Digital Commerce Growth in India

Digital Commerce Growth in India

White paper released by Indian Retailer.com

By Abhinav Bhagat, Head of Market Reseacrh

May 25, 2023 / 18 MIN READ

Abstract

India is at the cusp of a digital revolution. Declining broadband prices, aided by the launch of 3G services followed by the launch of 4G services, and now 5G, have been driving this trend which has led to an ever-increasing number of netizens. The changing lifestyles of the country’s urban population and the convenience of shopping from one’s house have also led many people relying on the internet for their shopping needs. B2C players like Snapdeal.com, Amazon.com and Flipkart.com have made intensive efforts to upgrade their areas such as logistics and the payment infrastructure. Furthermore, the Indian consumer’s perception of online shopping has undergone drastic change, and only for the good.

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Introduction

The Digital Commerce market has seen exceptional growth since last year. It is expected that the global digital commerce market size accounted for USD 4.6 trillion in 2021 and it is expected to reach around USD 19.2 trillion by 2030. With increased use of smart phones tablets and internet, Digital Commerce has become widely accessible to both urban and rural users. Foreign companies are investing huge sums of money into Indian companies. Digital Commerce is growing in rural areas with most of the traffic coming from tier 2 and tier 3 cities. In July 2014 Amazon invested $2 billion in India, following the news of Flipkart raising $1 billion in funding. There are a lot of companies in Digital Commerce market like Ezilikart Digital Commerce Services, Viha Digital Commerce, Oncods Digital Commerce Solutions etc. With numbers of companies increasing the competition is bound to happen for the first position. The retail industries have recorded annual growth of 40-50%, huge investments is expected to flow into logistics sector in future. Many offline brick and mortar companies are slowly moving to online business and those who are not in online commerce business will be forced to come online. The commerce industry is in nascent stage, more niche Digital Commerce companies are joining the competition. The customer is the king and there is pressure to deliver the best products and services to the customer.

What is Digital Commerce?

Digital commerce is the end to end process of sale of goods and services through digital channels. It includes processes like market research, customer acquisition, data analytics, and supply chain management. Digital commerce enables consumers to buy goods and services through an interactive experience. This includes people, processes, and technologies to execute the offering of development content, analytics, promotion, pricing, customer acquisition and retention, and customer experience at all touch points throughout the customer buying journey.

Current Scenario of Digital Commerce in India

  1. Mobile to be the top key aspect of Digital Commerce: With mobile apps being developed by most Digital Commerce companies, Smartphones are increasingly replacing PCs for online shopping due to ease of shopping anywhere from a Smartphone. In 2013, only 10% of the mobile users used Smartphones and only 5% of the Digital Commerce transactions were made through a mobile device. This figure has more than doubled, and more than 13% of all Digital Commerce transactions today happen via mobile. According to some industry experts, over 50% of the orders are being placed through mobile apps, which is not only leading to customer acquisition but also building customer loyalty for brands.
  2. Factors that will fuel growth: Fast growing internet population of 749 million in 2020, is an indicator of the sector’s huge growth potential in India. In relation with its population, 52% of Indians use the internet. This indicates the potential of internet use in India and as internet penetration increases, the potential of growth for the Digital Commerce industry will also increase.
  3. More business is coming from small towns: Digital Commerce is attracting customers from Tier 2 and 3 cities, where people have limited access to brands but have high aspirations. According to Digital Commerce companies, these cities have seen a 30% to 50% rise in sales.

Key factors to be taken into account before entering into new Digital Commerce business: To achieve success, Digital Commerce companies will have to understand the intricate landscape of new markets in addition to their own internal capabilities and limitations. The following factors must be considered:

  1. Market Size: Before moving into a new market, it is important to consider how big or small the overall opportunity is.
  2. Digital Commerce readiness: It is essential to completely understand the payment and logistical infrastructure, consumer behavior, retail opportunity and technological developments.
  3. Barriers to entry: Companies should know the regulatory environment and connect with solution providers, content distribution networks, and digital agencies.
  4. Competition: There is also a need to understand what competitors are doing, their online strategy and the nature of each offering.

White Paper Released by Indian Retailer.com

Recently, a white paper on Growth of Digital Commerce in India was released by Indianretailer.com at a D2C and IReC Summit 2023 happened recently in Bangalore on 15-17 May 2023. It was released by CEOs of Top retail companies and Mrs. Ritu Marya, Editor in Chief, Indian Retailer.

White paper released by CEOs of Top retail companies and Ms Ritu Marya, Editor in Chief, Indian Retailer.

Key Concerns in the Field of Digital Commerce:

Certain Digital Commerce companies and industry experts have raised concerns that deep discounts, free shipping, intense competition and higher rejection rates due to cash on delivery (CoD) have impacted online e-Tailing adversely. Some of these concerns are specific to India and are more difficult to overcome than issues such as internet penetration and getting more people to shop online.

