Tier-II, III cities move to virtual shopping

Demonetisation, digitisation Bappaditya Chatterjee & Fakir Balaji

The increasing use of digital technologies in buying and selling merchandise for convenience and mobility pushed e-commerce in India to an inflection point in 2016. The rapid growth of smart phones and internet connectivity across the country, especially in tier-II and III cities, has given greater access to virtual shopping and e-tailing for the tech-savvy generation and millennials.

Even as e-tail behemoths Flipkart, Snapdeal and Amazon vied for a greater pie of the growing e-commerce market, enterprises and businesses in diverse sectors have joined the bandwagon to hard-sell their products by leveraging digital technology. “E-commerce in India is at an inflection point, thanks to robust growth in consumer demand.

Mobile penetration and increasing use of smart phones have led to the emergence of m-commerce, which accounted for about 40 per cent of the sector's sales this year,” Tata CLiQ Chief Executive Ashutosh Pandey said. According to a study by the Internet and Mobile Association of India (IMAI), transition to mobile shopping is faster in India, which overtook the US this year in terms of active mobile users (220 million) and next only to China in user base.

The emergence of the Omni-channel model in e-tailing has also enabled netizens shop across e-portals, web sites, apps and in stores as per their convenience. “As a result, e-commerce players are looking at seamless integration of online and offline stores to offer consumers a unique shopping experience in the virtual and real worlds,” Pandey asserted.

With digital payments increasing through multiple gateways for online and offline buying, the push for cashless transactions in the aftermath of the November 8 demonetisation has driven more and more consumers to e-shopping and m-shopping. Greater use of cloud computing, data analytics and artificial intelligence has made e-commerce players not only competitive and smart in retaining their mass user-base but also map shopping trends and predict purchasing patterns to consolidate their dominant position for sustaining growth.

“The sector, however, continues to face a trust-deficit and last-mile delivery issues persist despite having robust logistics networks and partners. Lack of trust in online transactions makes many shoppers prefer cash on delivery, which is risky and time consuming,” Pandey lamented. The sector is also bedevilled by infrastructure woes across cities and towns, increasing operational cost for timely delivery and expanding the customer base.

Though demonetisation has impacted the retail sector due to the cash crunch, digital transactions have enabled e-commerce firms to weather the crisis. Growing at about 40 per cent cumulative average growth rate (CAGR), the country's e-commerce market is projected to touch a whopping $38 billion this fiscal (2016-17), with the online travel segment alone accounting for 70 per cent, followed by e-tailing, financial services, classifieds, job searches and matrimony.

“The key drivers of the sector's growth have been increased internet penetration, growing acceptability of online payments and an increase in per capita income,” a Snapdeal spokesperson said. Favourable government policies and improving infrastructure have also contributed in connecting consumers and sellers across the country. “The start-up ecosystem has gone through a phase of consolidation, indicating maturity in the sector for achieving scale, building capabilities and increasing the market share,” the spokesperson explained.

Given the demographics and rapid adoption of the internet, it's advantage for all the stakeholders to grow and consolidate. Global audit firm KMPG's e-commerce partner Sreedhar Prasad said demonetisation had impacted the sector with a 30 per cent dip in sales and, as a result, the annual growth may not show a big spike. “The cost of business, including that of supply chains, remains a challenge. Unless the cost is regulated, profitability will be difficult in the sector,” Prasad added.