“E-commerce is an evolution. You don’t have to get everything right immediately; you can learn from it.”
All the Indian e-commerce companies are going through a tough phase because of less number of ecommerce users in Indian subcontinent. Recent news, Flipkart needs big money to keep delivering and require about $150 million from new investors in the next six to nine months.
In India, technology adoption changes the lifestyle of normal human life and because of the social chain with large population it changes the way business is done. Telecommunication has already brought in revolution, and much awaited impact of internet in retail and baking industry is just in the corner. But prediction of future is not easy.
Let me give a simple context, according to the Google public data (the actual data that come from World Bank) internet users as percentage of population in year 1998, in India it was 0.14% and in North America it was 29.58%. In 2010 it was 7.5% in India and again in North America it was 74.95%. Interestingly, internet users in Brazil in the year 1998 were 1.48% and in 2010 it has grown up to 40.65%.
Now, I would like to make a comparison of technology impact on the industry, amazon.com was incorporated in 1994 and went online in 1995. Currently it is the largest online retail store in the world. In 1994 only 4.62% of North Americans were using internet. In 2010, amazon.com’ s revenue net sales were at $ 34.20 billion where North America accounted for 54.7% of sales. According to the U.S. Commerce Department, North American e-commerce was about $170 billion for 2010.
Looking at the data and trend in North American e-commerce market, it would be easy to assume a few predictions for India:
i) India is not yet seen a major boom in e-commerce market as majority of the population is yet to use internet.
ii) Raise of a e-retailer like amazon.com is inevitable but will not be easy as amazon.com also took 10 years to get into profit.
Another interesting part is a small percentage of the total population; itself represents a very large number in case of India. According to another news India reached 100 million internet users now (that could be a mere 7.5 % of total population)
Off late, many of the Indian e-commerce web-sites generated large funding from investors and as a consequence there have been a large number of commercials in TV, that was unlike previous trends where only a very few websites used advertisements in conventional channels. Though the current situation is not green, every investor is very much optimistic and why not as India have so much of potential. But there is a big concern also, that only a very small faction of 100 million Indian internet users performs any ecommerce transaction. Is the consumer behavior of Indian internet users going to change dramatically?
While internet user section shows difference of opinion, there is no doubt that Indian mobile communication system and consumer behavior through mobiles are very different. The large amount of ring tone download, music and other services and their sales depicts the acceptance of mobile in every individual. Telecommunication because of the infrastructure related challenges used have snail pace penetration in India, and mobile communication companies and systems broken that barrier.
While India has very wide consumer mix, a few more interesting facts coming into light that shows the explorer segment of Indian consumers are much more adaptive. As per a study conducted by Google India and IPSOS, mobile internet is the next BIG revolution in India. Around 94% Indian Smartphone users have used their smart device to access Internet from their phone. And 56% of Smartphone users in the country access the Internet multiple times a day in comparison to US, where the number stands at 53%.
Technology plays as a large enabler and consumer behavior in India is different than most of the developed countries because of infrastructure, population and accessibility. Mobile telephony became a huge success when it is able to attract the mass market. Changes in telecom tariff and cost of handset made it possible. Similarly, retail banking industry has already seen the change because of ATMs. Every ATM in India service much more large number of customers than in US or Europe.
Normally a standard e-Commerce platform provides 3 kind of facility to the users:
i) Banking: Conventional retail banking options through mobile phones with checking of balance, transfer of money from one account to another account, within or outside the Bank.
ii) Payments: providing a platform for making payments through mobile phones. This would include payments to merchants.
iii) Remittance: Enabling remittance of money to overseas
Because of the large population and very limited number of branches in rural area, India will require a very easy way of banking, a softer solution that could touch everyone. An interesting result from a study of mobile banking and payment adoption rates in 14 countries by ACI Worldwide (NASDAQ: ACIW) and Aite Group, has discovered a new category of consumer, known as Smartphonatics, that is driving the demand for mobile payments and banking. Smartphonatics are more common in India and China than in the U.S. and Europe. According to the study in the mobile banking adoption, India ranks highest for mobile banking adoption at 76 percent, followed by China.
There is no doubt the explorer and early adaptors itself create a very large market segment because of population. 100 million internet users is a very large number and future is much more promising as it just covers 7.5 % of the population and large number of Smartphonatics, confidence in mobile banking shows that mCommerce is going for a boom in India, investors just need to keep their patience and continue the effort. There would a very little surprise if mobile becomes the most preferred option of banking for a normal Indian.
