A Case Study on E-Commerce in India and the Struggling Issues

Electronic commerce, commonly known as E-Commerce is trading in products or

services using computer networks, such as the Internet. Electronic commerce draws on
technologies such as mobile commerce, electronic funds transfer, supply chain
management, Internet marketing, online transaction processing, electronic data
interchange (EDI), inventory management systems, and automated data collection systems.
Modern electronic commerce typically uses the World Wide Web for at least one part of the
transaction's life cycle, although it may also use other technologies such as e-mail.
E-Commerce businesses may employ some or all of the following:
 Online shopping web sites for retail sales direct to consumers
 Providing or participating in online marketplaces, which process third-party business-to-
consumer or consumer-to-consumer sales
 Business-to-business buying and selling
 Gathering and using demographic data through web contacts and social media
 Business-to-business electronic data interchange
 Marketing to prospective and established customers by e-mail or fax (for example, with
newsletters)

Global Scenario:
In 2010, the United Kingdom had the biggest E-Commerce market in the world when
measured by the amount spent per capita. The Czech Republic is the European country where
E-COMMERCE delivers the biggest contribution to the enterprises´ total revenue. Almost a
quarter (24%) of the country’s total turnover is generated via the online channel.
Among emerging economies, China's E-Commerce presence continues to expand
every year. With 384 million internet users, China’s Online Shopping sales rose to $36.6
billion in 2009 and one of the reasons behind the huge growth has been the improved trust
level for shoppers. The Chinese retailers have been able to help consumers feel more
comfortable shopping online. China's cross-border E-Commerce is also growing rapidly. E-
Commerce transactions between China and other countries increased 32% to 2.3 trillion Yuan
($375.8 billion) in 2012 and accounted for 9.6% of China's total international trade.
Other BRIC countries are witnessing the accelerated growth of E-Commerce as well.
Brazil's E-Commerce is growing quickly with retail E-Commerce sales expected to grow at a
healthy double-digit pace through 2014. By 2016, e-marketer expects retail E-Commerce
sales in Brazil to reach $17.3 billion. India has an internet user base of about 243.2 million as
of January 2014. Despite being third largest user base in world, the penetration of Internet is
low compared to markets like the United States, United Kingdom or France but is growing at
a much faster rate, adding around 6 million new entrants every month. The industry
consensus is that growth is at an inflection point. In India, cash on delivery is the most
preferred payment method, accumulating 75% of the e-retail activities.
E-Commerce has become an important tool for small and large businesses worldwide,
not only to sell to customers, but also to engage them. In 2012, E-Commerce sales topped $1
trillion for the first time in history.
In the past 10 years, E-Commerce is in a period of rapid development. Cross-border
E-Commerce is called the Internet thinking along with traditional import and export trade.
Cross-border E-Commerce enables international trade towards more convenient and free
open to cooperate between different countries in the world, incorporating developed and
developing countries. In the short term, developing countries may be limited to IT, but in the
long term, they would change the barrier to develop their IT facilities, and continuing to close
to developed countries. The moment, developing countries like China and India are
developing E-Commerce very rapidly, such as China 's Alibaba, the Financing capital (£15
billions) is the highest ever in E-Commerce company. In addition, China is becoming the
biggest E-Commerce provider in the world. The number of Internet users in China which
amounts to 600 millions, and which is doubled than USA users in total.
For traditional businesses, one research stated that information technology and cross-
border E-Commerce is a good opportunity for the rapid development and growth of
enterprises. Many companies have invested enormous volume of Investment in mobile
applications.

