WITH nearly 100 million broadband and mobile internet users in India, e-commerce is all set to take off in the country. Consequently, several leading international e-commerce players are eager to set up a presence in India.
E-commerce transactions are growing at a breathtaking 50 per cent annually, according to the Internet and Mobile Association of India (IAMAI). Mehul Gupta, associate vice-president, IAMAI, points out that net commerce in India has evolved over the past decade in terms of magnitude. “The total net commerce market of India is expected to grow to Rs.465.20 billion ($10.35 billion) by December 2011,” says Gupta. “It has come a long way since 2007 when the market size was just Rs81.46 billion.”
Of course, the travel and tourism sector accounts for the bulk of e-commerce in India even today. But e-retailing is expanding at a brisk 30 per cent annually, though it accounts for less than 10 per cent of e-commerce at present. Sale of jewellery, watches, cosmetics, apparels and shoes account for nearly 20 per cent of e-retailing.
Besides travel and tourism, job and matrimonial sites are also getting popular. So too are sites focused on the real estate sector.
ViziSense, an online audience and ad measurement platform, notes in a recent report that the increase in internet usage has seen a 30 to 60 per cent growth of portals in 20 categories over the past year. These include email, mobile, e-commerce, travel, online gaming and B2B.
“The internet user base grew by 35 per over last year and internet penetration combining broadband and mobile internet have touched over 100 million users,” says Amit Bhartiya, business head, ViziSense. Gmail, according to him, has emerged as the most popular email provider with 32.7 million users, overtaking even Yahoo mail. However, with 39.8 million users, Yahoo.com topped the website category. Social networking sites including Facebook and Twitter have also seen huge growth..
The success of B2C is attributed to the growing confidence among consumers, who order for products from reliable websites, knowing they are using safe sites and payment gateways. The strengthening of the payment gateway systems — with the introduction of second factor authentication and one-time password by the Reserve Bank of India — have also contributed to the growth of e-commerce transactions.
In fact, the government is determined to drive financial inclusion by means of digital money (DM). K. Sivaraman, general manager, department of payment and settlement systems, RBI, says: “We are determined to provide all kinds of support to ensure financial inclusion growth. What is needed presently is that consumers should gain confidence in digital money to adopt it.”
Indeed, DM is increasingly being seen as a move away from cash to a cashless economy. Says Kamaljit Rastogi, head, mobile strategy and international business, Financial Inclusion Network and Operations Ltd (FINO): “Various problems have cropped up regarding cash including counterfeiting and black money. This gives us an opportunity to start digitising money, which would be the beginning of a move towards a cashless economy.”
THE huge potential for growth for e-commerce and DM has started attracting global players. FINO, for instance, recently saw global private equity fund Blackstone Advisors invest Rs1.5 billion in it. FINO, which has a customer base of 35 million and 15,000 transaction points across 24 states, was promoted by top private lender ICICI Bank, public sector bank Corporation Bank, and Hong Kong and Shanghai Banking Corporation, among others.
Europe’s leading online payment service provider Ogone is also planning to make a foray into India, possibly looking at acquiring a local player. Currently, the e-payment space in India has attracted banks including ICICI, HDFC and Citibank — who dominate the e-commerce gateway business — besides independent firms including BillDesk, CC Avenue and EBS.
But analysts point out that the e-commerce backend space needs to be strengthened to meet the growing B2C segment. Ogone, which is also open to the idea of a collaboration with an Indian partner, sees great potential in managing online payments, says a spokesman.
eBay, the global online auction and shopping website, which is also ramping up its presence in India, operates PaisaPay — an Indian version of its international PayPal — which has partnered BillDesk for its payment gateway.
But most importantly, Amazon.com, the world’s leading online firm, is also making plans to set up operations in India. The company, which operates a few software development centres in India, has started hiring top-level executives for its India operations, it is learnt.
Similarly, up-market retailer Macy’s Inc has also extending its e-commerce services to India — besides several other countries — recently. Shoppers in India will be able to buy products from Macys.com and Bloomingdales.com, sitting at home. “International shipping will enable Macy’s to build upon its existing customer base beyond the US by exposing our product offerings abroad,” points out Kent Anderson, president, Macys.com. “In 2010, non-US-based shoppers accounted for 36 million visits to macys.com; the prospect of satisfying the demands of this consumer is an exciting business opportunity for us. It also provides Macy’s with a global platform on which to build our reputation as a source for great fashion and value.”
Another international funding firm, Tiger Global, has invested $6 million in online Indian jewellery portal, CaratLane, in its second e-commerce investment recently. The global PE major had earlier invested $20 million in books-to electronics e-retail venture, Flipkart.
CaratLane will use the funding to expand its national footprint. “We want to strengthen our back end and invest in marketing and brand building,” says Mithun Sacheti, the company’s CEO.
Earlier in April, Tiger Global, along with IDG Ventures and Indo-US Venture Partners, invested $14 million in e-retailer Myntra. They also invested in online electronics retailer Lets-Buy and in online babycare products retailer BabyOye.com.
WHILE the international majors are only now realising the potential of e-commerce in India, several domestic giants are consolidating their position. The Indian Railways Catering and Tourism Corporation (IRCTC), a subsidiary of Indian Railways, launched its portal way back in 2002, and it retains its position as the largest e-commerce portal in the country.
The site, which sees online transactions of a whopping 10 million every month, has been recording a growth rate of 45 per cent every year. Indian Railways has now decided to start offering e-tickets on its own portal, catering primarily to individual passengers – unlike IRCTC, which sells tickets to agents as well. Travel agents have allegedly acted in concert in the past, blocking seats especially of trains on key routes, much to the annoyance of ordinary passengers.
State government transport operators are increasingly selling their tickets online. The Karnataka State Road Transport Corporation is a leader, having introduced online booking a few years ago. The Maharashtra State Road Transport Corporation introduced online booking services last year, which has proved to be extremely popular in sectors such as Mumbai-Pune.
Another hugely popular e-commerce site is mjunction, a joint venture between state-owned steel giant Steel Authority of India Ltd and private sector behemoth Tata Steel. The B2B site conducts e-auctions of steel and coal, offering the best price for products to both public and private sector companies.
According to Viresh Oberoi, CEO and managing director, mjunction, the value of transactions has jumped from less than Rs1 billion 10 years ago to Rs250 billion.. “We are the largest e-marketplace for steel and have transformed the supply chain in coal through e-auctions for Coal India and its subsidiaries,” says Oberoi.
“Our core competence has been in price discovery and buyer discovery for several companies.”