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Home > Business > Special

E-commerce catches on despite concerns

BS Reporter in Mumbai | October 19, 2007

Despite being an over Rs 7,000 crore (Rs 70 billion) sector, e-commerce is not the main driver of internet usage. In fact, it comprises only 4 per cent of internet usage.

Email claims the biggest chunk, information search comes next, chat comes third, entertainment follows and e-commerce comes last. But e-commerce is picking up.

For instance, while email comprised 64 per cent of all users on a base of 4 million active (regular surfers) users in 2001, it dipped to 46 per cent on a base of 21 million active users in 2006.

Chatting is more or less stable at 10 per cent over the same period, while information usage has increased from 20 per cent in 2001 to 32 per cent in 2006. E-commerce too increased to 4 per cent in 2006 from a mere 1 per cent in 2001.

The size of the business to consumer (B2C) e-commerce industry for the year 2006-07 - which was computed to be around Rs 7,080 crore (Rs 70.80 billion) - is expected to touch Rs 9,210 crore (Rs 92.10 billion) by the end of 2007-08, according to the latest report by the Internet Mobile Association of India (IAMAI) and IMRB. This implies a growth of about 30 per cent over the current year.

The online travel industry remains the largest contributor to e-commerce, sized at Rs 5,500 crore (Rs 55 billion) for the year 2006-07, and is expected to rise to Rs 7,000 crore (Rs 70 billion) by the end of 2007-08. The overwhelming response of consumers towards this segment is triggered by the entry of low-cost carriers.

The industry saw an upsurge in the travel aggregators and tour operators, thereby bringing affordable travel at the doorsteps of Indian travelers. The industry has witnessed an increase in the number of travelers as well as number of travels per traveler.

However, the biggest issue facing this industry is limited penetration of credit cards, coupled with the consumer's apprehensions towards using their credit cards online, notes the report.

The non-travel industry caters to niche segments. For instance, e-tailing stands at Rs 850 crore (Rs 8.5 billion) in the year 2006-07 and contributes maximum to the online non-travel industry. It is expected to touch Rs 1,105 crore (Rs 11.05 billion) industry at the end of 2007-08.

Owing to elimination of physical costs, the category offers the best deals for low-end as well as high-end products. However, many customers complain about the untimely delivery of products ordered online.

Online classifieds is the second-largest contributor to the online non-travel industry. Estimated to be around Rs 540 crore (Rs 5.4 billion) at the end of 2006-07, it is expected to rise to Rs 820 crore (Rs 8.2 billion) by the end of 2007-08. Since, this segment is consumer-driven, it provides the users flexibility to access large database at the lower costs.

Sale of information online too is becoming a success. More and more players are entering the market to sell exclusives videos, research data, and reports.

The size of the online subscription market is expected to grow by 50 per cent - from Rs 20 crore (Rs 200 million) in 2006-07 to Rs 30 crore (Rs 300 million) at end of 2007-08.

Along with the PC-based internet access, the mobile-based internet access is expected to drive the growth of B2C and C2C e-commerce industry in the country. With increase in the mobile subscribers, there has been a rise in digital downloads to the mobile phone.

With the surge in mobile penetration and usage of GRPS enabled mobile handsets, the size of digital downloads market is expected to rise from Rs 170 crore (Rs 1.7 billion) in 2006-07 to Rs 255 crore (Rs 2.55 billion) at end of 2007-08.

Thus, with continuous efforts towards making online payment systems safer and rise in online shoppers from smaller cities owning to increasing Internet and mobile phone penetration, the growth of B2C e-commerce industry is inevitable in the country.

The next phase of growth will be marked by localised product offerings and making content available in various Indian languages, notes the report.

Top 6 concerns while buying online

  • Not sure of product quality
  • Cannot bargain/negotiate
  • Not sure of security of transactions /credit card misuse
  • Need to touch and feel the product
  • Significant discounts are not there
  • Have to wait for delivery

Source: i-Cube 2006

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