Digital TransformationRetailThe Future of India Is E-Commerce

The Future of India Is E-Commerce

Less than a quarter of India's population has access to the Internet today, but the country's future in e-commerce appears promising.

With just over 1.2 billion people, India is the second most populous country on Earth. Only around 33 million of these people are focused around the three main commercial hubs of Mumbai, Delhi, and Bangalore. That means 97 percent of the population is spread out amongst rural communities.

Surprising to some, India has the second largest Facebook market globally, just behind the U.S. at 125 million active users. Of these users, 59 million are actively accessing the platform on a daily basis, with 53 of them accessing from their mobile phones.

Internet penetration still has a lot of room to grow in India. Only 22.2 percent of the total population has Internet access today, according to eMarketer‘s September issue of The Global Media Intelligence Report, Asia-Pacific.

emarketer-india-internet-use-image-1

This translates into a hefty 277.4 million users – and that is just scratching the surface. By 2019, 459 million people – or 35 percent of the population – will be Internet users, which is good news for India’s e-commerce industry.

According to eMarketer, this year India’s retail e-commerce sales are estimated to grow 80.3 percent year-over-year – the largest increase worldwide. In spite of this huge growth, e-commerce will still only account for 1.3 percent of total retail sales. However, this is estimated to leap to 3.3 percent by 2019.

emarketer-india-e-commerce-image-2

The big e-commerce winner at the moment is a company called Flipkart, which currently dominates with a 44 percent market share. Currently valued at $15 billion in U.S. currency, Flipkart started in Bangalore in 2007 – the Silicon Valley of India. It was founded by two former Amazon employees, and eight years later boasts a staff of more than 33,000, selling everything from electronics, to appliances, furniture, books, apparel and more. Flipkart’s rivals include Amazon India, which occupies 22 percent market share, and Snapdeal, another Bangalore-based company that currently holds 14 percent of the e-commerce share.

Three main factors contributing most to e-commerce growth in India are:

1. A Rise in Household Incomes

India’s GDP has seen growth rates hovering between 6.5 percent and 8 percent – compared to 2.4 percent in the U.S. This has helped to stimulate more job growth and a general improvement in living standards. Not to mention the new Prime Minister, Narendra Modi, built his campaign around the modernization of India’s infrastructure and an emphasis on increasing foreign direct investment. Both factors heavily influence the e-commerce industry.

2. Continuous Mobile Internet Growth

eMarketer estimates there will be 986.4 million mobile connections in India this year, reaching 78.8 percent of the population. Only 13.4 percent of these are smartphones, but even this is changing. By 2019, 25 percent of the population will have smartphones, especially as low-cost phone brands, like China’s Xiaomi, start to enter India in a big way.

Also, both Snapdeal and Flipkart have really taken a mobile-first approach to their business. As a result, Snapdeal sees 75 percent of its orders come in via mobile devices, and 70 percent of Flipkart’s orders are placed via mobile.

3. Innovative Hyperlocal Strategy

Another interesting tactic these brands are taking is based on hyperlocality. Again, 97 percent of the population lives outside the three main cities, so they’ve had to think of ways to connect with these regional communities.

Last April, Amazon initiated its Chai Cart Program, in which carts offer free tea, cold water, and juice to local retailers and entrepreneurs. These carts have Amazon-trained professionals who explain to local merchants the benefits of selling online. Likewise, in July Flipkart launched India Art House, an online store offering potential sellers a system to promote regional products like handcrafted goods, home décor, and other furnishings.

As the government looks to stimulate growth, modernize its infrastructure, and encourage entrepreneurialism, India will become a major global player in the e-commerce sector. This evolution will serve as a model for other emerging markets looking to get into the space.

*Homepage image via Shutterstock.

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