E-COMMERCE SCENARIO IN INDIA
INTRODUCTION:
eCommerce is India’s fastest
growing and most exciting channel for commercial transactions. The Indian
e-commerce market is expected to grow to US$200 billion by 2026 from US$
48.5billion as of 2018. This growth has been triggered by increasing
internet and smartphone penetration.
The ongoing digital
transformation in the country is expected to increase India’s total internet
user base to 829 million by 2021 from 560.01 million as of September
2018. India’s internet economy is expected to double from US$125 billion
as of April 2017 to US$ 250 billion by 2020, majorly backed by ecommerce.
India’s E-commerce revenue is expected to jump from US$ 39 billion in 2017 to
US$ 120 billion in 2020, growing at an annual rate of 51 per cent, the highest
in the world.
(Source: https://www.ibef.org as of December 2018).
eCommerce
Services
There is a new trend of emerging eCommerce
aggregators aiming to digitize several offline services to create a convenient
ecosystem for consumers.
Tourism: MakeMyTrip; Goibibo; Yatra; IRCTC
Education: EduKart; Meritnation
Healthcare: Portea; Healthkart
Entertainment/ Ticket booking: Netflix;
bookmyshow
Real Estate: MagicBricks; Housing, 99 acres
Fin-tech: PayTM, Freecharge, PayUmoney,
Mobikwik, PhonePe
E-commerce Sector Composition
Currently there are 1 to 1.2 million
transactions per day in eCommerce retailing. Given below is the split of
sectors according to popularity:
- Electronics: 48%
- Apparel: 29%
- Home and Furnishing: 9%
- Baby, Beauty &
Personal care: 8%
- Book:3%
- Others: 3%
(Source: https://www.ibef.org/download/Ecommerce-March-2018.pdf)
DEVELOPMENTS IN INDIAN
E-COMMERCE SCENARIO:
Flipkart, after getting acquired by Walmart for US$ 16
billion, is expected to launch more offline retail stores in India to promote
private labels in segments such as fashion and electronics. In September 2018,
Flipkart acquired Israel based analytics start-up Upstream Commerce that will
help the firm to price and position its products in an efficient way.
• Launch of Paytm Payment Bank. Paytm bank
is India's first bank with zero charges on online transactions, no minimum balance
requirement and free virtual debit card
• The E-commerce industry in India
witnessed 21 private equity and venture capital deals worth US$ 2.1 billion in
2017 and 40 deals worth US$ 1,129 million in the first half of 2018.
• Google enters India's eCommerce Space
with Google Shopping. Google and Tata Trust have collaborated for the project
‘Internet Saathi’ to improve internet penetration among rural women in India
(Source: https://www.ibef.org/)
Government
Initiatives:
• The Reserve Bank of India (RBI) has
decided to allow "inter-operability" among Prepaid Payment
Instruments (PPIs) such as digital wallets, prepaid cash coupons and prepaid
telephone top-up cards. RBI has also instructed banks and companies to make all
know-your-customer (KYC)-compliant prepaid payment instruments (PPIs), like
mobile wallets, interoperable amongst themselves via Unified Payments Interface
(UPI).
• The Government of India has distributed
rewards worth around US$23.8 million to 1 million customers for embracing
digital payments, under the Lucky Grahak Yojana and Digi-Dhan Vyapar Yojana.
• The Government of India launched an
e-commerce portal called TRIFED and an m-commerce portal called ‘Tribes India’
which will enable 55,000 tribal artisans get access to international markets.
• To increase the participation of foreign
players in the e-commerce field, the Indian Government hiked the limit of
foreign direct investment (FDI) in the E-commerce marketplace model for up to
100 per cent (in B2B models).
• The e-commerce industry been directly
impacting the micro, small & medium enterprises (MSME) in India by
providing means of financing, technology and training and has a favorable
cascading effect on other industries as well.
Domestic
eCommerce (B2C)
The presence of international marketplace
players in India like Amazon, eBay (now being sold to home grown FlipKart),
Alibaba and others competing alongside the domestic marketplace operators such
as Flipkart, Snapdeal, TataCliq as well as with inventory led e-tailers, have
made India’s domestic eCommerce sector highly competitive.
