Impact of e-commerce on Indian Economy by Mr. Ankit Arora ,Director, Link2 Connect

The Internet and the WWW heralded an unprecedented evolution in the transformation of all business and communication. At present Internet is growing at an annualized rate of 34% and now has three billion users word wide. Due increased reliance of WWW, e-commerce will continue to grow in next few decades. 

E commerce today 

E-commerce is defined as buying and selling of information, products, and services via computer networks or internet. Internet and electronic commerce technologies are transforming the entire economy; and changing business models, revenue streams, customer bases, and supply chains. New business models are emerging in every industry of the New Economy. Travel industry and ticketing has seen a sea change in the last decade. One estimate suggests that online travel industry contributes about 76% of total net commerce in India. Ticketing is now done either in third party websites or airline sites. Customers of online shopping are delighted with prompt delivery and flawless payment mechanisms building trust in consumers. Even online cclassifieds have made a successful transition online with jobs and matrimonial taking the lead. Online retailers are now pushing a larger number of categories such as electronics and white goods. In these emerging models, intangible assets such as relationships, knowledge, people, brands, and systems are taking center stage. 

The growing impact of e-commerce can be readily seen in the pattern of advertisement spend by the corporate world. Although  traditional media like Radio and TV hogs about 80% of advertise revenue in 2013, the share of the online advertise pie is increasing at fast pace. From just one percent in 2005, it is about 7% in 2012. The total value of online advertising in 2012 was 1750 crore INR. Companies are capitalizing on the social networking sites also for their recruitment, selection and for product promotion and survey among customers. One survey pegs that by 2015 India will have 30 million online buyers and consumers adapting to ecommerce sites, compared with the 2.5 million online buyers at present. 

Market for the youth 

The world e-market crossed one trillion marks in 2012 marking a definite point in the retail marketing. During 2013, in the Asia-pacific region B2C e-commerce sales grow at about 23% with sales in China and Indonesia growing particularly fast, up 65% and 71%, respectively. Even the saturated markets of Europe saw a double digit growth of about 17%. 

According to a survey by ASSOCHAM the e-commerce in India grew at a staggering 88% in 2013 to $ 16 billion, despite slower economic growth witnessed during the period. Although it is the smart-phones and electronic goods like computers that are the primary drivers in India, the e-commerce goes beyond to include gadgets, apparel and jewellery, home and kitchen appliances, lifestyle accessories like watches, books, beauty products and perfumes and baby products. Further the survey indicates that largely it is the youth that make online purchase. The age-wise analysis revealed that 35 per cent of online shoppers are aged between 18 years and 25 years, 55 per cent between 26 years and 35 years, 8 per cent in the age group of 36-45 years, while only 2 per cent are in the age group of 45-60 years. Besides, 65 per cent of online shoppers are male while 35 per cent are female. With India poised to become youngistan, with about 64% of the population by 2020 in the age group of 15-35, the potential of e-commerce is all set to raise. 

Not just a metro phenomena 

If yesterday it looked that that the e-commerce was the way of handful of metro cities. However it is fast becoming way of life in non-metro urban areas and catching up even in rural areas. A survey by e portal in 2011 indicated that metros contributed 51 per cent of all e-commerce transactions, while Tier 2 and 3 cities contributed about 40 per cent and rural India 9 per cent. Use of mobile Internet and smart phones has definitely given a push to this sector as the access is available to the consumers on their fingertips. In small towns there may not be adequate market to make it viable to open a shop to sell products such as digital TV or fashion products. However there are consumers who may have purchasing power and hence e-commerce is the perfect route to deliver their products to those whose can afford from non-metros. While consumers in the metros buy products and services mainly because of convenience, those in the non-metros buy due to non-availability of products. With the ever increasing Internet penetration and proliferation of smart phones, companies selling products and services through websites are looking at smaller cities for expanding business. Indeed in the coming years it is the non-metros that are to play a vital role in the growth of the e-commerce. The booming e-commerce space in India is likely to be the game changer for job market as with growth online retailers would indeed hire personals from management to delivery segments.  

Challenges 

E-commerce has its own challenges. Small and micro retail traders and traditional shop owners of FMCG have discomfort with the growing e-commerce as they fear that their turnover will sharply reduce. It is in this context one must see the recent budget proposal of the Government of India that has allowed, manufacturing units, including set up by foreign entities to sell products through retail including e-commerce platforms without any additional approval. This provision virtually allows FDI in retail, but in a limited way. This policy is expected to provide significant encouragement to domestic manufacturing resulting in employment, especially in retail and e-commerce. Differing to the views of the small traders association, the government, it appears although permits foreign entities that has come into the country as a manufacturer, to do e-commerce even if it is sourcing from third-party vendors, but has prohibited purely single brand traders to set up e-commerce platforms. Given the sensitivity as well as significance of the e-commerce it is time that a comprehensive guideline to deal with e-commerce is formulated providing flip to e-commerce at the same time protecting the consumers and domestic compulsions.