Currently, it is estimated by Gartner that the Indian e-commerce market will reach as high as USD 6 Billion by the year 2015. This implies that if we compare the e-commerce market with the statistics from the year 2014, there is a substantial growth of 70%. It is safe to say that India is slowly becoming like the US in the area of e-commerce.
It is stated that India has started doing well in the market of e-commerce because of the growing number of people who have access to mobile Internet. Broadband usage has increased by about three times in the last two years, which clearly shows how important broadband has become to the common people now. According to Forbes, India has around 243 million Internet subscribers and, believe it or not, this has surpassed the number of Internet users in the US!
On the other side of the world, according to the latest stats, the retail market of e-commerce in the US will keep on growing till the year 2018. Everyone has a mobile phone these days and arguably more than half of the mobile users in US use a smartphone and almost all of those smartphone users have Mobile Internet enabled. Hence, they are always connected and have access to e-commerce sites very easily. This is the most important contributing factor in the growth of the global e-commerce market in the recent times.
A user in US makes an average amount of 6 times more online transactions than that an Indian user makes, even though the frequency of buying among online shoppers is almost comparable. The difference in the life cycle maturity of the consumers is connected with the level of maturity e-commerce segment has attained in the two countries.
Since I have gotten an opportunity to be directly involved in both the markets, some prominent contrast points have emerged, at the same time there are several similarities as well. Here is everything that is clear
India Loves Cash on Delivery (COD)
Image Source: India Today
Cash on Delivery is an Indian thing. US consumers mainly transact online using Credit Cards or through PayPal. Indians are known to be price sensitive.Even though with heavy discounting e-tailers are trying to lure them to buy online, consumers are still wary of making prepaid orders.
The situation is different in US. Even though the discounting games continue, users generally go with prepayment. This is also because the penetration of credit cards and electronic payments is highly evolved in that market, while in India, despite the estimated 1.252 billion strong population of India, only 18.8 million credit cards existed in the country, with approximately 331 million debit cards till last year.
There is a need for the Government to actively take initiatives to take India to being a less cash dependant society. Also, since the popularity of CoD is directly dependent on the trust issues consumers have, the online retailers need to pay more attention in delivering an excellent service instead of spending most of their budgets on marketing.
Consumer Driven Excitement for Shopping Festivals
The trend of mega online shopping festivals started in the West. From offline trends of Macy’s Day parade and Black Friday to taking these festivals online, and creating further new trends like Cyber Monday, US market has seen it all. The main reason behind this is the frenzy that genuine offers create among the consumers.
India is still naive, even the three editions of the Great Online Shopping Festival have not been able to make the impact they were expected to. The festive season of Diwali is a time when Indians indulge in spending, and while the Indian retailers were busy creating their respective versions of ‘mega sales’, US based Amazon was the first to step on this opportunity with ‘Diwali Dhamaka Sale’. Once again, Indian retailers need to learn what excites the customers.
Also, the consumer shopping behaviour is different in the two countries. Americans line up overnight before the store launch of a new iPhone.This is a trend that doesn’t happen in India. Black Friday in US has been known for consumers getting even violent to grab the best deals in the offline stores, whereas in India the maximum we will see is a small group of people lining up outside a store in a mall waiting patiently to get in.
What Do People Buy Online
Off late, there has been a lot of news of people buying real estate and even automobiles online in India. But in general, Apparel and electronics remain the most popular categories people buy online, and the same is seen in the US as well. These two categories dominate both the markets.
However an area where India is lacking is online grocery retail. Grocery retail and logistics is highly evolved in US. In India, it was a taboo, and wasn’t touched for a long time even though the sentiment was strong. Players are emerging now in this segment, with startups like BigBasket, LocalBanya etc. and mature players like Reliance Fresh taking the lead.The space has only now started to get traction in the country.
It is taking roots, but it is nowhere as near in popularity as it is in the US. The local Indian ‘banya’ is still stronger than online stores. The unorganised retail in India is an area where the e-commerce would be able make a difference and eventually take over.
