Trends that are Driving e-Commerce in India

Indians are known for their ‘street smart’ economic mindset that enables them to find solutions to impregnable challenges despite the constraints.

This is the similar ‘innovative mindset’ which is making Indian entrepreneurs embrace analytics, digitisation, and technology to develop platforms and deliver services and products to the end customer creating a new online buying behavior.

In the context, India’s retail opportunity is substantial and affected by several factors such as the rising standards of living, hyper-connected young population, upwardly mobile middle class, the explosion of social media platforms, deeper internet penetration, and increased smartphone penetration. So, a significant growth of e-Commerce is expected in the next two years.

Gaining Momentum of Government Initiatives

The Government of India has been active in leveraging and embracing e-Commerce digital platforms to transform and organize traditional offline markets such as those of agricultural product. The Government has launched an e-commerce platform to link the farmers with the vegetable markets of various states to sell the agro commodities. Also, flagship initiatives such as Start-up India, Digital India, Skill India, and Innovation Fund are contributing to the growth of the e-commerce industry.

Increase in the Internet Penetration

The e-commerce industry in India has been growing with the rise in the internet penetration due to major improvements in the telecom infrastructure. While the 3G and 4G services are making a way into India along with declining data tariffs, internet data spend is growing significantly. Even when India ranks the lowest in Asia in internet speed, the data rates in India are 3 times cheaper than in the US and 2 times cheaper than in China. Government schemes such as a National Optical Fiber Network (NOFN) can significantly increase the internet penetration in the rural communities as well as provide a means for e-commerce companies to tap the huge market potential there.

Growth in Smartphone Adoption

Smartphone growth has been massive over the years and is expected to exhibit more growth in the coming years. The smartphone’s adoption in India is propelled by several factors such as low prices due to high competition, ease of accessibility to content, and prevalence of internet enabled services. According to a report, India has the highest share of globally 41% of mobile based e-commerce sales. Almost 70-75% of the online traffic of e-commerce sites come from mobile phones, the leading e-commerce companies stated and thus higher revenues are coming from mobile applications like 50% for Flipkart while 70% for Quikr.

Evolution of New Payment Solutions

Cash on Delivery (CoD) has been the most popular mode of payment for Indian e-commerce transactions. Cash transactions result in high administration cost even for the e-commerce companies. Hence, to address these challenges, new digital payment solutions are evolving. Further, the Indian government’s initiative has extended banking facilities through the ‘Jan Dhan Yojana’ scheme which has added over 110 million debit cards thereby providing these customers access to electronic payments.  The electronic wallets have been launched and also digital payment products from traditional banks for faster transactions to ease the payment process in e-commerce.

Partnerships of Logistics Space with Hyper-local Companies and India Post

Customers are getting next-day delivery of products. Due to the challenges in terms of return orders, higher standards of customer service, and handling huge volumes of delivery, the industry has seen the rise of several third-party logistics service providers that handles last-mile deliveries. There is an increasing number of partnerships of e-commerce companies with the third-party logistics service providers in order to reach mainly in tier two and three cities. Also leading e-commerce players have their own logistics arms for enhanced customer experience and for greater control on deliveries.

GST to Enhance the Growth of e-Commerce

GST is expected to enforce a single comprehensive indirect tax regime that will be applicable across on the supply of goods and services across all states. The implementation of GST is expected to include the service tax, central excise duty, and additional customs duty at the central level and CST, VAT, and entry tax at the state level. It will enhance an operational efficiency of the e-commerce industry in the many ways like the transparency and simplification of taxes across the borders in India, elimination of the incidence of double-taxation, and improvement in the efficiency of the supply chain

The e-commerce is changing the lives of millions, but there are also a number of people who prefer offline shopping. If e-commerce is to make a huge impact in the coming years then these trends will definitely affect the business.