Here's Why India Really Does Have What It Takes To Become The World's E-Commerce Capital

13/10/2015 8:24 AM IST | Updated 15/07/2016 8:25 AM IST
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I recently read an article describing India's unprecedented e-commerce growth as a "primed-up athlete finally hitting his full stride." And indeed, digital augmentation has revolutionised the nation's e-commerce ecosystem by unlocking India's potential on various fronts, making it one of the most preferred destinations for global retailers.

But is India sitting on the cusp of an e-commerce bubble or will the growth multiply? If the truth be told, e-commerce has been booming for the past 15 years, but the ecosystem has only now started to fall in place - and this can be substantiated by the following factors.

1. Population with a huge appetite for e-commerce

Despite the larger playing field offered to e-commerce brands, along with positive consumer sentiment towards e-brands, fast technology adaption, increase in willingness on online purchases (up by 67%) and rising multi-million dollar investments in e-commerce products, we are still missing from the global e-commerce map. While the users-by-population ratio seems low, India witnessed one of the highest growths in e-commerce segment at 27% and is the projected to grow at a 21% rate for the next five years.

"While the users-by-population ratio seems low, India witnessed one of the highest growths in e-commerce segment at 27% and is the projected to grow at a 21% rate for the next five years."

2. Government favouring the start-up ecosystem

Recent developments by the Indian government -- such as SEBI relaxing its regulations for start-ups to list and raise, institutionalisation of policies such as exemptions from service tax and excise duties -- have been viewed as major boosts for start-ups. While we are seeing movement on the government front, online retailers still continue to suffer from the increased regulatory burden. Thus, resting greater responsibility on the government to enable an ecosystem that promotes growth and helps India gain its due in the global scheme of things.

3. Growth in a greater variety of segments

Though the e-commerce ecosystem is fast addressing varied needs of the consumers in India, 70% of Indian e-commerce space is dominated by the travel industry -- indicating that other segments such as financial services and digital downloads have room to accelerate faster and take on the untapped market in full stride. A few other major sectors that are witnessing slow growth and need the right push include food tech, financial technology and on-demand services among others.

4. Underdeveloped infrastructure and organised retail

In principle, there is no Walmart/TJ Max to beat or Starbucks to disrupt in tier II/III markets - which means various sections of the retail market are waiting to be tapped and captured. One of the biggest propellers enabling growth and allowing a mass-customer-acquisition is the rapid adoption of internet/digital mediums that are aggressively driving the demand for easier access to organised retail in rural areas. Thus, leading to a higher percentage share of digital commerce as compared to global averages in developed economies.

5. Winning the talent war on the global front

India is clearly becoming a frontrunner in the e-commerce space with its wedge formation of young engineers and technologists. India ranks as the second largest programmer community currently and is expected to become home to the largest number of software developers by 2017. Undoubtedly, it is this young talent who are and will continue to drive disruption in this space.

6. The rise of mobile banking

The mobile is evolving into our 24x7 banker, thereby, succeeding in directing the Indian populace, especially the youth, towards the cashless payment route. According to the RBI, in FY15 cashless transactions accounted for Rs 92 lakh core, whereas mobile banking accounted for Rs 1 lakh crore during the same period. While the latter isn't a great number, there are projections of growth in the mobile banking space due the increasing usage of mobile wallets (which is expected to reach 100 million customers in the next five years).

"[N]ot only has the dollar value of investable capital increased, there have been major advancements in the creation of a robust capital ecosystem..."

7. Development of a robust capital ecosystem

Over a period of time, not only has the dollar value of investable capital increased, there have been major advancements in the creation of a robust capital ecosystem (which stood on weaker grounds in the past). And, this capital layer can be divided into two parts. The first being the development of an angel/early stage layer allowing more and more entrepreneurs, ideas and companies to take birth, and secondly, the development of large institutional capital pools (such as Soft Banks and Tiger Global) providing access to long-term growth capital much needed to build large-scale businesses.

8. E-commerce business models heading towards disruption

While the East is now accelerating its speed to match the e-commerce growth that the West has already enjoyed, there is an emerging trend in the nation to disrupt existing subscription commerce, consumer-to-consumer and on-demand business models - the aim is to innovate and thus lead the race. This indicates that the next phase which will be dominated by disruptive e-commerce models. Point to consider: how exciting would it be if the e-brand knew exactly what one needed and when? What if consumer consumption habits were not only tracked online but were analysed to provide a solution to people's habits/needs? It would ensure convenience- and necessity-based shopping that completes its full circle.

9. Help from the media

Though little credit is given to the media, the fact is that news-sharing platforms (digital or print) are actively contributing to e-commerce growth in India. Media outlets have managed to increase confidence and awareness in the audience by publishing stories that highlight the e-commerce space. While there are no metrics to measure the impact created by news outlets, there is no doubt that the media plays a major role in connecting the dots between entrepreneurs, investors, consumers and the government.

To conclude, it's all about the survival of the fittest and those who manage to break through the clutter in a crowded marketplace will win the game. While prima facie e-commerce companies are doing everything they can to gain a foothold in the market and the consumers' minds, their real challenge is to reinvent their consumer retention and product/service innovation strategy at every step. That's what it will really take for India to become the e-commerce capital of the world!

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