"Growth and Challenges of E-Commerce in India: An Overview"

The presentation "E-Business & E-Commerce in India" explores the rapid growth and challenges of the e-commerce sector in India. Despite having the second-largest internet user base globally, India's e-commerce penetration remains lower than that of developed nations but is growing rapidly. The presentation highlights that around 70% of India's e-commerce market is related to travel, with electronics and apparel being the most popular categories. Key drivers of growth include increased smartphone usage, declining broadband costs, rising disposable incomes, and government initiatives like the Digital India project. However, the sector faces challenges such as poor internet infrastructure, high customer acquisition costs, low customer loyalty, logistical issues, and regulatory complexities. Cash on delivery remains the preferred payment method due to low credit card penetration and trust in online payments, which also contributes to higher rejection rates and profitability challenges for e-commerce companies.

1. Unit- 1
E-Business & E-Commerce

2. E-COMMERCE IN INDIA
India has a population of 1.3 billion. Out of this, India has an internet user base
of 450 million as of July 2017, 36% of the population. India has the second-
largest internet user base in world, only behind China. The penetration of e-
commerce in India is low compared to countries like USA or France, but is
growing at an unprecedented rate. About 70% of India's e-commerce market is
travel related. In terms of sales, electronics items and apparels are the largest
selling items and cash on delivery is the most preferred payment method in
India. The largest e-commerce companies in India among others are Flipkart,
Snapdeal, Amazon India, and Paytm.

3. Transition to e-commerce in India
India has shown tremendous growth in e-commerce segment. Due to
less number of internet users and lack of awareness, transition to online
purchasing from traditional purchasing is taking a long time in Indian market.
Though e-commerce has witnessed tremendous growth in the recent past and is
expected to grow, many e-commerce ventures faced tremendous pressure and
had either to close down or were forced to change their business models to
survive. The major factors for the growth of e-commerce in India are :
•Increase in Foreign Direct Investment in retail sector, earlier FDI was only allowed
in B2B businesses..
•Participation of niche companies in online trading who specialize in exclusive
items. Moreover, entry of global majors in Indian market.
•Uniform Goods and Services Tax. Same tax for same product or service
throughout India would help in maintaining price stability. Different tax rates for
the same item in different states was a deterrent for e-commerce in India.

4. Transition to e-commerce in India
•The increase in internet and smart phone users due to declining broadband
subscription prices.
•Changing lifestyle of urban India.
•Growing acceptability of online payments.
•Access to funding.
•Rising living standards and a growing, upwardly mobile middle class with high
disposable incomes.
•Availability of much wider product range compared to what is available at brick
and mortar retailers.
•Busy lifestyles, urban traffic congestion and lack of time for 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.

5. Transition to e-commerce in India
•With an increase in awareness about the benefits of online trading. more and
more companies have started doing e-commerce business. Many established
business houses have setup online transaction channels along with offline
trading. Many items such as food and grocery which were never thought Of as
items for online trading are being transacted online.

6. Indian Readiness for E-Commerce
•India's e-commerce market has taken off, and there are projections of
phenomenal growth in the future. Driven by government policies and smart
phone usage, India 's e-commerce sector, now undergoing rapid development,
has already attracted a great deal of overseas interest. The Indian government's
ambitious Digital India project has also affected the e. commerce sector. The
programme will give a strong boost to the e-commerce market as bringing the
internet and broadband to remote corners of the country will give rise to an
increase in trade and efficient warehousing and will also present a potentially
huge market for goods to be sold. Currently, e-travel comprises 70% of the total e-
commerce market. E-Tailing, which comprises of online retail and online
marketplaces, has become the fastest-growing segment in the larger market.
Books, apparel and accessories and electronics are the largest selling products
through e-Tailing, constituting around 80% of product distribution. The increasing
use of smart phones tablets and internet broadband and 4G has led to developing
a strong consumer base which is likely to increase further. This, combined with a
larger number of homegrown e-Tail companies with their innovative business
models has led to a robust e-Tail market in India.

7. Indian Readiness for E-Commerce
•Around 75% of Indian internet users are in the age group of 15 to 34 years.
•This category shops more than the remaining population. Peer pressure, rising
aspirations with career growth, fashion and trends encourage this segment to
shop more than any other category and India, therefore, clearly enjoys a
demographic dividend that favors the growth of e-commerce. In coming years, as
internet presence increases in rural areas, rural India will yield more e-commerce
business.
•Besides general online shopping, customers are also shopping online for
weddings and festivals. The free and quick shipment and wider choice of
products, along with the ease of shopping online as compared to in-store
shopping.
•There is a recent trend of relatively newer products such as grocery, hygiene and
healthcare products being purchased online.

8. Challenges for the e-commerce sector in India
The phenomenal growth of the e-Commerce sector is accompanied by certain
challenges:
•E-lnfrastructural issues: Internet is the backbone of e-commerce. Very low
proportion of the Indian population has internet connectivity. Therefore, e-
commerce is not easily reachable to the common man. Moreover, the quality of
connectivity is poor in several regions especially in rural areas.
•Branding and marketing: To get people to come on an e-commerce site and make
a purchase involves heavy cost due to branding and marketing. This cost is
significant. Experts say that the average cost is between INR 500 — 1000 per
customer, which is not sustainable for even medium sized companies, let alone
early stage ones.
•Customer loyalty: The loyalty of online Indian customers is also a very big
challenge. A large proportion of online buyers in India does online shopping to
avail discounts, cash backs, gifts, etc. Moreover, they come to an e-commerce site
to check rates and use this information to bargain with offline trader.

9. Challenges for the e-commerce sector in India
•Declining margins: With the of a large number of players in the already
competitive e-commerce market, the customer is pampered by offering huge
discounts, offers, taking returns etc. resulting in less margins.
•Logistics and supply chain: Logistics failure in any area can mean detrimental
damage to a startup's future and can hurt the brand overall. Poor last-mile
connectivity, especially in remote areas with larger population, is another
problem faced by Indian online traders. Moreover, providing a guaranteed return
policy is a very challenging proposition.
•Tax related issues: Tax rate system of Indian market is another factor for lesser
growth rate of E-Commerce in India in comparison to other developed countries
like USA and UK. In those countries, tax rate is uniform for all sectors whereas tax
structure of India varies from State to State. But with the recent introduction of
GST, this problem will be resolved to a great extent.

10. Challenges for the e-commerce sector in India
•Touch and feel: Indian customers are more comfortable in buying products
physically. Companies dealing with products like aPparel, handicrafts, jewelry
have to face challenges to sell their products as the buyers want to see and touch
before they buy these items.
•Cash on delivery (COD) is the preferred payment mode: Low credit card access
and low trust in online payment has led to cash on delivery as the prefered
payment mode in India. Manual cash collection is more risky and expensive than
electronic payment. High rejection rate of COD orders adversely affects the
profitability of online traders. Moreover, Indian payment gateways have an
unusually high failure rate by global standard. E-business companies lose business
in this process as several customers do not attempt making payment again after a
transaction fails.
•Shortage of skilled manpower: Lack of talent availability is causing manpower
crunch, which is fast becoming a hurdle.

11. Challenges for the e-commerce sector in India
•E-Commerce laws: Laws regulating e-commerce in India are still evolving and lack
clarity. The IT Act 2000 which was passed to promote e-commerce in India, has
done little to achieve its objectives. In the current form of the Act, it has several
drawbacks and gray areas. There are many important issues and areas which are
very important for the promotion and development of e-commerce in India which
are not covered by the Act.
•Data protection: Data protection and the integrity of the system that handles the
data and transactions is a great challenge.