E-Commerce in India- where’s the Tipping Point?

India is a $1.2 trillion economy (2008 estimates) and various studies and reports (let me correct myself there are not many!) peg the e-commerce Industry size between Rs.9, 000-10,000 Crores (i.e. Rs 90 -100 Billion which is about US $ 2 Billion)

India e-commerce Market Size
India e-commerce Market Size

On the other hand US is a $14.2 Trillion with the B2C ecommerce Market estimated at $ 220 Billion end of 2008 and is expected to shrink about 1.5{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} in 2009 and grow about 7{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} in 2010.

US B2C e-Commerce Market Size
US B2C e-Commerce Market Size

It does not take a more than elementary school mathematics to figure out e-commerce to the GDP ratio is not proportionate. Indian economy is about 7{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} the size of US economy and the Indian e-commerce market is only about 1{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} the size of US B2C e-commerce market.
e-commerce has not taken off in India for sure.There are questions abound. Why e-commerce in India not catching up with the other markets? Why a technology savvy population abstaining from the Internet? Is there money to be made in India’s e-commerce space?
Here’s a shocker take out online travel and Indian e-commerce market is about $400 million a mere 0.3{b533f414762ff80097ee09d177cb5141b2a13e37c77cdd72580da9125ed6123c} of the US B2C e-commerce market.

Do the likes of EBay India, Rediff, Indiatimes, Future Bazar, Bigadda.com have a viable business model? ‘Build it and they will buy’ certainly does not work in India. A quick research on Alexa shows no significant increase in traffic for bigadda.com in.com or eBay.in in the last 6 months.

2009 Jan-June Traffic
2009 Jan-June Traffic

Elsewhere in the world various models of online commerce (comparison shopping, community shopping) is being tested. India is still waiting to reach the critical mass. What would be that killer e-commerce format for India?

I believe viable e-commerce models in India need 3 major paradigm shifts. Moving from ‘Caveat Emptor’ to ‘Trust the Consumer’ Mindset, Partnering and not challenging the Local Brands and Coming out of the American mindset.

Moving from ‘Caveat Emptor’ to ‘Trust the Consumer’ Mindset.
In India, unlike the west, Consumer’s Rights and Buyer Protection Laws are non existent. It is very difficult to return purchased goods. This is true for all formats of retail, virtual or real world. Not many stores have defined Return Policies and the default policy is ‘do not trust consumers’. Once a product is out of the store why bother if the consumer is unhappy.
e-commerce formats that go against the norm and ‘Trust the Consumers’ will definitely have an edge.
There are some very simple rules to follow to trust the consumer:

  • Share all product/ service information and avoid ‘need to know’ approach.
  • Look at things from consumer’s perspective.
  • Provide for misuse of trust by a fraction of consumers.
  • Go the extra mile to exceed consumer’s expectations.

Partnering and not challenging the Local Brands.
Mobile Telephony was the success story of the last decade. Organized Retail was touted as the Industry of this decade; however; none of the organized retail brands and formats are in the Green or anywhere close to projected Reach. Reliance Group, Future Group, Aditya Birla Group all included. After the initial euphoria of buying vegetables in Air Conditioned environment consumers are back to buying from the round the corner vendors or cart pushers. I see 2 primary reasons for the reverse migration, the Quality was never addressed the air conditioners went off due to power outages.
In the packaged food category the store labels (sold at discount) and bundled in promotions have not managed competing with the local brands.
This is a not post on the retail formats and I will not dwell further on their business models however e-commerce is a subset of commerce and I believe successful e-commerce models have a learning here. Partner Local brands!

Come out of the American mindset when H1 expires.
Most e-business in India are promoted or run by Successful Entrepreneurs and Professionals of Indian origin who have returned to India after their H1 (or whatever Visa class) expired or their employer saw a goldmine waiting to be tapped in the BRIC nations or when they decided to migrate back to expose their kids to Indian values.
These accomplished Entrepreneurs and Professionals bring with them years of experience in running e-business and try to recreate the success in India without an appreciation of the Indian dynamics. I call it the sub-domain approach. Take www.anyecommercemodel.com add the Tricolor and voila you have a running business www.india.anyecommercemodel.com.
That simply does not work!
Once these models do not succeed and the entrepreneur starts running out of funds they use their Network to rope in a successful back from the US Indian origin Venture Capitalist.
After the PowerPoint honeymoon is over that partnership is a recipe for disaster. 2 individuals that have multiplied capital 100x in their earlier ventures more often than not do not have the willingness and skill to nurture a 5x business in India. If only these guys could work on www.indiacentricecommercemodel.in !

To conclude I believe, model that addresses these three challenges will certainly manage to address the other stated drawbacks of the Indian system: ‘consumer’s want to see touch and feel’, payment infrastructure, broadband availability etc. The e-commerce entrepreneurs are experimenting with various formats and technologies. I believe the Tipping point is not very far off.

Bhaskar Thakur

Digital Transformation & Marketing Leader , Growth Enabler, Recreational Runner, Learner & Seeker. On this blog I share my perspective on Technology, Entrepreneurship, Startups, Growth, Health, Running and Biking.