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E-commerce in India: Evolution and revolution of online retail

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Chapter 5
E-Commerce in India:
Evolution and Revolution of Online Retail

Prateek Kalia
I.K Gujral Punjab Technical University, India

Navdeep Kaur
Guru Nanak Dev Engineering College, India

Tejinderpal Singh
Panjab University, India

ABSTRACT
This chapter uniquely reports origin of e-commerce and holistic present scenario of online retail in India.
Desk research and extant review of literature from reliable market research reports, books, journals
and web has been done to decipher internet penetration, evolution of e-commerce and present scenario.
Study observed that India is third largest country in terms of internet users. India will drive e-commerce
in Asia pacific region after China and Indonesia. Reasons hampering India from finding place in global
retail e-commerce index are also put in foreground. Sequential events leading to growth of different types
of e-commerce in India are delineated into two waves to understand the evolutionary process. Out of
total non-travel B2C e-commerce, online retail holds significant fifty percent share and its prospects for
future growth are extremely positive. Businesses and researchers will find this chapter useful to devise
future strategies to win and sustain e-commerce market in India.

INTRODUCTION

In India, online consumer base is increasing dramatically, as gadgets like smartphones and tablets are
available at reasonable prices and access to 3G and broadband is easy. This technology adoption by
masses has fueled the success of domestic e-commerce players like Flipkart and Snapdeal, and lured
international players like Amazon and Alibaba into Indian market (PWC, 2015). While domestic com-
panies are experimenting with their business models to attract and expand their customer base (Awad,
2012; Chaffey, 2013; Kalia, n.d.; Laudon & Traver, 2007; Schneider, 2012), international companies

DOI: 10.4018/978-1-4666-9921-2.ch005

Copyright © 2016, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited.
 
E-Commerce in India

are banking on their deep pockets, strong domain knowledge and international exposure. One of the
fastest growing segments of e-commerce is online retail. Significant funding is required in India due to
underdeveloped e-commerce ecosystem (Kalia, Kaur, & Singh, 2015) and e-retailers are deploying large
chunks of their investments to build infrastructure like fulfillment and logistics on their own (PWC &
ASSOCHAM, 2014).
Young population, growing internet penetration and upwardly rising middle class will propel e-
commerce and overall retail business in India in coming years (PWC, 2015). But this opportunity can
only be encashed by e-commerce business if they have significant understanding of evolution and cur-
rent scenario of the Indian e-commerce market which has seen a dotcom burst earlier in 2000 (Kumar
& Mahadevan, 2003). Extant review of literature from reliable market research reports, books, journals
and web has been done covered in this chapter to present evolution and current status quo of e-retail
market in India.

INTERNET PENETRATION: WORLD VS. INDIA

From 1% in 1999, internet penetration has reached 40% of the world population in 2014. Landmark of
first billion internet users was reached in 2005, second in 2010 and third is expected by end of 2014.
Global internet users by per year since 1993 are mentioned in table 1.
As seen in the figure 1, Asia has almost half of internet users i.e. holds 48% (1322491069) of total
internet user population. Americas (North and South) comprises 22% (596331291), Europe has 19%
(520381481), Africa 10% (268209162) and Oceania holds 1% (25109590) of total internet user population.
In 2014, top 20 countries comprise almost 75% (2.1 billion) of all internet users in the world (2.8
billion). Rest of 25% (0.7 billion) is held among the other 178 countries, each representing less than 1%
of total users. China, is on the top of the list with 22% (642 million users in 2014), this user base is more
than combined user base of next three countries (United States, India, and Japan). United States, Germany,
France, U.K., and Canada have the highest penetration: over 80% of population in these countries has an
internet connection. India has lowest penetration (19%) in top 20 countries but highest yearly growth rate
(14%). Despite such low penetration rate India ranks third with 243,198,922 users (Table 2). Because
of tremendous growth of internet in India there is enormous potential for e-commerce (Joseph, 2012).

B2C ELECTRONIC COMMERCE: WORLD VS. INDIA

Worldwide business-to-consumer (B2C) e-commerce sales will grow by 17.7% this year to reach $1.771
trillion (Figure 2). This growth is attributed to increase in number of online and mobile users in emerging
markets, boom in mobile commerce, better shipping and payment options, and entry of major brands in
international markets (Emarketer.com, 2014).
Asia-Pacific will become largest regional e-commerce market in the world in 2014, as B2C e-commerce
sales in the region will grow to $525.2 billion as compared to $482.6 billion in North America (Table
3) (Emarketer.com, 2014).
In 2014 Asia-Pacific will hold 46% of worldwide digital buyers; these users are just 16.9% of the
region’s population. This explains that emerging markets are getting strength out of their huge population

100
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It is estimated that worldwide business-to-consumer (B2C) e-commerce sales will grow by 20.1% to
reach $1.500 trillion in 2014 and Asia-Pacific will become largest regional e-commerce market in the
world. This explains that emerging markets are getting strength out of their huge population base that
come and shop online for the first time. Asia pacific growth will be driven by China, along with India
and Indonesia.
Despite of its huge population and entrancing forecasts discussed in the paper, India fails to reach
among top 30 countries of Global Retail E-Commerce Index because of poor internet penetration, infra-
structure constraints, low credit card penetration, complex tax laws and paucity of funds. Even during
evolution of e-commerce in India, which occurred in two waves; first wave in (1996-2000) faced a bubble
burst in 2000 due to similar reasons like low internet penetration, menial online shopper base, slower
internet, inadequate infrastructure support and little acceptance of internet shopping concept. More than
1000 e-commerce business in India crumpled during this dot-com burst, making 2000-2005 a silent era
of Indian e-commerce. Second wave (2006-present) has been dominated by online travel throughout its
evolution, but online retail is catching up and more and more online users are showing interest in making
purchase online and it claims nearly fifty percent share of non-travel B2C e-commerce.
In spite of problems discussed above, potential of India’s online retail industry is huge and it can be
estimated from the fact that currently it is just 7.9% of organized retail and 0.5% of overall retail. Chang-
ing lifestyles and growing internet penetration in last 5 years, are fueling India’s online retail industry,
which has grown nine folds from 2007-08 to 2012-13. This compounded annual growth rate (CAGR)
of over 56 per cent is propelled by sales of books electronics and apparel. As per a report by CRISIL,
new businesses are focusing on niche segments like grocery, jewelry, furniture and apparel, and it will
further drive the market at healthy 50-55 per cent CAGR to Rs 504 billion by 2015-16. By understanding
the utility of e-commerce technology, learning lessons from evolutionary past and knowing absolved
present position, this additive knowledge can be extrapolated by electronic retailers to capture golden
opportunity in near future.

5()(5(1&(6

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E-Marketplace: A virtual space which provides the infrastructure services for buyers and sellers to
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