1.

0 INTRODUCTION
Internet is changing the way consumers shop and buys goods and services, and has rapidly
evolved into a global phenomenon. Many companies have started using the Internet with the aim
of cutting marketing costs, thereby reducing the price of their products and services in order to
stay ahead in highly competitive markets. Companies also use the Internet to convey,
communicate and disseminate information, to sell the product, to take feed back and also to
conduct satisfaction surveys with customers.

Customers use the Internet not only to buy the product online, but also to compare prices,
product features and after sale service facilities they will receive if they purchase the product
from a particular store. Many experts are optimistic about the prospect of online business.

In addition to the tremendous potential of the E-commerce market, the Internet provides a unique
opportunity for companies to more efficiently reach existing and potential customers. Although
most of the revenue of online transactions comes from business-to-business commerce, the
practitioners of business-to-consumer commerce should not lose confidence.

It has been more than a decade since business-to-consumer E-commerce first evolved. Scholars
and practitioners of electronic commerce constantly strive to gain an improved insight into

consumer behavior in cyberspace. Along with the development of E-retailing, researchers

continue to explain E-consumers behavior from different perspectives. Many of their studies
have posited new emergent factors or assumptions that are based on the traditional models of
consumer behavior, and then examine their validity in the Internet context.

1.1 ONLINE SHOPPING IN INDIA

The birth and growth of Internet has been the biggest event of the century. E-commerce in India
has come a long way from a timid beginning in the 1999-2000 to a period where one can sell and
find all sorts of stuff from a high end product to a meager peanut online. Most corporations are
using Internet to represent their product range and services so that it is accessible to the global
market and to reach out to a larger range of their audience.
Computers and the Internet have completely changed the way one handles day-to-day
transactions; online shopping is one of them. The Internet has brought about sweeping changes in
the purchasing habits of the people. In the comfort of one's home, office or cyber cafe or
anywhere across the globe, one can log on and buy just about anything from apparel, books,
music and diamond jewellery to digital cameras, mobile phones, MP3 players, video

games, movie tickets, rail and air tickets. Ease, simplicity, convenience and security are the key
factors turning the users to buy online.
E-commerce revenues in the country are projected to reach Rs 2,300 crore in the year 2006-07,
growing at 95 per cent over 2004-05(Source: Internet and Mobile Association of India, IAMAI).

This pertains to the business-to-consumer (B2C) segment. It may be too early to do a comparison
with the e-commerce scenes in countries such as the US where billions of dollars are spent online
but the business in India is growing exponentially every year, albeit from a smaller base, the total
revenues have reached a respectful size.
1.1.0 Recent Developments
The number of users logging on to the Internet is growing by leaps and bounds. The number of
Indians who are online is expected to touch to 100 million by 2007-08, from the present 38.5
million according to the research conducted by IAMAI. The numbers indicate a growing sense of
comfort with the use of Internet for shopping. Accompanying this growth, there is an increasing
maturity in the way people use the Internet. It's a classical curve. Online users typically start by
using e-mail, gradually move on to browsing for news, information and entertainment, and
finally graduate to shopping and conducting business online. Online sales have registered a huge
jump and what was a concept five years ago is now beginning to hit the mainstream levels.
Roughly 10 percent of the world's population more than 627 million people have shopped online
at least once, in India it is just

sprouted and beginning to perish. Internet is now going beyond the simple exchange of
information to a shopping paradise. This medium is far bigger than expected, but many retailers
and marketers are not using it to its full potential.
Indian customers are increasingly getting comfortable with online shopping, and there is a higher
acceptability for the concept. India has 25 million Internet users and more is now

turning to online shopping. There has been an influx of online shopping sites in India with many
companies hitching onto the Internet bandwagon. The revenues from online shopping are
expected to more than double by 2006-07. According to IAMAI, the average number of
transactions per month in India has gone up from 2 lakh in 2003-04 to 4.4 lakh in 2004-05 and
has doubled to 7.95 lakh transactions per month in the year 2005-06. The online sales during the
festival season had increased rapidly especially during Diwali and Ramzan which recorded a
sales of Rs115 crore, a 117 per cent increase from the Rs53 crore in the year 2004-05(source
IAMAI). These figures clearly show that online shopping has truly come of age and consumers
are keen to shop on the net. Effective customer communication on products plus reduced
shipping costs and timely delivery has helped online marketers to seize a slice of the Rs 115
crore sales.
Online shopping has become the latest trend among shoppers. Indians are becoming more
comfortable with e-commerce. The consumers attitude has been evolving towards online
purchases. It has become increasingly positive over the years. The attitudes that drive people to
shop online, such as
convenience, price comparison and choice are improving tremendously in India.
Though a miniscule amount in the global context, the Indian online shoppers population would
make its presence felt quite remarkably. The potential of the Indian e-market can be gauged from
the fact that 16 percent of Indian consumers want to buy online in the next six months, making it
the third most online-potential country after Korea (28 percent) and Australia (26 percent)

