The Indian e-commerce industry has been known for its dramatic twists and turns from its very inception. Not surprisingly, it managed to carry on this legacy in 2013. Shedding its dotcom bubble image, the industry has come a long way. However, it is still struggling on various fronts. e27 takes a look at the year that was in the journey of the e-commerce sector in India…
An undesired start
The beginning of last year saw major e-commerce players such as Flipkart, Jabong and Zovi handing pink slips to a considerable chunk of their workforce. Also, the first half proved to be very difficult for start-ups owing to stiff competition and lack of growth capital. Websites such as KoolKart, WopShop and Travelocity shut shop, while start-ups such as SherSingh, Esportbuy and Letsbuy were acquired by bigger labels.
To add to their woes, e-commerce players had to deal with the effects of devaluation of Rupee in the form of decreased traffic and constantly redefining markets. “A number of factors such as Rupee depreciation, hike in ATF prices and the subsequent increase in airfares influenced the travel and tourism industry in 2013,” shared Sharat Dhall, President, Yatra.com. It is important to note that 75 per cent of the Indian e-commerce market constitutes of travel related offerings.
Nonetheless, the second half brought a silver lining to the former black cloud as the market bounced back in the festive season.
Lifestyle becoming a game-changer
Starting with books and gadgets becoming mainstay, apparels and accessories followed soon. However, the segment was affected by the touch and feel barrier faced by the Indian audience. Nonetheless, 2013 changed the rules with fashion and lifestyle taking the lead.
“At Yebhi, fashion and lifestyle now contributes to almost 80 per cent of the business and has seen a 100 per cent y-o-y growth,” said Nikhil Rungta, Chief Business Officer, Yebhi.com.
Not only homegrown brands are using e-commerce portals to attract the masses, but also international labels such as American Swan and Puma are seen entering the market. Also, players are now roping in exclusive designers to fight the clutter, thus giving a boost to the segment.
‘Real India’ taking over
E-commerce and e-service websites have been receiving considerable traction from tier II and tier III cities. However, 2013 witnessed further penetration of e-commerce in smaller towns and cities of India.
“Fifty per cent of purchases are dominated by consumers from non-metropolitan cities,” shared Praveen Sinha, Co-founder, Jabong.com.
Entry of IRCTC (Indian Railways Catering and Tourism Corporation Limited), ticketing arm of Indian Railways, in the online shopping space played catalyst in making smaller towns and cities familiar to e-commerce.
“We have seen a huge number of new users coming from ‘Real India’ – from cities such as Khorda, Kamrup, Bankura, Durga, Kota, Sidhi and Latur,” said Rungta. He explained that traffic from theses cities started coming after Yebhi’s tie-up with IRCTC.
E-services sector also witnessed a similar trend. “Greater internet penetration helped us in reaching out to tier II markets. We witnessed a change in the mindset of the customer, along with growth in bookings across products categories from the smaller cities,” said Dhall of Yatra.com.
While majority of customers still look up to cash on delivery, plastic money emerged as a prominent option in the festive season.
According to a research by Internet and Mobile Association of India (IAMAI) (conducted from October 30 to November 4, 2013 during Diwali time in 15 cities) 59 per cent of the respondents used credit cards to shop online, while 28 per cent used debit cards, reflecting the maturing of consumer behaviour in urban markets.
The year also saw websites such as Flipkart and Snapdeal designing their own payment gateways. Flipkart’s PayZippy powers card payments for websites and mobile sites, while Snapdeal’s gateway offers shipping details and analytics relating to consumers’ specific choices, along with processing credit card payments.
The FDI battle
Currently, 100 per cent FDI is allowed in business-to-business (B2B) e-commerce in India, but when it comes to business-to-consumer (B2C), it is prohibited. Besides, there is a mandatory 30 per cent local sourcing norm for foreign players.
According to a recent report by IAMAI-KPMG, Indian inventory-based e-commerce sector failed to grow as much as international counterparts that have FDI support despite having one of the largest internet populations. While B2C players have been in conversation with the government from the beginning of 2013, it can finally be expected before the end of the current financial year.
While the first half created a tough scenario for the Indian e-commerce industry, it did manage to have a close to ‘legend-wait for it-dary’ quarter post festive season.
The hard reality
Despite the emergence of positive trends, most e-commerce players have not managed to break-even, highlighting that there is still a very long way to go for the industry.
“We need a reasonable size of internet-savvy user base for e-commerce to be successful, and that might still take some time,” explained Sinha. “Globally, we have seen sizable e-commerce companies take more than five to six years to be profitable. Given the gestation period, India will soon see significant sized companies be profitable.”
Indian e-commerce is surely on the right track. We eagerly wait to see what 2014 unfolds. Watch this space for more…