Apr 15 2015 | Focus

E-Commerce in India | Taking Off

Few years back if somebody talked about e-commerce business in India, there were hardly any takers for this line of business. As of now, the country is experiencing multitude of options available on the internet to shop and bargain online. A new breed of e-business entities like FlipKart, SnapDeal, Jabong, YepMe and Amazon India are blooming online. With the advent of Smartphones and its availability at the lower end of the price ladder coupled with introduction of 3G is leading a revolution in the online sphere. Nobody could have thought of successfully running a shop online where they would offer items like Jewellery, Clothes and Footwear. But all these have become realty. The power of online business can be understood with leading stars like Shahrukh Khan, Aamir and Ranbir Kapoor endorsing online entities. The business rules have changed of late. There was a time when physical retailer faced little or less competition but now they have to tighten their belts and compete with the online stores. Within a few clicks on your laptop or taps on the smartphone, the customer is able to get the best price. This price is mostly often referred by the customer to the physical goods retailer and best price is arrived even offline. With e-commerce taking off, the profit margins are under pressure. The online stores are competing with each other and trying to grab major share of the online business by offering the goods at the lowest price. Future Group Sabse Sasta Teen Din kind of scheme which was launched to lure the customer to Big Bazaar outlet during the republic day has been replicated by online stores successfully. Special product launches are organized on the online portal like FlipKart and SnapDeal. The end result is the products getting sold before the launch itself. Within minutes all the available stock is booked. Flash sale have become a routine online. Chinese cellular phone maker Xiami tied up with leading e-tailer Flipkart and has successfully conducted flash sale on Tuesdays.

According to Internet and Mobile Association of India (IAMAI), the hottest segment in the e-commerce space for India is the online travel. It has been the largest e-Commerce segment in terms of revenue generation. By 2016, it is expected that online retail will catch up with online travel. According to ASSOCHAM report, the e-commerce business in India valued at US$ 2.5 Bn in 2009 has touched US$ 16 billion in 2013. As per ASSOCHAM report titled ´Evolution of e-commerce in India´, if the current growth trend continues over the next few years, the size of the e-retail industry is poised to be 10 to 20 billion US$ by 2017-2020 and US$ 56 billion by 2023.

E-Commerce Facts
eCommerce or electronic commerce refer to transmission of funds or data online mainly internet owing to buying and selling of goods and services
eCommerce transactions can be B2B, B2C, C2C, C2B, B2B2C
Market size has grown to $2.3 billion from $600 million in just two years.
Likely to touch $32 Billion by 2020
Products sold online include lifestyle products, jewellery, furniture, groceries, apparel, shoes, baby care products, electronic products.

Changing Habits
The customers in India were skeptical few years back about making an online payment. But in the last couple of years, the online payment module comprising Debit / Credit card and Net banking has become the norm for the customers. Now the customer is not hesitant to pay his utility bills and life insurance premium online. The Indian customer has now accepted mechanism through NEFT / RTGS as the most convenient way of fund transfer at a minimum cost. Indian customer mainly from the urban centres have started to use internet for booking travel / movie tickets, reserving a table in a restaurant, paying utility and credit card bills, consulting experts online and for buying/selling products online.

Demographic Dividend
As the demographics in India points to a large population in the working age group, the potential of online business seems to be enormous. India is the seventh-largest country by area, the second-most populous country after China, with more than 1.2 billion population. The stakes are quite high both the physical and online retailer in India.Wikipedia figures indicate more than 50 per cent of its population below the age of 25 and more than 65 per cent below the age of 35 as of now. The average age of an Indian by 2020 will be 29 years, compared to 37 for China and 48 for Japan. So the demographics clearly points towards setting up shop in India both online and offline.

Internet Penetration & Smart Device Usage
The country has the world´s third largest internet user base of 243 millionas per 2014 figures available with InternetLiveStats. No doubt the internet spread is lower compared to countries like US, UK or France but the user base is multiplying at a faster pace.The internet users in India have grown at 14 per cent in one year adding 29,859,598 users as per InternetLiveStats. So far around 19.19 per cent of India´s population has got an internet connection.The spurt in Internet penetration in India has reduced the digital divide and is leading to providing a level playing field to business spread across the length and breadth of the country. Even a small time artisan sitting in a remote corner of the country is able to offer his creations to the world. The shipments of smart phones have doubled to 80 million in a year. The use of smartphones and tablets are on the rise giving way to exploring the potential of e-commerce in India. As per pwc report titled ´Ecommerce in India´, the transport and logistics sector of the economy are also gaining due to spurt in the e-commerce segment. India Post transacted business worth Rs280 crore in the cash-on-delivery (CoD) segment for firms such as Flipkart, Snapdeal and Amazon.

