E-commerce in India – Present and Future

Today, the market place is flooded with several e-commerce options for shoppers to choose from. A variety of innovative products and services are being offered spoiling customers for choice. Online shopping is no more a privilege enjoyed by your friends and family living in the US or UK. Today, it is a reality in India. In the last couple of years, the growth of e-commerce industry in India has been phenomenal as more shoppers have started discovering the benefits of using this platform. There is enough scope for online businesses in the future if they understand the Indian shopper’s psyche and cater to their needs.

Changing the game

Indian e-commerce industry has evolved over a period of time with innovations that have changed the rules of the game globally. Cash on delivery (COD) is one such example. In a country where credit card penetration is much lower than other developed markets and where e-commerce companies are still working hard to build trust among shoppers, introducing cash on delivery has been one of the key factors for the success of the segment. At present, COD is the preferred payment mode for close to 55-60% of all online transactions in the fashion and lifestyle segment in India.

COD is here to stay owing to its convenience and its cultural affinity and will be a major part of payment mechanisms for at least the next four to five years. Executing COD efficiently and painlessly for the customer is critical to the success of any e-commerce player in the country.

Delivering experiences

Besides COD, e-commerce players need to focus on customer experience as a means to build trust and confidence. Customer experience encompasses every interaction a customer has with your service from placing an order to interacting with your customer service team, to the actual delivery experience.

Providing a great delivery experience is one of the core aspects to delighting customers. This doesn’t necessarily mean constantly pushing the frontier on faster deliveries. Being a day behind the fastest in the market isn’t a big deal, but trust, consistency and reliability are more important. The more faith the customer has in your delivery service, the more likely he is to buy again. Delivering a good experience is critical not only to ensure repeat purchase from a customer, but also for building a good brand image and word-of-mouth publicity.

Growing the base

Online shopping has seen a lot of traction in the last 12-18 months. India has almost 130 million online users at present, out of which as many as 10% are engaging in online transactions. The online user base is expected to cross 300 million in the next 2 – 3 years and a larger percentage of people are expected to transact online by 2015. This large base will provide vast scope for e-commerce businesses to establish themselves in India.

Growing opportunities

Cities beyond metros are in the limelight for all the good reasons. On an average, almost 50 – 55% of our business come from tier 2 and tier 3 cities and I believe this ratio is similar across other ecommerce companies in the country. With metro markets reaching saturation, I believe tier 2 and 3 cities are going to be the biggest drivers for ecommerce businesses in India in the not so distant future. Building a robust supply chain is critical to efficiently fulfilling orders from these cities and tapping their full market potential.

The e-commerce industry is growing at a rapid pace and changing the dynamics of the retail industry. In the coming years, e-commerce is expected to contribute close to 8-10% of the total retail segment in India. This growth is bound to continue provided e-commerce companies focus on innovating, building strong technology infrastructure and delivering the best customer experience.

(Mukesh Bansal founded in February 2007 with a vision of creating India’s largest on-demand personalization portal. Having grown consistently, the company expanded into fashion and lifestyle retailing in December 2010.  He has over 14 years of experience in multiple early stage start-ups in Silicon Valley [NexTag, eWanted, Centrata, newScale] where he has held various senior management positions in Product Management, Marketing and Product development.)

Meet Mukesh Bansal at Internet Retail Expo 2013


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    Very nice read and there is no second thought about the fact that COD has changed the way people think about online shopping. Also being consistent and reliable is the key to hold onto your customers for ever and ever.

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    Good Post, however this could have been a much more detailed article. Mainly because it’s coming from one of the pioneers of Indian e-commerce scene. Totally agree that future of Indian e-commerce sector is going to be huge, however I personally feel that lot of e-com sites in India are not functioning the way they should be and that is creating a lot of friction for customers to switch to online shopping.

    Thanks for sharing this.

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    It really is a great idea and I will have a trial of this idea as soon as I get the pattern. I got to read some excellent stuff here. Thank you for constantly posting so many useful tips. I’m wondering how considerably you attempt to get these excellent informative web pages. Thank you very much!

