eCommerce in India

Promising Signs for eCommerce in India

Category: International Business

Despite its ranking as the world’s second most populous country, India is not regarded as an eCommerce powerhouse. Accordingto KPMG and the Internet and Mobile Association of India, India’s eCommerce market clocked in at roughly $13 billion last year, with online travel dominating 70% of total consumer transactions. Compare this to China, whose eCommerce market topped $53 billion in 2013 and is expected to account for 50% of all Chinese retail by 2020, according to China’s Ministry of Commerce.

Why hasn’t India followed in China’s footsteps? You might think that with over 17% of the world’s population, eCommerce would be booming in India. A few major factors have hampered growth. First, hundreds of millions in India have no internet access. Even in areas with access, many cannot afford a device suitable for online shopping. Finally, India’s government prohibits direct foreign investment (FDI), which limits how foreign companies can expand and operate.

Business in India

Rather than sell goods to consumers, India’s current model is concentrated around online marketplaces where buyers and sellers caninteract. The majority of the revenue comes from commissions paid by customers of the sites. The two dominant players in these marketplaces for locally sourced goods are Flipkart and Snapdeal, though Amazon has launched its own marketplace in India and worked aggressively to tie it to social media platforms such as Twitter.

India is poised, however, for explosive eCommerce growth. Amazon isn’t the only one lobbying hard and betting big on the futurein India. Accel Partners, Chinese eCommerce giant Alibaba, Walmart, and eBay have all invested in eCommerce ventures. In the past year, $936 million has been invested in Indian eCommerce from partners around the globe.

India’s new Prime Minister has signaled an interest in easing restrictions on FDI, and the adoption of mCommerce (mobile commerce) friendly smartphones has grown. Though a lack of widespread credit card use may slow growth somewhat, there are promising signs that third-party electronic wallet startups may ease the challenge. Demographically, 65 percent of India’s population is under 35, and the projections for potential sales growth infashion and electronics categories are staggering.

If you’ve previously discounted India as a market for your company, now might be a good time to consider positioning yourself to takeadvantage of a potential boom. Even though English is spoken widely throughout the country, translation into Hindi and prudent localization should be priorities for any company looking to expand.

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