Problems concerning Indian E-Commerce Business:

In the report of Business Standard (dated 16 th day of April, 2015) it was found that,
even as most players in India’s E-Commerce space are currently far from break-even, a
recent report has estimated that the industry may turn profitable at an operating level by
around 2020. According to a recent report by UBS Securities, the Indian E-Commerce market
is likely to growing 10 times from the current level and touch $50 billion (Rs 31,169 crore)
by 2020, when it also starts making operating profits. “Investor concerns about E-Commerce
being a bubble in India are misplaced, in our view,” UBS said in a report published earlier
this week.
According to the report of Business Standard (dated 16 th day of April, 2015) it was
found that, “Our analysis of the supply-chain for offline retail by category implies adequate
margins for e-tail in future. Inherent operating leverage in the business model and 700 basis
points (as a percentage of gross merchandise value lower discounting should lead to
operating profit for the industry by 2020.” The estimates have been assessed based on a
multi-factor approach that includes accessibility, affordability, adaptability, and
accountability.
UBS Securities added that it believes India’s E-Commerce sector is well placed for
“significant growth”, which will be driven by the favourable demographics in the country,
multifold rise in internet penetration, and scarcity of organised retail. It also said that players
in the sector are already looking to solve “initial issues” around acceptance, lack of credit and
debit card penetration, and last-mile delivery through innovative solutions such as cash on
delivery and specialised e-logistic operations.
India’s regulatory environment for E-Commerce remains uncertain. There's no clarity
on whether the government will allow 100 percent foreign investment in the space
(something that's still not allowed in brick-and-mortar retail). India’s tax administrators,
notorious for their arbitrary actions, haven’t yet developed a clear policy on E-Commerce
players, most of whom make losses; as valuations continue to soar, companies may face
unwelcome scrutiny. Importantly, the same constraints which hobble growth of the real
economy -- such as world-class infrastructure -- will undercut E-Commerce, too. Terrible
roads make deliveries difficult, while warehouse space can cost as much as in the developed
world. Last month, the United Nations released a survey that ranked India 83rd out of 130
countries in terms of its E-Commerce environment, judged by factors such as the number of
Internet users, availability of secure servers and credit-card usage.
So far, the E-Commerce industry in India is bleeding money. Between April 2013 and
March 2014, the total sales of Flipkart.com, Snapdeal.com and Amazon.co.in, the three
largest e-tailors in India, amounted to $85 million. Their combined losses were $160 million.
Unlike in China, India’s E-Commerce industry is highly fractured. The market leader Flipkart
controls just 5 percent market share compared with Alibaba’s 80 percent market share in
China. Not every firm that is receiving investment now will be viable in the medium run.
Some consolidation will take place, especially if losses continue for a long period.
E-Commerce is a rapidly growing market in India, and domestic as well as
international players are looking to tap the opportunity in the sector. However, there are no
specific E-Commerce laws in India. The sector is governed by the IT Act 2000, which
regulates the legal obligations of sellers and buyers of goods and services in cyberspace.
Apart from the IT Act 2000, E-Commerce laws in India need to comply with other
statutory laws in force in the country, e.g., the Indian Contract Act and Foreign Investment
Regulations. E-Commerce companies also need to comply with banking and financial laws,
where applicable. For example, financial intermediaries are required to obtain licenses from
the RBI to provide services. Adding to the complexity of such laws in the country is the fact
that legal issues pertaining to the sector differ across categories of E-Commerce.
India’s E-Commerce market is mainly restricted to urban areas, with the bulk of the
business being restricted to cities. Internet usage in rural areas is limited. This could be due to
several reasons including low internet speed and internet user base (20 million out of a total
of 121 million in 2011), though rural areas account for 70% of the country’s population. The
inadequacy of vernacular content on E-Commerce websites is another reason for low
penetration in rural areas.
Future Prospects:
The report of Business Standard (dated 16 th day of April, 2015) added that grocery
could be a key segment for growth going forward and success in the category could lead to a
significant upside in the estimated valuations of several players.
“3G rollout and affordable mobile handsets are key drivers, with the bulk of online
traffic now mobile driven,” the report said. “We believe telecoms and logistics will be
beneficiaries while offline retail could be vulnerable. E-Commerce will dilute distribution as
an edge for consumer companies in India as it conceptually breaks these barriers.”
Additionally, it said that standardised products may be vulnerable but premium
product brands could see a significant expansion in penetration in previously unsaved tier III
and IV cities through E-Commerce.
It is estimated that the E-Commerce market is about 57% from small towns and the
balance from the largest metros. The most popular use of E-Commerce is on travel websites,
which is done by about 70% of all E-Commerce consumers in India. There are challenges to
E-Commerce companies operating in India - including some reluctance of consumers to pay
for goods or services online. Some companies are trying to get around this problem by
providing cash-on-delivery as a service to their consumers.