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    Looking forward to see this :- “The online user base is expected to cross 300 million in the next 2 – 3 years and a larger percentage of people are expected to transact online by 2015”

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    eCommerce in India would evolve now. But differently. Market places are going to take back seat in coming years. And brand e-commerce is going to emerge where people can buy products confidently and have great experience from the brand eStores. They experience Brand even in their ONLINE buying.

    The eCommerce in India is changing and changing very fast.

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    The proliferation of e-commerce retailers is a natural step in Indian economy. Moreover, since it is a very big market, there are immense opportunities for e-commerce players. I have shopped from various retailers like Myntra, Infibeam etc and The one thing that strikes my mind is that the e commerce companies have to adopt to changing needs frequently so that the loyal customers always stay loyal. It’s very easy to change preferred companies since there is no physical interaction. Still, these online retailers bridge the gap between rural regions and urban lifestyle. The Indian e-tailing is going to explode with options since there is a huge opportunity to exploit the middle class choices through online sales. All the best to the Indian e-tailers. I want to see an Indian e-tailing company grab a global market share.

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    We supply Books, Software, DVD’s to different e commerce Market places in India and South Africa. Both are very fast growing e commerce market, but the respective Government’s Policy are the biggest barrier. The biggest problem, Market Places currently faces is Break even, which is obtained after long painful time. A little support from the Government and the Banks could help the Industry.

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    I run an online gadget store – hitplay and can tell you, more than anything in this industry, it’s mainly about how much money you’ve got to sell stuff vs. how much you make. Everyone’s been talking about how the industry is growing, but you probably already know the number of companies that have gone bust in a year’s time. The eCommerce industry runs on valuations based on assumptions and not cash. In fact, most of the big eCom sites run in loses year after year, but have yet got high valuations. That’s the present situation.

    The future of this industry depends on how much real money you make on sale along with what your company is valued at, which equals to being sustainable. You need both to be a big hit.

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      Don’t mind the astronomical valuations that you come across – I’ve seen and done some of these calculations myself for some eComm startups – they’re valued at least X2 or in some cases X5 times their actual value. The bottom line for any eComm startup is this simple TEST – “you may not make any profit OR revenues; but are you losing money at the “unit-level transactions” in spite of funding, discounts and offers”? If the answer is YES – chances are you will go bust – sooner or latter.

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    I completely agree with Mukesh Bansal, that till now ecommerce is been driven by increase in internet traffic and some innovations. But now its time when, ecommerce company will have to understand needs to people in terms of product. Ecommerce will have to move from ” Discount ” driven approach to ” Selection & Service ” driven approach.

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      Ecommerce will have to move from ” Discount ” driven approach to ” Selection & Service ” driven approach. –> completely agree; but that’s where our “Indian” blood comes into play. Recently one of my friends shifted loyalties from Flipkart to another ebookstore; since the latter was giving 11/- more discount than the former; such things are unheard of in the west. 🙁

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    I agree…also as much as COD is a much needed payment/logistic solution for Indian ecommerce, there is indeed an urgent need to build in ample efficiencies in the COD operations…ecommerce companies are struggling to have their payments reconciled and cleared from the logistics companies on a timely basis. This adds to the cost of transactions and burdens the ecommerce companies…

    Bala Unni
    GTM Support Solutions Pvt. Ltd.

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    Good article – but extremely shallow.
    These are the good points – the bad ones are those preventing eCommerce companies making profits, even breaking even at the unit-level transaction levels. Extremely poor loyalty amongst customers, practically zero USP for most players, and extremely high (Rs.800-2000) CPAs for first time buyers – practically makes – running a B2C portal a non-profitable venture in India; for the first decade or so. Does most companies have enough funding to last so far? I don’t think so. Thus, we see either companies dropping off, or getting laterally acquired (forced by the Investors) with the industry/category leaders. Yes, the basket size of eRetail, which is currently pegged at 10million is increasing, but extremely poor when compares to over 100million in China and over 800+million in the US.

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