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No one buys online but E-commerce is alright!

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E-commerce in India is starting to be recognized as a major industry of the future. With more than 300 websites currently operating in the sphere and hundreds more in the pipeline, it is obvious that ecommerce is here to stay.

Speculation and criticism have been raised against the valuation of e-commerce. While a group of entrepreneurs and investors seem upbeat about the growth of e-commerce in India, another group of investors and early adopters are pessimistic about the future of e-commerce. They feel the valuation of e-commerce companies are exaggerated and that ecommerce is a Bubble waiting to burst. It may be easier to pick sides and state either “No one buys online” or be brave and say “E commerce is alright”. However, in each case both groups are right in their own right.

Lets consider, the simple facts: A recent report by Avendus states the following values for the Indian ecommerce sector:

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It isn’t surprising then that a large population still seems unaware of or are not using the services of ecommerce websites. The basic number of internet users has been stated to be about 80 million currently. With barely 2-3 Million users of those connected to internet using it for e retailing, chances are you may not know someone who even shops online.

But however, with a stated growth to 35 million users transacting online by 2015, one can expect a similar growth of e-tailing customers to at least 8 million users to transact online by 2015. It is important to consider that just 29% of the population of India will have internet connectivity in 2015, of which only 10% would even engage in ecommerce activity. The abysmally small numbers seem to give the impression that “No one really buys online”. The number though small however does contribute a whopping $12Bn to the ecommerce industry. That’s a growth rate of over 34% every year in number of users and a revenue, that’s 12 times the initial amount in less than 3 years or 83% CAGR in value terms.

All this gives us proof that in the end “E-commerce is alright”. The future of ecommerce rides on the growth of these 8 million potential users. 8 million users who can be broadly classified as below.

The Small Town Buyer

A significant portion of online sales today come from the tier 2 cities and small towns of India. A significant portion of it is on books, mobile phones and even rare branded merchandise. There is a higher diffusion of incomes happening today, mainly due to migration of population from rural and semi-urban India to the metros. With family members gaining money from relatives working in big cities there is greater disposable income available with the semi-urban family.

Today’s semi-urban youth is exposed to latest brands and luxury products through internet and television. He/she aspires to buy these goods. However, semi-urban India still faces a major crunch in terms of infrastructure. There are few or no malls or multiplexes in small town India. Here is where e-commerce has managed to come to the rescue of the aspirational small town buyer.

E-commerce portals today offer access to the latest gadgets, books, luxury branded items etc to even the most remote corners of the country. It is no wonder then that the report states that 57 % of ecommerce sales come from small towns. The “Small Town Buyer” will continue to drive the growth of ecommerce stores in the year to come.

The Reluctant Buyer

If you are a typical software engineer, you probably dread those weekends when your wife/girlfriend/mother drags you along for their shopping trips. Not only do you regret chauffeuring along the people mentioned to all the expensive malls and stores, you are also caught making difficult choices for them in terms of color, brand etc.

The average man is goal oriented and likes to get in and get out with the good that best meets their requirement. E-commerce portals provide such buyers the perfect opportunity to make adequate purchases. Be it books, music, electronics or even fashion items, men today are increasingly using the services of ecommerce sites to make quick purchases. What more, you no longer have to drive long distances and waste hours browsing through the mall to find one pair of t shirt or jeans.

The Deal Seeker

It is a well known fact today that ecommerce sites have the cheapest prices for goods in India. With most products sold at at least 30% less than MRP, users are provided with amazing deals on branded merchandise, consumer electronics and even Books. E-commerce sites provide a great platform for the deal hunters and penny pincher of India to find the best deal. Unlike the pre-e commerce days, when the average shopper would have to roam from shop to shop haggling and bargaining trying to find the best deal possible, todays shoppers can get the best prices at the click of a button. These shoppers can even use price comparison websites such as MySmartPrice to get the best price without even having to browse through multiple websites. The Cost Conscious customer today uses Deal sites to get the best out of a dinner package or a vacation or spa. No wonder that our page for coupons is one of the most popular sections on MySmartPrice.

The Gift Giver

The last group of buyers use the services of ecommerce sites for its sheer convenience. The gifter buys and sends gifts to his distant relatives and friends online. If you wish to gift a distant relative or friend, you would have to engage in the purchase of the product from an offline store, then pack up the product and spend a significant amount of money to courier the product to the relative or friend.

The ecommerce gifting services make life simpler by eliminating the need for you to personally purchase and courier products. A significant number of ecommerce websites have started to specialize in the gifting space. While some offer customized chocolates, cards etc, others offer more traditional gifts such as handicraft items and traditional jewelery and show pieces. A significant number of NRIs falls into the Gifter category. The Gifter plays an important role for ecommerce site due to the high value purchases he/she makes. As most of the purchases are for special occasion, the Gifter tends to splurge more than necessary.

  1. Sandeep Vohra says

    E-Retail is here to stay and grow in volumes.The semi urban infrastructure is not yet geared up to absorb the demand that is likely to accrue in coming years.The ROI and cost of buying an item physically compounds the problem and as highlighted, the high costs are going to put burden on shopkeepers or retailers.We still have not factored class'C" cities and rural sector too.With 30% discounts, comforts of buying at home and COD gateways have made this sector very interesting.Imagine the penetration with 2G/3G/4G and mobile commerce, the youth awareness in exploiting e-commerce is outpacing the culture.I feel its a big BOOM area!

    1. Vishal Saxena says

      Such a pity that politico's are worried about (and wrongly) about FDI in retail? Who needs a carrefour or a walmart, when you can buy cheaper sitting at the comfort of one's home! This will quietly and surely kill the debate of FDI in retail in another 3-4 years! Everyone benefits

    2. Tejinder Oberoi says

      e- retail is surely here to stay
      .
      .
      where else do u think retailers will dump their left overs..lol

  2. Kiran Babu T says

    good one..usefull stats for some who have plans getting into ecommerce.

  3. Anil says

    ammmm soon its going to be huge

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