Conclusion:
The future of E-Commerce is difficult to predict. There are various segments that
would grow in the future like: Travel and Tourism, electronic appliances, hardware products
and apparel. There are also some essential factors which will significantly contribute to the
boom of the E-Commerce industry in India i.e. replacement guarantee, M-Commerce
services, location based services, multiple payment option, right content, shipment option,
legal requirement of generating invoices for online transactions, quick Service, Terms &
Conditions should be clear & realistic, the product quality should be same as shown on the
portal, dedicated 24/7 customer care centre should be there.
The trend of online shopping is set to see greater heights in coming years, not just
because of India’s rising internet population, but also due to changes in the supporting
ecosystem. Players have made intensive efforts to upgrade areas such as logistics and the
payment infrastructure. Furthermore, the Indian consumer’s perception of online shopping
has undergone a drastic change, and only for the good. Given these developments, venture
capital investors, who were restricting themselves to the sidelines, are now taking a keen
interest in the country’s E-Commerce market.
New technologies such as virtual walls and virtual mirrors will further help improve
the retail customer experience, thereby encouraging greater consumption. Virtual mirrors let
shoppers ‘try on’ clothes and accessories virtually before making buying decisions. Virtual
walls help customers scan barcodes for items on an electronic wall using their mobile phones
and place orders with retailers. Tesco in South Korea was an early adopter of this technology.
In India, HomeShop18 has launched India’s first virtual-shopping wall. Scan N Shop at New
Delhi’s international airport uses a similar technological interface.
A key outcome of the technology revolution in India has been connectivity, which has
fuelled unprecedented access to information. Millions of people who had little means to join
the national discourse can now gain new insights into the world around them. Farmers know
crop prices. Consumers understand global standards of product and service quality. Rural
Indians recognise the differences between the opportunities available to them and those
available to their urban counterparts. And citizens have a mass forum for expressing their
political opinions. The upshot of this connectivity revolution has been empowerment of
Indians.
Today, we are talking about E-Commerce progress level of India, the seventh-largest
by geographical area, the second-most populous country, and the most populous democracy
in the world. Indian ecommerce space percentage is getting higher as more and more online
retailers enter the market. Although this level of entry in the E-Commerce market is good
from a long term perspective, the challenge is that most entrepreneurs don’t have the
resources or capital to wait for years before they can get profits .The past 2 years have seen a
rise in the number of companies' embracing E-Commerce technologies and the Internet in
India. Most E-Commerce sites have been targeted towards the NRI's with Gift delivery
services, books, Audio and videocassettes etc. Major Indian portal sites have also shifted
towards E-Commerce instead of depending on advertising revenue. The web communities
built around these portal sites with content have been effectively targeted to sell everything
from event and movie tickets the grocery and computers. This is not to say that the
ecommerce scenario has been bad in India as highly successful e-business like baba bazaar
and India mart have proved. Indian Banks too have been very successful in adapting EC and
EDI Technologies to provide customers with real time account status, transfer of funds
between current and checking accounts, stop payment facilities. The future does look very
bright for E-Commerce in India with even the stock exchanges coming online providing a
online stock portfolio and status with a fifteen minute delay in prices. The day cannot be far
when with RBI regulations will able to see stock transfer and sale over the Net with
specialized services.