With no major entry barriers and with few
e-tailers the Indian market for eCommerce has grown at a faster pace for the
past three years. Omni-Channel retailers such as Shoppers-stop, Reliance,
Croma etc. have also embraced eCommerce as another sales channel to increase
digital footprints.
In some cases, e-tailers are tying up with
exclusive American brands to sell U.S. products on their platforms.
Additionally, Omni-channel retailers are also importing leading American brands
and selling them via eCommerce.
Cross-Border eCommerce
The U.S. is one of the top ten countries for
cross-border shopping for Indian buyers. Automotive, baby supplies, toys,
clothing, footwear, wearables and accessories, jewelry, watches, cosmetics,
health products and digital entertainment and educational services are some of
the leading categories for cross-border B2C eCommerce. Some of the
challenges restricting growth of cross-border eCommerce are high shipping
costs, import duties and complexities in returns and exchanges.
B2B eCommerce
To tap the huge potential in the B2B eCommerce
market in India, leading B2B companies have started to build their own
platforms for small business owners and traders. More and more companies
and SMEs are buying and selling online and plan to shift procurement
transactions through the internet. Understanding this untapped potential of the
B2B eCommerce industry, the government has allowed 100 percent FDI in the B2B
e-Commerce sector.
NEW Government Regulatory Landscape for eCommerce Foreign Direct Investment
(FDI):
On December 26th, 2018 the Department for
Promotion of Industry and Internal Trade under the Ministry of Commerce (the
"DPIIT"), introduced stricter guidelines that govern foreign direct
investment ("FDI") in e-commerce firms.
Clarification
to the FDI policy:
Setting forth the definitions of e-commerce,
e-commerce entities, market place-based model and inventory-based model, the
policy clarifies that 100 percent foreign direct investment is permitted, under
the automatic route, in marketplace models of e-commerce and no FDI is
permitted in inventory-based models of e-commerce. These changes came into
effect on February 1, 2019.
Equity
Ownership:
The new guidelines bar online retailers from
selling products of companies in which they own stakes. The policy states that
a business having equity participation or control of its inventory by
e-commerce marketplace entities will not be permitted to sell its products on
such marketplace entities’ online platforms.
Inventory
Based or Marketplace Based:
The policy further explains that a marketplace
e-commerce entity shall not own or exercise control over the goods sold on the
platform. Any ownership or control over the goods sold by the market
place entity will render the entity into an inventory-based model. The
inventory of a vendor will be deemed to be controlled by the e-commerce
marketplace entity if more than 25 percent of vendor sales are from the
marketplace entity.
Exclusivity:
The new norms also bar exclusive tie-ups between
e-commerce entities that follow the 'marketplace model' and sellers using their
platform. An e-commerce entity is prohibited from directing a seller to
exclusively sell only on one platform. This move may affect smartphone brands
that till date have exclusively operated as online-exclusive brands on online
marketplaces like Amazon India and Flipkart.
Services Offered by the E-Commerce Entity:
In a marketplace model, the e-commerce firm is
not allowed to directly or indirectly influence the sale price of goods or
services and is required to offer a level playing field to all vendors. That
services offered by the e-commerce entity are to be offered to all vendors on
the platform in a fair and non-discriminatory manner. These services
include, among other things, quick delivery, logistics, warehousing,
advertising, marketing, payments and financing.
Compliance
Certificate:
There is a new requirement for all e-commerce
marketplace entities to furnish to the Reserve Bank of India (the
"RBI"), a certificate along with a report of a statutory auditor,
confirming compliance with the guidelines by the 30th of September every year.
Conclusion:
The revamped e-commerce norms are stricter in
nature and will force online retailers such as Amazon and Walmart owned
Flipkart and Myntra to tweak their business plans and revisit their India plans
going forward.
(Source: http://www.mondaq.com)
Online Beauty & Cosmetics Market in India
The strong growth of organized retail and
eCommerce in India is also creating a demand for more imported cosmetics
products including second tier cities. In general, the Indian consumer is
aware, well-traveled and more exposed and connected than ever before. Consumer
behavior patterns in India are changing as well as Indian consumers have moved
from being traditionally savers to spenders.
The online cosmetics market sees a close
competition between marketplace players like Amazon and Flipkart with beauty
focused online retailers like Nykaa and Purplle.
