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How will the E-commerce industry in India evolve in 2016?

E-commerce in India has certainly brought a revolution among the people where buying and selling of goods are done via electronic channels. It has witnessed an unprecedented growth of over 60 percent over the last year and has emerged as one of the fastest growing sectors. It has made the life of people easy by offering varieties of brands within a product where the customers could examine/compare the features of the goods or services and finalise the order without wasting much of their time by hopping from shop to shop. Increasing use of smartphones has led to a substantial growth in the e-commerce sector, prompting more young people to shop online. As 2016 has arrived, the outlook for the sector looks even better.

While Flipkart had 23.5 million unique visitors, Snapdeal had 17.9 million in May last year. An annual comparison showed that Amazon had seen over a 142 per cent jump in the number of unique visitors since May 2015 while Flipkart had nearly 80 per cent surge. For the same period, Snapdeal saw a 90 per cent rise in unique visitors. Companies like Myntra and Jabong have targeted young generation for the sale of apparels where the consumer gets the desired apparel at discounted price. The customer delight and satisfaction level have increased. Investors are pumping huge sums of money in profitable e-commerce firms in India in the hope that these companies will gain sizeable market share as more young people with higher disposable incomes will buy in 2016. Logistics, as one of the most important backbones in e-commerce sector should be strengthened to gain the customer loyalty and trust. Some of the customers have reported to get the empty packages or damaged product in the package.

The growth prospect of e-commerce in India is humongous. Also, India is at a nascent stage making it a fertile area for any player who can get sufficient funds and be innovative enough to differentiate yourself from others. Improving customer credibility will involve ensuring timely service, keeping up with commitments (buyback guarantee, replacement in place of defects etc.). Enhancing the user experience which would enable users to access websites freely will help boost sales. This will also involve migrating from online to mobile which will not only reduce website costs but also improve personalized tracking of customers.

E-commerce sector in India has witnessed 34% (CAGR) growth since 2009 and has touched 16.4 billion USD in 2014 and is expected to be in the range of 22 billion USD in 2016. Ecommerce shopping experience in 2016 is expected to have minimised turn-around-time (TAT) which will lead to word-of-mouth publicity. The Current technology is unable to cater to the basic requirements of the technology dependent industry since, there is server crash reported every time the e-commerce portal announces flash sales, which shows a very strong need to revamp the infrastructure and provide break free services to large number of customers visiting the portal. Probably a centralized information network which can share updated information for inventory status, demand schedules and forecasts, shipment schedules and promotion plans among stakeholders of the supply chain will form the backbone of an e-retailer. The use of mobile ordering has increased from 10% in 2013 to 50% in 2015. In fact companies like Myntra have changed their model to mobile app only signifying the changing trend to handhelds.

In 2016, the realm of e-commerce competition will be shifted to deliver ever-shortening delivery timeliness. Negligible or zero delivery prices, doorstep delivery solutions and convenient reverse logistics have become essential elements of differentiation for providers. The key to success for e-commerce in 2016 is an efficient last-mile network to ensure time bound delivery in the logistics chain.

The sector holds tremendous promise in 2016 for current market players as well as for many other entrepreneurs who want to venture in e-commerce sector in the country. Though the e-commerce revolution has taken the country by storm, it accounts for a mere 4% of the Indian retail market at present.

The current Government’s initiative to set up well defined regulatory framework for ecommerce sector will prevent fraud and malpractices in the industry. Also the Digital India program of Indian Government will improve the internet penetration in remote corners of our country. These Government steps will further help the e-commerce firms to gain new customers and expand in the previously unexplored geographies. Currently e-commerce accounts for just 4 percent of India’s retail market and thus holds immense growth potential in 2016 for the current market players as well as for many other budding entrepreneurs who want to make it big in the e-commerce area.

Though e-commerce has taken the world of retail by storm, there are some hiccups of not being able to live up to people’s expectations. But any industry and business have faced these initial issues and they can be sorted out in time with setting up of proper regulations. E-commerce companies should take care of the key hurdles that regularly come in the way of their operation. Then only the industry will be on a different growth trajectory altogether in 2016.

The outlook for sector looks even better in 2016. Along with online shopping, online payments industry is also witnessing a strong growth. E-commerce and payments brands significantly encouraged transition and transactions flow through mobile application as a platform. With increase in internet penetration, adoption of smartphones and lower data rates, the way India shops is going to change completely. As per analysts the online shopping space in India is expanding at a massive scale and the journey is not yet over. This sector holds tremendous promise for the coming years for current market players as well as for many other entrepreneurs who want to make the most of the e-commerce wave in the country.

Indian E commerce companies are moving towards growth over profit. There has been loud noise from small retailers and big retail giants like Future group, Aditya Birla Group etc. against the predatory pricing i.e., by giving deep discounts that other firms cannot compete and are forced to leave the market Increase in growth leads to gain the market share and customers base. It is important for these companies to sustain in the market and also to impress the investors to pump in more money. Moreover, customers wouldn’t be willing to pay higher prices if the companies increase their prices in the long run. The main reason for investing huge amounts in these e commerce companies is that the NPV (Net Present Value) will be positive in the long run. For this to happen, the value of future cash flows should have lesser losses compared to the previous years. Some important aspects that need to be looked in 2016 includes, Government regulations for the e-commerce industry, revamping the IT infrastructure and winning the customers’ trust.

In 2016, e-commerce players see mobile commerce as the most preferred route with mobile wallet as the preferred way of payment. With 4G services expected to launch in 2016, Internet penetration is likely to take a significant leap, which is will give another boost to mobile commerce. The growth till now was driven by rapid technology adoption due to the increasing use of devices such as smartphones and tablets, and access to the internet through broadband, 3G, etc., which will lead to an increased online consumer base. Furthermore, with a demographic dividend (young population, rising standards of living and growing middle class) and rising internet penetration, even more strong growth in ecommerce is expected

Also, the Indian government’s ambitious Digital India project and the modernisation of India Post will also affect the Indian e-commerce sector. The Digital India project aims to offer a one-stop shop for government services that will have the mobile phone as crucial role in delivery mechanism. The programme will give a strong boost to e-commerce market as it will bring the internet and broadband to remote corners of the country which will give rise to an increase in trade and will also present a potentially huge market for goods to be sold. If the above challenges can be taken care of, the industry will be on a different growth trajectory altogether, since they can focus their energies on competing with the global ecommerce giants rather than getting stuck in overcoming these obstacles on a day-to-day basis.

Written By : Vineet Sinha ,PGP, Great Lakes Institute of Management

References/Sources of Information: yourstory. com , gadgets.ndtv. com, indianexpress.com, assocham.org, livemint. com

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