What’s the future of e-commerce in India ? Articles in English / Digital

India, a country of more than 1.2 billion people, with innumerable challenges, is also an emerging economy which offers billions of opportunities. The potential of growth in e-commerce in India has caught the attention of several regional players like Flipkart, Snapdeal and also of global giants like Amazon, Alibaba. From being worth just about $3.9 billion in 2009, online retail is worth $38 billion in 2016 and it is expected to generate about $100 billion in revenue by 20201. So, what are the challenges to sell online in this complex market ?

 

An heterogeneous market

India has the second largest Internet user base in the world and the fastest growing one. Around 375 million Internet users and counting2. One of the challenges is the estimated 415 living languages in India. On January 2016 Snapdeal, the eBay-backed Indian marketplace, was made available in 11 local languages besides English. Thus, Snapdeal expanded its reach to an additional 130 million smartphone users in India.

 

A mobile-first economy

80% of Internet sessions are coming from mobile in India1. Because the Internet penetration is recent and booming, Indians bypassed the desktop age and are directly moving into mobile. And since long loading times and frequent drops in connection make it harder for a user to keep browsing on mobile, applications became the answer. Nonetheless it could be a mistake to be app only. The app is, indeed, more user-friendly and allows better user-targeting. In 2015, a marketplace called Myntra decided on an app-only approach and shut down its websites – its app accounted for 90% of traffic and 70% of the sales at that time. But due to low-end smartphone devices, users tend to uninstall an app after a purchase to make room for those they used more frequently. Myntra relaunched its mobile website not long after, adopting an app-first but not app-only strategy.

Offline versus online

As of 2016, online retail sales just represent 2% of the total retail spending in India6. Due to the innumerable problems faced in reaching new customers, e-commerce players have found it hard to grow in terms of customer acquisition. When it comes to shopping for clothes & jewellery, Indian consumers like to touch and feel their products before making a purchase. Additionally, according to demographic statistics released by Flipkart, consumers above the age group 45, have staunchly resisted shopping online7. In view of these challenges, some of the e-commerce players like Amazon, Flipkart or Pepperfry are planning to or have already launched a physical store in India.

Besides, Indian consumers are highly driven to shop online by discounts and offers. It has become a huge challenge for e-commerce players to attract loyal consumers since most of the consumers shop from the platform which gives them the best discount. Due to this discount war, it has become very difficult for the market players to distinguish themselves in terms of services, as most of them are busy fighting over discounts. This strategy to focus on customer experience will not only help the players to acquire new users but also help in building a loyal customer base.

Last but not least, it is estimated that 70% of the consumers prefer to make cash on delivery (CoD) while shopping online, since majority of Indians are sceptical of doing e-payments3. When the government decided to demonetize Rs. 500 and Rs. 1,000 notes, the CoD orders for the major online retailers fell by 15-30%4. It is a huge challenge for the e-commerce players to attract consumers to their platform since CoD is not only the preferred payment option but also laborious, risky and expensive. To circumvent this problem, e-retailers are incentivising and helping consumers shift to making electronic payments. For example, Amazon allows its consumers to load their gift card balance and avail an incentive of 15% discount at the checkout5.

 

Consumer satisfaction & loyalty : logistics & services as key factor success

Customer loyalty seems to be harder to earn in India where consumers are spoiled for choice. And since the cost of acquiring a new customer is 5 times the cost of retaining one, tending to the customer relationship would be profitable. Unfortunately, the seamless customer journey is not entirely up to the e-retailers to guarantee. Indeed, one of its main pain points is delivery, and different carriers are used for different regions of India. All of them are not accustomed to handling commercial value goods, thus delays, mix-ups and product damages are not uncommon. To tackle this issue, many big players are integrating logistics divisions in their business model, as Flipkart did with Ekart.

Online retail companies need to be innovative and keep on offering unique experiences in order to win consumers’ loyalty. Some of them have already invested in this direction : Myntra acquired a tech solution for virtual fitting room, Limeroad provides online advice from a stylist, Flipkart announced a monthly instalment scheme without paying interests…

As a conclusion, we can say that data marketing will be key for tomorrow’s leaders. To better know customers, better engage with them, anticipate their needs and eventually increase their customer value. Which is a major challenge for a market that is expected to have 175 Million online shoppers by 20208 !

  1. We Are Social – Digital 2016 Report (2016), based on GlobalWebIndex Q4 2015 survey
  2. The Hindu – 22nd September 2016
  3. The Economic Times– 9th November 2016
  4. The Indian Express– 17th November 2016
  5. The Hindu 11th November 2016
  6. Forbes 22nd November 2016
  7. Your Story 30th December 2016
  8. Google and AT Kearney – Digital Retail 2020 (2016)

Avatar de Marie Mallein
Marie Mallein

As a student of HEC, Marie started her internship at Equancy in July 2016. After a first experience in the Customer Marketing Team in Paris, she joined Equancy Mumbai in January 2017 as a Digital Marketing and Webanalytics intern.

Avatar de Ronak Hegde
Ronak Hegde

Ronak joined Equancy India as a junior consultant. Prior to joining Equancy, he graduated from Masters in Communication from Sciences Po, Paris and worked in Social Media Management and Strategic Planning for Tata Nano, SBI Mutual Funds and Reliance Brands Limited

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