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Factors which helped e-commerce retailing develop in India

It has come back and it's back with a bang. After the downfall and internet bubble burst in year 2000, this time e-commerce sites in India have come with a full swing. This time it is for real. Compared with the population of India in year 2000 there were limited people having access to internet. Now the scenario has changed and easily available internet connectivity has made this change.

Numerous e-commerce sites have come up in last 2 to 3 years. Flowers, cakes and chocolates are the ones which people widely used to send through e-commerce sites having operations in India. Earlier people from abroad used to frequent this site, but now locals residing in India have also found it to be interesting by surprising near and dear ones. As a result, these sites are getting good sales. This also has encouraged other active entrepreneurs to venture in India's online retailing scenario.

Today we can find categories from apparels to shoes, general merchandize to accessories and books etc. E-retailers have also gone ahead and started making customized delivery. This has connected well with the customers as they are more than happy to send gifts to their loved ones based on his personal requirements. They also don't mind spending some extra bucks with customization of their choice.

But is IT only the concept which has clicked with customers of these e-commerce sites? Not really. There are many factors which has helped the customer to revisit - these sites. The user experience is the key factor that drives the customer to come back to the e-commerce site. The lesser the time customer spends searching for a product, better will be customer connect and user experience. For example, if one has to search a book of a particular author, one can look into book categories and then click on the sub category fictional or non-fictional. He can also search by giving the author name. This is what makes the e-commerce more powerful.

One of the most important factors which tempt people to buy online - is good deal or discounts. Customers these days often try to search for better deal which gives them better discount than -brick and mortar retailers. With hardly any physical stores, less items to manage in warehouse and some items being managed by vendor, these e-commerce retailers have cut their operational cost to a large extend. Hence they pass on good discounts to customers, which is generally less than the market price. For example, when Home appliances are purchased from leading e-commerce retailers, the price would be approximately 6%-7% less than the market price. This means more percentage discount from MRP.

The other factor is the various payment options. They have Cash on Delivery (COD), pay by Debit card, pay by Credit Card and Net banking. Customers can choose their own payment mode. To top it up, some e-commerce retailers have tied up with leading Indian banks to provide EMI option with nominal processing charge, wherein customers can decide if they want to have 3 months, 6 months or 9 months EMI option. This gives decision making power to customers to purchase now, instead of delaying the purchase for next 3 to 6 months.

Finally the order packing and on-time delivery of the product is the last mile for e-commerce retailers to bring smile on customers face. Some e-commerce retailers in fact have mastered the art of packing. One of my friends ordered a mixer grinder online. They are packed well by manufacturers. It hardly gets damaged, when a truck load of it comes to distributers from manufacturers. But if a single one has to be delivered with other heavy and small items, there are chances it may get damaged if not placed properly in parcel. Hence when the parcel arrived they were excited to receive the product intact with outer box thick carton and bubble wrapped, apart from manufacturer's packing.

For on-time delivery the bigger logistics player are doing well in terms of bulk transfers for inter and intra city. They are also able to meet customer delivery timelines in tier 1 and tier 2 cities. But last mile delivery due to orders coming from remote places or outskirts of a city can be a challenge. I think that here local players can come up and help the bigger ones in fulfilling the last mile delivery. And with volumes growing exponentially, can help local players to grow and expand faster.

The above factors are based on my views. Please feel free to write about other factors from your experience and views that has given a boost to e-commerce in India.


Nice insights put in simple words Sudhanshu.
Ecommerce is really picking up in India. I feel the two main reasons for this boom are convenience & Price discounts more than anything else. Looking at the ferocious price competitions and weaker margins, it remains to be seen whether the Low Price-High volume-Fast Delivery model will be sustainable. I would like to see some more insights on business models and supply chains of major Indian ecommerce players in your future blogs. All the best!!

In my opinion, there are many but three major factors are valid enough to be credited for this booming e-commerce market in India.
1. Changing perception of Indian Consumers towards living life and lifestyle as well. Young generation has contributed a lot in the growth through their early employment and go getter attitude.
2. Penetration of Banking and Internet, in my opinion are the factors which have contributed most and without this technological advancement nothing was possible.
3. Logistics is and will remain a critical factor in India. Just think of Dominos in India when they started home delivery and above all, delivery in 30 minutes. Unbelievable step it was then when number of articles criticized this move by Dominos. If Dominos can prove themselves, why not e-commerce market when everybody (Logistics Companies) are trying their best to make the road smooth.

Thanks Aditya. Rightly pointed out that convenience and price discounts are factors which are driving it. I think the model which you spoke would be sustainable with consolidation to some extent. Increase of Awareness and acceptability should make it sustainable.

Hi Mukesh. Thanks for writing in. Indeed logistics is one of the major and critical factor in India. Although logistics companies are increasing their reach and presence in last mile delivery, it is yet to be seen how effectively they would accomplish it and sustain it. It would be good to see if products arriving in the city are delivered same day to customers.

Good blog highlighting the rise of ecommerce in India. You have listed a lot of opportunities, but there are many challenges as well. For instance, Cash On Delivery may attract customers in India, but its not the best option in terms of impact on retailer's revenues and margins. There are also too many players in the Indian e-commerce market catering to a small percentage of the total population and hence intense competition, again leading to lesser revenues and margins due to promotions etc. But I agree, it's a growing market with plenty of opportunities for companies that can differentiate themselves from the rest of the pack.

Good article. I looking for these type of article. I got lot of information about e-commerce. Thank you for writing such a article.

Very good article as usual, surprisingly enlightening.

eCommerce facilitated the people with the discounts, coupon, easy payments options etc. As the market growing, too many eCommerce companies are emerging.

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