(Source:IMRB). This is an indication of a growing breed of Indian consumers who are not only
better equipped but also more confident of the online

transactions. Indian businesses have also grown mature enough to move up the IT curve and they
are considering Business to consumer (B2C) e-commerce a viable revenue model. Some
of the companies that have benefited are baazee.com, indiatimes.com, rediff.com, indiamart.com,
fabmart.com, traveljini.com and sifymall.com.
Indiamart.com has witnessed a growth of more than ten times in just two years in its online gifts
domain. In the online travel domain, the company was able to generate an average $8,000 worth
of room bookings/month for its premium client. It is expected to touch $15-20,000/month/client
by the year-end, which is over 100 percent growth (Source:Indiamart). Brick-and-mortar
businesses are also building up e-commerce revenues. In the year 2005-06 Samsung India
recorded a 120 percent jump in online buying from its site over the year 2004-05 (Source:
Samsung). Nirulas witnessed more than double growth in its B2C e-commerce revenues in the
year 2005-06 and is positive for the next one to two years (Source: Nirulas). Companies like
eBay India have seen a large increase in the number of sellers and buyers from B and C cities
and in a year the eBay community (buyers and sellers) base has increased to 1.7 million users,
which shows that more Indians are shopping online (Source: eBay). Online sales are currently
marked by a single digit growth, but the leading garment retailers like Pantaloon, Shoppers Stop
and Globus have already made business strategies to enter into the world of e-retailing. Famous
apparel brand Zodiac has already started online stores. The main motive of these retailers
through online sales is to reach the global markets and the small towns where they do not have

the outlets. Thus the India's Internet shopping sector is preparing for a massive growth, which is
fuelled by increasing broadband usage and growing e-commerce.

1.1.1 Online Activities

The Internet has entered the mainstream consciousness over the past decade. This has happened
primarily because the web has got a graphical interface and Internet has moved from
governmental control to private hands. The activities which are happening on the Internet are
email and instant messaging, general web surfing or browsing, reading news, hobby searches,
entertainment searches, shopping and buying online, medical information searches, travel
information searches, tracking credit cards, and playing games.
Communication i.e. email, chat or instant message is the basic activity for which Internet is used.
It is the single most important reason for people to go online. E-mail provides the opportunity to
communicate more often with a much broader circle of people than one can reach by telephone
or by mail in a convenient way. In India too email constitutes the major activity on the Internet. It
was found that more elderly people are increasingly using email as compared to the younger
generations.
In India the top five online activities are e-mail, surfing, chatting, search and job search. Some
of the sites, which are commonly used for these particular activities, are:
Yahoo -Most preferred communication portal, tops for email and chat
Indiatimes Best event and sports news provider.
Naukri-Best recruitment portal
Google-Best information domain
Shaadi-Best for matrimonial services

 eBay-Best online shopping portal

(Source:IAMAI)
In India online trading, travel, recruitment, ticketing, real estate, classifieds and social
networking are a few spheres ripe for investment.
1.1.2 Employment
Today online job search market is expanding tremendously. According to IAMAI the number of
online job seekers had reached 6.5 million in 2005-06 and is expected to across 9.2 million in the
year 2006-07. The market size of the Indian online recruitment industry in 2005-06 was 145
crore and it is estimated to reach Rs 241 crore for 2006-07 (source IAMAI) this is mainly
because of the increase in the internet penetration which has lead to an increase in the users for
whom net has become a convenient way to meet their needs. Every year thousands of graduates
pass out and look for employment opportunities, for these job seekers Internet is the most
convenient (24 hour a day) and the comprehensive medium to research and look for jobs.
Internet is advantageous to both the job seekers (saves time and cost) and to the recruiters (easy
access to the best talent pool) as a result there is a win a win situation.
1.1.3 Banking & Trading
The net banking is increasing and it is estimated that 4.6 million Internet users are using Internet
for banking purposes and it is expected to grow to 16 million plus by 2007-08 (Source IAMAI).
Trading stocks is also becoming a fast booming activity amongst the Indians. The traders feel
that trading through Internet is not that cheap but the convenience provided by online trading is
worth the costs involved. Traders can keep a regular check on various stocks and it is easier to

compare them. They can not only buy and sell stocks but can also find the track record of various
stocks, do technical analysis, can access live news from international news agencies such as
Reuters, CNBC and can find opinions from other leading brokers which help them do decide
whether to buy or sell. More and more traders today are making the immense use of these
services, which shows that there is a huge potential in this sector.
1.1.4 Matrimonial
As the popular adage goes, "Marriages are made in heaven" but today with so many matrimonial
portals in the market they help one find the best match for themselves. Some of the popular
marriage portals are shaadi.com, bharatmatrimony.com, Yahoo India matrimony, MrnMrs.com,
Matricorp.com and jeevansaathi.com.
These marriage portals have increased because there is a rise in the career orientation among
youngsters and increasing work pressures have resulted in less time for socializing. These
youngsters are becoming more independent and are now making their own decision in respect of
choosing their life partners. The marriage portals provide them the medium to interact with the
people who match their required profiles. These portals not only help in finding a better match
but also provide with services of astrologers, decorators, wedding planners and caterers thus
providing a whole lot of services in one basket. More Indians are registering to these matrimonial
portals and there seems to be a huge growth in the coming years.
1.1.5 Online Ticketing
The growth in the online travel business today is phenomenal. The Indian online travel business
is worth $350-400 million and is growing at 40-50 per cent year by year, as the online population

of the country is estimated to be 25 millions (Source:IMRB). There has been a significant

increase in online ticket booking in India with a double-digit growth, which has also lead to an
increase in Indian tourism. This growth in the travel industry has definitely leaded to the increase
in the travel portals. The scope for growth is immense in this sector as more Indians are using the
Internet.