big question is:

Is e-commerce going to take over offline retail ?

Globally we have seen, e-commerce penetration of total retail is not more than 20%. Even in a country like USA it is just 7%. This is a buzz which will subside over period of time and then both formats will co-exist with offline always being the dominant peer.

Significance for Consumers

As far as the consumers are concerned party will definitely continue for some time with retailers offering all sorts of schemes, freebies to woo the customers. Initially customers would be enticed into buying online and over a period they will realize the nuances and limitations around the model.

Either ways it is going to be a bonanza time for merchants.

Roadblocks on the Way

As this internet juggernaut starts to roll, it will only gain momentum as it gains ground and no amount of interdictions can stop it . However, some of the roadblocks need to be overcome to make this journey smoother and faster.

Internet Penetration: 25% internet penetration is still a abysmal number. for any omniscient revolution to take place. Internet penetration and supporting infrastructure needs to be seriously ramped up to build a conducive environment.

Logistic Infrastructure: We need to really spruce up our logistic infrastructure. India has 90,000 postal PIN codes and still after Indian Post, there is no other company that has the capability to deliver more than 10,000 Pin posts, which means almost 80,000 PIN codes are practically unserviceable. For any commerce to pick up, last mile delivery poses the biggest challenge.

Payment Infrastructure: Absence of a robust payment environment is one of the biggest stumbling block for e-commerce to pick up. We are still a more cash driven economy with only 2% population having access to credit card and significant portion without formal banking relationship.

Government Policy: Last and most important is the change in mindset at all levels from consumer to retailer to government. This is a new form of business and should be handled with a different perspective. There should be new rules and guidelines which gives clarity on government policy on e-commerce. Absence of fresh approach and clear policy guidelines are just delaying the overall process of change.

Whatever may be the outcome of this change, the wheel has started to turn and it will definitely revolutionise the retail industry and enunciate a new wave of consumerism which is good for everyone from retailers to buyers to enablers.

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