Business
China's e-Commerce market is 80 times larger than India's
By
By Devanik SahaNew Delhi, June 17
Retail e-commerce sales in India
are expected to reach $17.5 billion (Rs.105,120 crore) by 2018, from
$5.3 billion (Rs 31,800 crore) in 2014, according to data analysed by
eMarketer, a digital-research firm, but only two of 10 internet users in
India shop online.
India’s e-commerce market is intensely
competitive, with US giant Amazon establishing its presence in India in
2013 and Alibaba, the Chinese giant, planning to start selling by August
this year. Flipkart, India’s largest e-commerce firm, recently raised
$550 million (Rs.3,300 crore) at a valuation of $15 billion (Rs.90,000
crore).
Despite having the third-largest internet user base in
the world with 200 million users at the end of 2014, India does not
feature in the top 10 e-commerce markets in the world, according to an
eMarketer report. The reasons centre on low Internet reach, slow
internet speeds outside the metropolitan cities and poor customer
services.
India’s e-commerce sales in 2014 were $5.3 billion
(Rs.31,800 crore) -- 80 times smaller than China’s $426.26 billion
(Rs.2,557,760 crore) and 58 times smaller than US’ $305.6 billion
(Rs.1,833,900 crore).
“If you look at Japan, China and US,
e-commerce became popular as early as 2002-2003. It has taken them about
12-13 years to reach where they have reached. E-commerce really took
off in India only in 2012-13. It will take India also that much time to
reach there,†Rajnish (he uses only one name), a technology expert,
said.
China and the US accounted for more than 55 percent of
global internet retail sales in 2014. China’s growth over the next five
years will widen the gap between the two countries. China will likely
exceed $1 trillion (Rs.6,000,000 crore) in retail ecommerce sales by
2018, accounting for more than 40% of the total worldwide.
Globally,
retail sales reached $22.492 trillion (Rs.134,952,000 crore) in 2014
but retail e-commerce sales stood at $1.316 trillion (Rs.7,896,000
crore, 5.9 percent of overall retail sales).
E-commerce sales
are expected to increase 89 percent to $2.489 trillion (Rs.14,934,000
crore, 8.8 percent of overall retail sales) in 2018.
Digital-buyer
penetration -- a measure of digital reach -- is a major factor in
determining the success of retail e-commerce sales. India’s
digital-buyer penetration was quite low at 24.4 percent in 2014 as
compared to the global average of 41.6 percent.
The UK leads the
world with 88% penetration. Ironically, China with 55.2 percent and US
with 74.4 perent penetration do not feature in the top five. Indian
e-commerce has a long way to go.
“E-commerce in India still has a
lot of friction,†Rajnish said. “Till that is solved, it will be hard
for penetration to go beyond 30 percent. For example, India has very low
credit-card penetration and the cash-on-delivery (COD) model is why
Flipkart really took off.â€
People above 35 are not very
comfortable using their debit card online. PayTm and others solve this
problem but there is a lot of friction.
“I use PayTm for Uber
and it is still a process that has friction. ?In US, the return policy
is very generous. I bought a coat from Amazon in the Bay area; it ended
up being the wrong size. My experience of changing to the correct size
was very seamless. When I bought a down jacket in Bangalore, and it
ended up being the wrong size, getting the right size was really a
painful experience,†said Rajnish.
That view is echoed by
Paritosh Sharma, an advisor to tech startups and an entrepreneur with
PayUMoney, a digital-payment platform.
“Digital buying has an
attached expectation to it. I place the order and it should appear in
front of me over the next two or three days. In many cases this does not
happen. Also, in a lot of cases (especially in Tier-2 and Tier-3
cities) in India, if you get a product that is not of the exact quality
that you ordered, returning it is a major problem. Most people, hence,
prefer what’s available in a physical retail store,†Sharma said.
There
are two more reasons for low online sales, said Sharma. First, the
internet infrastructure in India is poor. If one steps outside city
limits, you automatically are shifted from 3G to an Edge (a lower-speed)
connection, deterring buyers.
Second, lack of good service and
support. While most Indian e-commerce companies are sprucing up their
support via phone and digital media, it’s quite haphazard. Most
companies still lack processes to ensure customer satisfaction and
trust.
(Devanik Saha is a freelance journalist. In arrangement
with IndiaSpend.org, a data-driven, non-profit, public-interest
journalism platform)