Generation and sustenance of traffic: Competition from established Digital Commerce companies is making it difficult for private label brands to generate traffic on their white-label websites.

  1. High customer acquisition cost: The customer acquisition costs have been rising due to intense competition by the relatively better off companies.
  2. Last-mile delivery: Poor last-mile connectivity, especially in remote areas is another problem faced by Indian Digital Commerce players.
  3. High payment cost: CoD services impose substantial financial cost. In India, unlike in developed markets, CoD continues to be a preferred route of payment.
  4. Low profitability: Profitability is negatively impacted by high customer acquisition costs, free shipping and high rejection rate of CoD orders.
  5. Regulatory barriers: Regulatory barriers in the Indian Digital Commerce market are higher as compared to more mature markets.
  6. Skilled manpower: Lack of talent availability and high attrition are causing manpower crunch, which is fast becoming a hurdle.

Future of Digital Commerce

Mobile commerce has increased infiltration in Digital Commerce market. Mobile transactions are increasing every year, the value of these transactions are estimated to be Rs. 36,000 crore according to Forester research. According to Google India managing director India adds five million internet users a month which are mobile users. Recently Myntra decided to shut down its website and moved all its operations to its mobile app. Gartner says that digital business means companies interact with competitors with congruence of interest. They cooperate with each other to work in same market to acquire global reach. Future of Digital Commerce looks promising because more and companies will be investing in small business startups. Digital Commerce investment list was big in India last year, more investment are expected in coming years. Social media has become marketing place for merchants where they can advertise and promote their product freely. The expansion of mobile networks and social media in commerce will take Digital Commerce to new heights that will change online retail markets in future.

Volume of UPI transactions done in 2022 are 74.044 billion. Volume of UPI transactions done till 2022 is 146.6 billion.

Volume of UPI transactions done in 2022 are 74.044 billion. Volume of UPI transactions done till 2022 is 146.6 billion.

 

Value of UPI transactions done till 2022 are INR 256.2 trillion. Value of UPI transactions done in 2022 is INR 125.95 trillion.

Value of UPI transactions done till 2022 are INR 256.2 trillion. Value of UPI transactions done in 2022 is INR 125.95 trillion.

Growth in Omni channel components since in India

Growth in Omni channel components since in India

Conclusion

We live in a world where we communicate with each other over mobile phones than we do face to face. For keeping in touch, shopping, hailing a cab, or ordering food everything begins and ends with that Smartphone new technologies, especially mobile, in India has sparked a social change that’s difficult to quantify. While mobile, internet, and social media penetration and growth can be quantified; describing the changes in social values and lifestyles that have accompanied those trends is far more challenging. Internet connectivity has become basic obligation not only in urban cities but also in rural ones. The rapid growth of Digital Commerce is challenged by legal hassles, logistics and many factors which need to address early.

• Companies that want to expand their business need to spend resources on advertisement, branding, logistics, reverse logistics, supply chain management and customer services.

• There is a need of depth understanding of security requirements such as confidentiality, privacy of data.

• To maintain loyal customers companies need to provide superior website experience coupled with customer service.

• Companies who want to reach more consumers and want to cater need of local population should develop website in local languages.

Digital Commerce growth is inevitable as Indian Digital Commerce industry is having access to funds both local and international investments. The Digital Commerce industry will be faced with challenges as it matures but there is potential for growth owing to rising internet users and advancement in technology. 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 fueled 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 recognize 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 the empowerment of Indians. Increases in the number of smartphones and 3G subscriptions are further driving this growth. Thanks to rising internet penetration, the gross number of online users in India now exceeds the number of people who have completed primary education. This shift emphasizes the increasing relevance of India’s digital economy. There is humongous potential for Digital Commerce companies owing to the growing internet user base and advancements in technology. However, this will not be without its share of challenges, be it operational, regulatory, or digital. Companies will need to work harder to provide better service to the customer as more companies will be foraying in Digital Commerce business in future.

To download the entire white paper, click https://pink-keely-60.tiiny.site/

 

Abstract

India is at the cusp of a digital revolution. Declining broadband prices, aided by the launch of 3G services followed by the launch of 4G services, and now 5G, have been driving this trend which has led to an ever-increasing number of netizens. The changing lifestyles of the country’s urban population and the convenience of shopping from one’s house have also led many people relying on the internet for their shopping needs. B2C players like Snapdeal.com, Amazon.com and Flipkart.com have made intensive efforts to upgrade their areas such as logistics and the payment infrastructure. Furthermore, the Indian consumer’s perception of online shopping has undergone drastic change, and only for the good.

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