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Explained: Why e-commerce in India is growing fast?

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The contemporary business world is shaping itself digitally in various aspects and today, the e-commerce industry is making all the noise. The liberty to purchase almost anything from your internet-enabled mobile device or computer with just a few clicks have made people ditch the conventional shopping to a great extent. Startups and big industrial names, many are venturing into the e-commerce domain.

With an expected 564.5 million internet users and 329.1 million digital buyers by 2020, India stands as one of the most lucrative markets in the globe for e-commerce. The acquisition of 77% stake in the homegrown e-commerce company, Flipkart by Walmart Inc that took place a year ago is a proven example of the same. The share of the Indian online retail market in 2020 is predicted to be at 5% of the total retail industry of India. This clearly shows that a large chunk of the retail market is still untapped by the e-commerce industry.

Spike in internet users is changing the landscape of e-commerce in India

Increased smartphone usage, high internet penetration, and affordable internet have played a pivotal role in shaping the e-commerce industry as we see it today.

Internet users in India from 2015 through 2018
Year Number of users (in millions)
2015 259.88
2016 295.39
2017 437.40
2018 483.00

As evident from the table, internet users went up by 13.66% from 2015 to 2016. The percentage change was 48.07% from 2016 to 2017 and for the subsequent year, the percentage change was 10.42%. The abrupt increase in internet users as observed in 2016-2017 can be attributed to Reliance Jio which was launched on September 5, 2016. Within six months of Jio's launch, India saw consumption of over 1 billion GB of data each month, making it the highest data user in the world. Surpassing the US, India became the second in terms of app downloads, lagging only behind China.

To minimize the internet gap in rural India, the Indian Space Research Organisation (ISRO) has launched satellites GSAT-19 and GSAT-11 in 2017 and 2018 respectively and GSAT-20, the third in a row which is set to be launched in September 2019. This will enable faster and cheaper high-quality internet connectivity in remote locations.

Numbers suggest a high growth in Indian e-commerce in the coming years and India is expected to surpass the US to become the second largest E-commerce market in the world by 2034.

Let's analyze some numbers. The population of India in 2018 was 1353.5 million and that of the US was 327.21 million. If we look at the number of digital buyers for the two countries in the said year, then the numbers stood at 224.1 million and 258.9 million respectively. This indicates that only 16.55% is the share of digital buyers of the total population in India whereas it is 79.12% for the US, which clearly shows that there is a huge gap between the total population and digital buyers owing to the less internet penetration in India. The estimated population of India and the US in 2024 is 1443.06 million and 340.98 million. Given the population factor and the efforts by the government and the e-commerce industry, bridging this gap will give India leverage over others.

The B2B e-commerce industry is hot on heels of the B2C e-commerce industry

Lately, the e-commerce market is seeing a transition. New players are looking beyond the B2C facade and are venturing into the B2B domain.

In a country where data usage is skyrocketing and people are switching to app-based solutions for all their buying requirements, manufactures and SMEs/MMEs are ditching the traditional bulk transactions. India has 42.5 million SMEs/MMEs who are slowly slipping into the e-B2B domain.

The coming years will see more than 80% of manufactures spending immensely on e-B2B.

Backed by technology and the fact that in India 100% Foreign Direct Investment (FDI) is permitted for the B2B e-commerce industry, new players and startups are heavily investing in the said domain. The sector is also driven by the advancement in artificial intelligence and machine learning algorithms which help in identifying the buyer behaviour.

In-store delivery along with lower logistics cost, a variety of products to choose from, and discovering sellers with ease are the advantages of buying from e-B2B.

From the e-commerce giants such as Amazon to startups like Udaan, Shadowfax, Delhivery among others, every market player is eyeing on e-B2B. Amazon Business (B2B) which goes by the tagline “sell in bulk to business customers” is a B2B marketplace in India where SMEs (Small and Medium Enterprises) can buy products in bulk.

Last June, Walmart India activated unified payments interface (UPI) for all it's registered members. The move was to boost online transactions and to make direct and secured payments through bank accounts without the need of sharing bank details.

Udaan, which raised $225 million in a series C , is a platform for a better connection between small and medium-sized manufacturers with online retailers. It also provides a unique amalgamation of logistics, payments, and technology support. What started as a logistics platform that connected buyers and sellers in the category of staples, electronics, and apparels, later established itself in the B2B supply business. Today, it caters to 1,80,000 buyers and sellers. As a next leap in the company's business plan, they have started to source manufacturers and sellers in smartphones, electronics, and apparels from China.

Gearing up for the challenges ahead in the e-B2B sector

Some key challenges include quality issues and already existing relations of retailers with offline distributors. As the e-B2B market is expanding, so are the number of new players in this segment. But that does not simply imply that the numbers are following an upward trajectory.

Instability and sudden closures of companies is a major challenge for retailers. Once crowned as the highest funded Indian e-B2B company, Just Buy Live, that raised funding of 119.8 million in 2017, has collapsed and operations have shut down since a year. There are companies who are at the verge of shutting down or have suspended ops temporarily as they are waiting for fresh rounds of funding which drastically impacts the trust factor.

The author is CEO .

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Shivansh Pandey
Shivansh Pandey
Shivansh Pandey is CEO of Nuclay Solutions
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