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“Each month, 8-10 million Indians connect to the Internet for the first time, mostly via mobile.” Vineet Taneja, CEO, MicroMax

“Discounts!”- Not many Indians can refuse or ignore that one temptation. Generally, discounts offered on products and services drives online shopping experience; other factors taking a back seat.

According to a survey of the E-Commerce industry,

  1. 61% of the consumers shall stop buying online if companies don’t offer discounts
  2. For 41% of the respondents, convenience was the most important reason to shop online
  3. 30% believed that delivery and return policy are main reasons to buy online

e-commerce

According to a study made by RedSeer Consulting, e-commerce companies had recorded a whooping Gross Merchandise Value  of Rs 13,500 Cr comprising a sale of more than 65 Mn units during September-October (a peak season in India). Also, Indians associate the term “E-Commerce Industry” with a few known names like – Amazon, Flipkart, Snapdeal, Jabong, Zomato etc.  But that’s not it! The e-commerce ecosystem can be summarized as follows –

e-commerce

In the past, online retail was considered to be a failed dream. Until it started showing a CAGR of 50-55% to clock US$ 4 .5 billion in 2014, nobody believed it could become a reality in India. Since then, it has never looked back and has been growing exponentially. The e-commerce industry is pegged to multiply 15 times the current size of US$ 20 Bn to reach US$ 300 Bn by 2030 as per IBEF.

e-commerce

To write a sustainable growth story, the industry shall have to focus on certain important areas:

  • Consumer Demographics – In India, 75% internet users are below the 35 years of age. Hence, the industry has failed to focus on the “above 35” segment who is financially independent and has the capability to buy!  Also, the rural population of India is estimated to catch up with urban India by 2020 (48% of the total online population). This indicates the enormous potential of the Indian rural segment. Also, industry experts recommend companies to target women as their potential customers looking at the fast changing lifestyles.
  • Shift from COD to Cashless payments – As per an EY survey, the respondents above 30 preferred opting for cashless payments which is clearly due to their financial independence and strong spending ability. Where as, remaining respondents who were below 30 years of age preferred Cash on Delivery (COD). Though COD is the most popular form of payment in the e-commerce industry and drives 60% of the sales, it is not a sustainable option for the players. Companies can achieve a shift from COD to cashless payments by providing incentives or exciting offers to people opting to pay via the cashless route. Industry can also increase the confidence of the consumers by enhancing cyber security measures.gst compliance
  • Medium of Marketing Communication – The players should use the right medium of communication depending on the immediate target audience. Television ads influence and impact more that 60% of Indian audience. Social media promotions and offers tend to influence consumers who fall below 21 years of age. Family and friends also influence a woman’s opinion. Thus, looking at the trend, dynamic integrated marketing communication is the need of the hour.
  • Heavy Dependence on discounts – The e-commerce industry used the market penetration strategy to gain consumer attraction by offering discounts at an early stage. Instead, they should focus on delivering value to consumers via other means in order to sustain in the long run. With “showrooming” coming in the limelight, consumers have high expectation of the quality of product/service. Thus, the industry should focus on delivering value by meeting consumers expectations through excellent quality of service. Some ways to achieve this can be – Hybrid Pricing strategies, Charging for fast delivery, bridging the huge gap between online and offline, streamlining the return policies etc.
  • Continuous Innovation – The players should focus on rapid innovation techniques to adapt to the fast changing environment and tastes. Use of analytics to target “real-time” opportunities can be the next step to overcome challenges of maintaining vast consumer base. Many companies are venturing in the B2B E-Commerce space which can be more profitable than B2C space. A few avenues can be industries like textile, electronic products, GRC services, financial services etc.

Conclusion

With the GST roll out happening in July 2017, the Indian E-Commerce sector shall witness a major disruption. Although, GST rules are not offering any clarity on a variety of topics including definition of the term “E-Commerce”. The challenges may include implementation of TCS (Tax Collected at Source), treatment of sales return & resolution of existing ambiguities. VComply, a SaaS based GRC tool offers a GST compliant platform to help the e-commerce industry to dilute all its impending worries. 

Finally, the e-commerce industry will definitely witness innovation in payments, new delivery models, new technology adaptation, empowered logistics ecosystem. However, it will not be without its share of operational, digital and regulatory trials!

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