As the fastest growing online retail country in the Asia Pacific, many online retailers are looking at India as a possible destination for global expansion. While the country is still maturing, the eCommerce landscape in India currently caters to young consumers (75% of online shoppers in India are under the age of 35) with a keen eye for fashion and technology.
So what exactly is the state of eCommerce in India in 2015? To learn more we asked some tough questions to Malahar Pinnelli, the Managing Director of our office in Bangalore, India.
eCommerce in India is drawing investments from major global eCommerce players including Alibaba and Amazon. What currently existing aspects of eCommerce in India do you think are appealing to these companies?
The primary reason for these investments is related to the rapid growth in the eCommerce sector with the possible ROI being very high if the right investments are in place. Another reason is consumers in India are still getting used to products being available 24/7 online – this “new age” of retail in India also means essentially every online retailer is new to the market and there is currently much market share to be obtained by these companies. Flipkart currently holds a large amount of market share, but other more local online retailers continue to expand and invest in their business either by working with major global companies like Amazon and Alibaba or through venture capitalists.
The online retail industry in India is projected to grow to 3% of the entire Indian retail industry (currently only 0.5%) by 2020. What do you think will drive this growth of online retail sales within India?
There are many factors that will drive this growth including the increased ownership of smartphones in India, the growing middle class, and the purchasing power of young consumers. Some additional factors include more products being available online (especially through a single website), discounted products (through sites like Cashkaro), and the ability of online retailers to provide easy returns and product exchanges. Traditional retail stores in India do not have returns and exchanges so this is a major selling point for online retailers.
Low credit card ownership has been viewed as something that has prohibited the growth of eCommerce in India. What tactics are online retailers in India utilizing currently for payments and how are they looking to improve the online payment process?
This may be a bit of a misperception as credit cards and online banking payments are becoming widely used; it’s just that Indian consumers prefer COD (cash on delivery) as the way to pay for their online purchases. Many online retailers also provide installment payments as an option to be more attractive to consumers in India and some major online retailers have created their own payment gateway that is secure and works similar to PayPal.
You mentioned the increased ownership of smartphones earlier in the interview. What impact do you think mobile commerce has and will have in India?
Mobile commerce has a huge impact on the online retail industry in India. Over 90% of all internet users in India are also active internet users on their mobile devices and this percentage actually continues to rise. All legitimate online retailers in India have a mobile optimized site and many have an app for smartphones to make the mobile commerce experience better for consumers. Mobile commerce is important for online retailers in holiday sales and efforts to optimize the mobile experience through personalization (i.e. custom on-site search experiences) are becoming more common.
What, if any, additional trends should online retailers be aware of regarding eCommerce in India?
There are several trends, but here are four unique nuances and trends related to eCommerce in India that some online retail professionals might not be aware of…
1) Many online retailers keep track of consumers who shop from their site on a regular basis and add them into a “Premier Consumer Group”. These consumers are sent gifts and/or coupons on a regular basis and they get additional discounts on the products they buy.
2) Reward and loyalty points are still not a big concept in India and the only online retailers to attempt these programs have been very large sites. Having a good reward or loyalty points program would likely have a positive impact and could be a competitive advantage.
3) “Cash back” offers are currently limited to certain payment cards. Only a select number of banks in India have these offers on a regular basis with the major online retail sites. Including these offers on commonly used credit/debit cards like CitiBank, HSBC, and ICICI can help to grow an online retail business.
4) Most of the popular online retailers in India right now are marketplaces such as Amazon and Alibaba, not branded eCommerce sites such as Walmart or Target. The success of “branded brick-and-mortar” retailers in eCommerce space in India has not happened quite yet, but it could be the next step for eCommerce in India.
Thanks to Malahar for sharing his great insight on the state of eCommerce in India in 2015! It will be interesting to see how eCommerce in the country continues to evolve, especially given the strong mobile impact and presence that currently exists today. Current trends such as COD payments are unique compared to other countries and could be a contributing factor as to why some major international brands have not expanded into India quite yet. Overall, India is an exciting country to watch from an eCommerce perspective and it’s one to keep an eye on in the coming years.