New Delhi: India's digital commerce market may touch the $128 billion mark in 2017, up from the current level of $42 billion, a new study has claimed. The market has already shown a steady growth from $4.4 billion in 2010 to $13.6 billion in 2014.
Increasing mobile and internet penetration, m-commerce sales, new payment options, exciting discounts and the push into new international markets by e-businesses have been cited as the major factors behind the exponential growth in the report titled “Future of e-Commerce: Uncovering Innovation” conducted jointly by ASSOCHAM and Deloitte.
The study found that merger and acquisition deals such as Softbank's $627 million deal with Snapdeal, Flipkart's acquisition of Myntra for $370 million, Ola Cabs acquisition of TaxiForSure for $200 million coupled with extremely high valuations of the e-commerce giants is a sign that the sector is heating up.
On the other hand, the report also questions the sustainability of sky rocketing valuations despite showing no signs of profitability. “Global players like Amazon and Alibaba have deep pockets to rely on their parent companies for continuous funding support. The homegrown players would definitely need different metrics to preserve the investor confidence build in the sector,” the report points out.
The report also highlights how big retailers have sharpened their focus on digital strategies in order to leverage online platforms. “The e-commerce companies are concentrating their efforts on increasing the penetration of their mobile apps for higher growth. Big players in this space claim to have more than 50 per cent of their revenue coming from mobile apps,” the report says.
The supply chain and logistics in e-commerce business are highly complex to manage in a vast country like India where infrastructure is not well-developed. Furthermore, the taxation policies for the e-businesses are not well-defined, depending on different business models and transaction types, D S Rawat, Secretary General, ASSOCHAM, pointed out.
“The complexity has further amplified with transactions happening across borders for online selling of goods and services. Moreover, e-businesses do not take sufficient steps to deploy a security solution, which is hindering the consumer rom transacting online,” he observed.
The report also takes into account the changing paradigm in online business on account of newer technologies. Analytics, autonomous vehicles, social commerce, and 3D printing have been recognised as the biggest disruptors, leading to companies investing more in data analytics to gain real-time insights into customer behavior and offering a more personalised user experience.
The study further notes how e-commerce companies are building communities on social media networks to better understand customer needs and to drive effective marketing strategies.
The study further brought to light how online travel continued to be among the key drivers of India's e-commerce market, accounting for nearly 71 per cent of e-commerce business in India
Though India's online retail market currently stands at a meager $1.6 billion of the country's overall $500 billion retail industry, retail e-commerce has witnessed a three-fold growth since 2011.
Mobile commerce, on the other hand, has shown rapid growth and is increasingly being seen as a “secure supplement to the e-commerce industry”, the report said. Shopping online through smart phones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 per cent of their total revenues.
The government's ambitious ‘Digital India' project will further bolster the sector by introducing internet and broadband to remote corners of the country and increase trade. “This initiative through a targeted investment of nearly $17 billion will transform India into a connected economy and also attract investment in electronics manufacturing and create millions of jobs,” said Rawat.
