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Rediff.com  » Business » India's e-commerce awaits more billion dollar babies in 2015

India's e-commerce awaits more billion dollar babies in 2015

December 31, 2014 14:52 IST

The passing year saw big investors from India and abroad putting their money on various e-commerce ventures, which got funds to the tune of $3 billion from individuals, companies and private equity firms.

A worker collects items to pack into boxes at Amazon's logistics centre in Graben near Augsburg.

Image: A worker collects items to pack into boxes at Amazon's logistics centre in Graben near Augsburg. Photograph: Michaela Rehle/Reuters   

From Amazons of the world to Chinese Alibabas to desi Flipkarts, everyone wants to have a pie of the burgeoning e-commerce market in India and consumers are not complaining with sweet sale deals coming their way.

In the process, these e-retailers rubbed the brick-and- mortar traditional retailers wrong way in 2014 and are facing charges and investigations for alleged unfair trade practices.

Still, no one has any doubt about future growth prospects of the e-commerce market in India and experts believe that the country may see many more billion-dollar entities in this space during the new year 2015, while expanding the size of this over $3-billion marketplace.

Flipkart

Image: Flipkart office at Koramangala, Bengaluru.

The passing year saw big investors from India and abroad putting their money on various e-commerce ventures, which got funds to the tune of $3 billion from individuals, companies and private equity firms.

The industry players expect the fund inflows to continue, or may be get stronger in 2015 as well.

"With large scale global investments, growth of niche category eCommerce firms and the entry of global competitors/brands, eCommerce landscape in India looks very promising," homegrown online marketplace major Flipkart Co-founder and chief executive officer Sachin Bansal told PTI.

Today, India is one of the fastest-growing eCommerce markets in Asia/Pacific along with China.

With increase in internet penetration, adoption of smartphones and lower data rates, the way India shops is completely changing, he added.

Kunal Bahl co-founder and CEO of Snapdeal said that e-commerce sector saw phenomenal growth this year and is changing the way people shop.

A view of the office building of Alibaba (China) Technology Co. Ltd on the outskirts of Hangzhou, Zhejiang province.

Image: A view of the office building of Alibaba (China) Technology Co. Ltd on the outskirts of Hangzhou, Zhejiang province. Photograph: Steven Shi/Reuters

"We are focused on delivering the best shopping experience for customers.

“We are investing heavily on logistics and our platform so that consumers have a richer experience," he added.

Analysts say the online shopping space in India is expanding at a massive scale and the journey is not yet over.

Consulting firm PwC's India Technology Leader Sandeep Ladda said the eCommerce sector has seen unprecedented growth in 2014.

Ecommerce"It was driven by rapid technology adoption led by the increasing use of devices like smartphones and tablets and access to the Internet through broadband, 3G, etc, which led to increase in online consumer base," he added.

Furthermore, favoured demographics and growing Internet user base helped in aiding the growth.

In terms of major highlights, growth shown by homegrown players like Flipkart and Snapdeal and the huge investor interest around these companies showed the immense potential of the market.

Also, in terms of funding, renewed market sentiments post the formation of the new government helped and overall business confidence significantly improved, Ladda said.

Research firm Technopak's Associate VP Pragya Singh said 2014 was an inception year for the eCommerce space with intense competition and investor interest.

"Players had an urgency to scale up and grab leadership positions. Leaders are beginning to emerge," she added.      

Apart from the traditional online formats of retail and lifestyle, newer online business segments like classifieds, real estate, grocery and healthcare have also become popular and will continue to gain traction, he added.

Going ahead, Singh said the market will see leaders emerge more clearly as the competition will intensify.

Besides, niche players will evolve as well as the logistics will continue to evolve. Also the sector might see consolidation, she added.

Along with online shopping, online payments industry is also witnessing a strong growth. The further development of online payment and mobile commerce offers great opportunities in 2015 as well.

For consumers in small towns and cities across India, mobile devices will be the only contact point in their evolution towards becoming online customers, while others in big cities will use smartphones along with computers.

Payment solutions provider Oxigen said journey of online payment mechanism was primarily driven by cash on delivery as it accounted for a major share contributing to the sales.

eCommerce and payments brands significantly encouraged transition and transactions flow through mobile application as a platform, Oxigen Services Deputy MD Sunil Kulkarni said.

Amazon founder and CEO Jeff Bezos poses as he stands on a supply truck during a photo opportunity at the premises of a shopping mall in Bengaluru

Image: Amazon founder and CEO Jeff Bezos poses as he stands on a supply truck during a photo opportunity at the premises of a shopping mall in Bengaluru. Photograph: Reuters

"The 3 key eCommerce players -- Snapdeal, Flipkart and Amazon -- with their special schemes pushed for traffic from online to mobile application resulting in tremendous traffic shift," he added.

In 2015, he said that mobile is expected to be a major platform in view of smartphone population touching 100 million users, including Android, Windows and iOS.

PayU co-founder and CEO Nitin Gupta said 2014 saw an increased number of payments happening through mobile devices.

The number increased 2-3 times from 2013 levels and now mobile devices account for 35 per cent of total transactions.

"2015 will see a deeper marriage between offline and online in terms of collecting payments. Many small merchants like brick and mortar shops, mom and pop shops, individuals etc will start collecting payments online," he said.

Also, he added, there will be an increase in adoption of online collection among establishments like electricity boards, schools. There will also be a rise in the number of people using mobiles to pay at physical stores.

"2015 will also see a surge in the use of wallet services to make payment with a lot of benefits being provided by payment companies to the users," he said.

Cash back and coupon firms also made tremendous progress in 2014 aided by growth in online shopping space.

E-commerce bandwagon is not just marching ahead full steam, has begun generating interest for Cash Back and Coupon sites among Venture Capital firms and angel investors as it expands, cashback and coupons site CashKaro co-founder Rohan Bhargava said.

"Being a price sensitive nation Cashback and Coupon sites are gaining a foothold and the trend of affiliate marketing is fast gaining popularity in India.

“According to estimates, affiliates account for up to 15 per cent of sales of e-commerce sites in India, he added.

"In 2015, we expect this trend to further strengthen.

“Investors in India and globally are getting more interested in this sector. On the retailer's side, the affiliate channel is proven to be one of the higher ROI channels," Bhargava said.

Consolidation is also likely to continue in 2015, especially in newer market segments such as real-estate, grocery and furniture, and PwC expects India's eCommerce market to increase by over 70 per cent in 2015.

On the scope for more billion dollar firms, PwC's Ladda said: "The Indian eCommerce market is a primarily minority stake market, with maximum traction in early-stage deals, such funding at early stage will help companies have good foundation and solid base to start from.

"With such strong markets prospects and equally upbeat investor community, we certainly expect many more eCommerce firms from India to enter the coveted billion dollar club."

Ladded added: "Also, significant interest is also seen from traditional retailers planning to move to the online or to an omni-channel format, enticed by potential of the eCommerce market, several Indian companies, as per market reports, including Tata Group, Reliance Industries and Aditya Birla Group, are planning online retailing forays."

The market is in a nascent stages, he said, adding that the sector grew by over 50 per cent CAGR over the past five years.

"And India's overall retail opportunity is substantial, coupled with favoured demographics (young population, rising standards of living and upwardly mobile middle class) and growing Internet user base, strong growth in eCommerce market is expected," he said.

Rishi Ranjan Kala and Stuti Roy in New Delhi
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