The online cosmetics market, valued at USD 50
million, is 2 percent of the total Indian cosmetics market. Nykaa, started in
2012, and currently offers over 600 brands in both offline and online
stores. The company plans to increase its offline footprint by
establishing 35 stores across India and targets yearly sales of over USD 155
million by 2025.
The mushrooming of beauty service aggregators
like My Glamm, Belita, Big Stylist, Vanity Cube and portals in the men’s
grooming sector like Beardo and Ustra are also a result of the influence of
internet penetration in India.
Source: https://redseer.com/wp-content/uploads/2017/10/118-Cosmetics-Industry-Report_Final_July2017.pdf
eCommerce
Intellectual Property Rights
The Internet is borderless with minimum
regulation, and therefore protecting intellectual property rights (IPR) on
Internet is a growing concern. There are currently several significant
IPR issues including misuse of trademark rights.
The basic idea behind IPR is
the fact that knowledge is a non-rival good, which can be easilyaccessed by the
public. Without any protection from the laws, imitators can easily reproduce
thetechnology or technique without paying any cost for the research work.
Subsequently, theimitators can offer a more competitive price and gain more
profit than the inventors, at a lowercost. In such a case, the innovators would
not see much reason in investing on research andinnovation. In the presence of
an IPR system, the creators would gain additional profit throughmonopoly
protection and would be more willing to invest in physical and human resources
oninnovation activities.India’s IPR agreement conforms to The Agreement on
Trade-Related Aspects of IntellectualProperty Rights (TRIPS), a legal agreement
between WTO members. However, theimplementation of various IP laws has been
rather lax. Patent or copyright infringement andpiracy in India is not
uncommon. Weakly implemented IPR laws play a part in India’s poorperformance in
R&D, where it accounts for merely 2.7% of global expenditure. India’s
new IPRpolicy seeks to ramp up implementation of IPR laws by building
infrastructural and human resource capacities. India needs a singular IPR arm
for dealing with IP matters, rather than IPR
being dealt by different
ministries and departments. A system which combines strict
implementation and adequate
incentives for entrepreneurs is required. Only then can innovation truly drive
India’s economic progress.
Barriers
to growth of e-commerce
Regardless, there are many
obstacles which seriously hinder the growth of E-Commerce industry. E-Commerce
has the potential to provide many opportunities in a manner unprecedented by
other technological advancements, with its positive impact on trade,
investment, business transactions, and market penetration (Wresch and Fraser
2011). But the conclusion reached by many researchers who have tried to search
for the realization of these benefits in developing countries has been, by and
large, disappointing. According to Molla and Heeks (2007), “the majority of
businesses do not appear to have obtained E-commerce benefits in terms of
expanding their access to markets, improving their reach or linkages to
customers or suppliers, or in relation to cost savings or other efficiency
gains”. The obstacles may vary between
regions but the commonly reported barriers include a severe dearth of
managerial skills requisite to formulate and implement an e-commerce strategy
for business. Internet connectivity with regard to the cost, quality, and speed
of the service provided is another stumbling block while lack of effective
branding and trust issues is another important barrier to e-commerce growth.
The latter has succeeded in pricking the E-Commerce bubble as buyers feel more
secure conducting transactions from renowned companies and brands rather than
from unknown companies online (Travica et al. 2007). Another common obstacle
these countries face is the absence of a sound legal and regulatory environment
for E-Commerce, which acts as a deterrent for both buyers and sellers to
conduct business over the Internet (UNCTAD 2004).
Road Ahead
The e-commerce industry been directly impacting the
micro, small & medium enterprises (MSME) in India by providing means of
financing, technology and training and has a favourable cascading effect on
other industries as well. The Indian e-commerce industry has been on an upward
growth trajectory and is expected to surpass the US to become the second
largest e-commerce market in the world by 2034. Technology enabled
innovations like digital payments, hyper-local logistics, analytics driven
customer engagement and digital advertisements will likely support the growth
in the sector. The growth in e-commerce sector will also boost employment,
increase revenues from export, increase tax collection by ex-chequers, and provide
better products and services to customers in the long-term.
BIBLIOGRAPHY:
https://www.ibef.org/industry/ecommerce.aspx
https://www.export.gov/article?id=India-e-Commerce
https://www.academia.edu/32920051/Ecommerce_in_India_Current_Scenario
http://ijrect.com/issues/vol3issue4/taranjeet.pdf
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