Opinion: Indian ecommerce is crawling forward, yet remains promising

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India is on the cusp of a digital insurgency, as the internet plays a vital role among the developing urban Indian populace.

A growing internet penetration, entrance of global players, rise in smartphone usage, mobile advancements, access to funding, millennial customers, and digital payments are fueling the ecommerce industry in India. The country is the fastest-growing market globally, with US$64 billion projected online retail sales by 2021.

Moreover, a uniform tax collection structure, which goods and services tax (GST) is positioned to accomplish, would add to the success of ecommerce business in India. Online business is done all over India, and a uniform tax structure makes calculations less demanding and constant.

In spite of the good news, India remains an immature ecommerce market. There are three noteworthy potholes, but they can be turned into opportunities.

Mega discount events

Deals, coupons, and cashback have played significant roles in attracting customers to online stores. According to a 2015 data from Goldman Sachs, 30 percent of ecommerce expenses in India are toward discounts.

Other than the daily bargains, leading online retailers in the country are also facilitating yearly mega sale events. Examples are Flipkart’s Big Billion Day, Amazon’s Great Indian Sale, and Google’s discontinued Great Online Shopping Festival, where rebates often run as high as 80 percent. Flipkart claimed to have sold items worth US$100 million in 10 hours.

But despite recording hefty sales after acquiring Myntra, Flipkart still experienced losses and was eventually devalued. This somehow signals online retailers to cut down on their expenses and get an edge in the competition, as investors check for profits.

This event somehow affected how online retailers offer discounts and rebates now, as the recent sale events were not as appealing as they used to. In August this year, a month of festivals, the discounts offered were only around 30 to 40 percent, and this failed to awe customers.

Relying on discounts to boost sales may not be that simple for ecommerce players in India, given the growing contrast between investors and customers.

Developing client base

In general, apparels are the biggest classification of online retail, followed by consumer electronics and computer equipment. Grocery items, beauty products/cosmetics, home appliances, and furniture are the quickest-developing categories, demonstrating the expansion of ecommerce shopping in Asia Pacific.

But the payment methods are yet to be developed. Many Indian online customers still prefer cash on delivery (COD) to online forms of payment, despite the government’s demonetization efforts.

Customers may spend more online for small, ordinary items with extra charges for logistics (around US$0.46 to US$0.61 commission is paid to the third-party courier per transaction). These fees are upsetting marketplaces and sellers alike. Ironically, people wouldn’t mind taking some time to visit a store and compare costs when they need to buy more expensive products. However, if big-ticket items are sold online with discounts (like the deals from the big sale events), they would turn to online shopping.

A study reports that the number of consumers in India who purchase online is expected to cross 100 million by the end of 2017. Ecommerce firms should take this opportunity and attract more customers through COD.

Diverse client base

Overcoming barriers