Logistics, Regulations and More
Image Source: Cerasis
E-Commerce logistics is an interesting differentiator between the two markets. There are many features specific to each of the geographies. For instance Cash on Delivery, as mentioned above, is something that is unheard of among the American consumers. And even hourly delivery that players like Myntra etc. were practising in certain metropolitans, Amazon US is now trying experiment with faster delivery methods like drones, using bikes, cabs etc.
The logistics infrastructure is still not up to the mark in India. While India Post is doing a great job in helping the e-commerce players, no dedicated e-commerce company has been able to scale up its operations to reach all the postal codes. But then again, the low Internet penetration in India, 18%, as against 87% in US, is a big hindrance. The dedicated logistics companies won’t see a scope to scale up, unless there’s a pan-India demand for e-commerce.
When it comes to technology, site crashes, issues in ERP systems etc. are commonly heard things in India. Whereas in US, the technology is very strong.
Also, the Government bodies in India haven’t yet matured to the online businesses that are operational. There hasn’t been any clear guidelines for FDI until recently, even there the Government has decided to treat both online and offline retail alike. Some of the other online marketplace keeps running into warehousing policy issues. The heavy discounting is another questionable area, since the Government has clear guidelines for Maximum Retail Price, there is no lower bar set.
And not just the Government, the online players too don’t have a seamless system setup. There have been cases of online shoppers complaining aboutgetting all sorts of random things from reputed marketplaces instead of what they ordered, whether the sellers are at fault or the logistician, it is not clear. Also, unauthorised selling of many consumer brands is another area of concern whereonline marketplaces lack regulation. This is not seen in the US. While there are a handful of leading marketplaces there, their systems have been well-established.
Affiliate Marketing Scenario
The couponing and cashback industry in US is mature. In India, the culture of online affiliate marketing got a boost when Amazon entered last year. The company came with an experience from US, and they wanted to keep the similar model and hence embraced affiliate marketing here as well. The other online retailers and marketplaces followed its lead, and hence the couponing and cashback websites started flourishing.
In US, large players are more evolved.They don’t ridiculously mark down prices and coupons and cashback sites are more prominent there. The cashback sector is highly competitive, unlike in India. Rakuten’s acquisition of American affiliate marketing companies like Ebates, Popshops etc. shows the level of intensity these businesses are creating there.
E-Commerce and the Retail Projections: What does the Future Hold?
According to the latest report by Forrester, the e-commerce sales across thirty retail categories for the year 2014 is expected to be 294 billion dollars and this number is expected to grow more, to around 414 billion dollars by the year 2018.
With the Internet ready to provide a huge list of products and a lot of variety too, a potential buyer can easily compare the prices and the items to make a final choice with satisfaction and content. The easy access of mobile data provides a great boost to the online sales in every aspect there is. And not only for shopping purpose, mobile devices are also used highly for ordering food and booking modes of travel.
US already has some very firm and established e-commerce sites like Amazon and Walmart and Indian firms need to hurry up, if they want to catch up in this race of online retailing. It needs to be mentioned here that Amazon opened shop in India just last year and their CEO recently pumped in $2 billion into its India operations, so as to wage a tough fight against the indigenous players like Jabong, Myntra, Flipkart and Snapdeal in the Indian e-commerce domain. However one major reason that is deterring the emergence of a single leader is the diversity in the country. India has always been spoilt by choices. Diversity among customers, leads to diversity in demands, and to cater to that, diverse businesses are needed.
The current Indian Modi government also seems to be ticking the right boxes, as far as e-commerce is concerned. India has the means and opportunity to increase the profit and revenue that is generated through the digital media. More and more people are in the favour of buying a smartphone or a tablet and that ensures a great future for India in the field of digital economy.
About the Author:
Ravitej Yadalam is the CEO and Founder of Pennyful. In 2009, he graduated with a degree in Electronics & Communications Engineering from R.V. College of Engineering in Bangalore. In 2010, he launched Pennyful.com in US, as a part of wholly-owned subsidiary, Eze Get Online Inc. (Wilmington, DE). The success of the cashback site in U.S. lead to the launch of Pennyful.in in 2011.
Disclaimer: This is a contributed post. The statements, opinions and data contained in these publications are solely those of the individual authors and contributors and not of iamWire and the editor(s).
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