E-Commerce Enters Critical Phase
The e-commerce business has entered into a critical phase in India. The top three leading e-tailers in India like FlipKart, Snapdeal and Amazon are vying for customer´s attention through not only online email marketing but through TV ads on a scale never thought of before. The funding to many of the startups and the established players are making news. According to early data from Venture Intelligence, a research service focused on private company financials, transactions and their valuations, the largest E-Commerce deal reported in Q1´15 was the $100 million fourth round raised by ShopClues.com led by Tiger Global. Tata Group Chairman Emeritus Ratan Tata in his personal capacity has invested in SnapDeal, Urban Ladder and PayTM. This investment shows the growing appetite of venture capitalist and HNI´s in the online sphere. Many of these e-tailers in India have entered billion dollar club in such a short time which took decades for traditional businesses to achieve in India. The new age e-commerce business is not only changing the way we shop but also creating billion dollar opportunities for our small and medium scale entrepreneurs to offer their quality product to the world. It´s just a matter of time when we will capture the attention of the world and goods from India reaching foreign shores will become the norm.

Payment Options
Indian customer has embraced the online world and is quick in placing order online through apps or the portal. As per the statistics available, majority of the customers are preferring cash on delivery (COD) amounting to around 75 per cent of the online e-commerce business. As per AIMAI, the Cash-on-delivery (COD) is one of the key growth drivers for the growth of online retail and is estimated to account nearly 50% online retail sales. This clearly points to two things, one is customer in India prefer cash transactions, secondly they don´t trust the In India, cash on delivery is the most preferred payment method as not everyone in India is comfortable with the Net banking, Debit/Credit card payments online.

The customers preferring COD needs to be educated towards shifting to other online payment mechanism for the e-commerce business growth in India. To achieve this financial and banking sector needs to come forward and impress upon their clientele about the safety and security of online transactions. The shift towards other payment options can put the e-commerce business in top gear in India.

Private Equity Funding
Softbankfocus is on mobile apps, app stores and mobile sectors. Softbank has invested in ScoopWhoop, Snapdeal and Housing.com
DST Global has invested heavily in FlipKart, India and internationally in biggies like Facebook, Airbnb, Spotify, Twitter, Alibaba, Xiaomi and Rocket Internet.
Tiger Global is a Hedge Fund who is active in the e-commerce space in India. The fund has already invested in e-commerce sites like Flipkart, Ola, ShopClues, LimeRoad, PolicyBazaar, GlassDoor, Myntra, CultureMachine, CaratLane, CommonFloor, CarTrade, Quikr and many more.
Many more such private equity players like Warburg Pincus, Google Capital, Kinnevik, Naspers and KKR are either eyeing to invest or in the process of investing in the growing e-commerce segment in India.

Future Potential
According to Internet and Mobile Association of India (IAMAI), the e-Commerce market in India has registered an average growth of almost 35% since 2010. The e-commerce market was valued at Rs 53,301 Crore in December 2013. It grew at 53% through 2014 and touched Rs 81,525 Crore by the end of December 2014. The industry is estimated to grow further at a rate of 33% and cross Rs 1 lakh Crore by the end of 2015.

Tolexo.com The Rising Star
Tolexo is the recent entrant into the e-commerce b2b segment in India. Tolexo is from the IndiaMart group lead by the most enterprising, energetic and promising talent ´ Brijesh Agrawal. He is the one who had set up IndiaMart.com portal nineteen years back and provided a platform for both buyers and sellers to interact through the portal. As the e-commerce business in India is entering critical phase. Brijesh could identify the unexplored potential of e-commerce in the B2B space quite early. Tolexo is the end result of his thought and has started making waves in the online world of business goods and services segment. No one would have ever thought of selling a drill machine, testing and measuring instrument online like any other consumer and durable products. Tolexo is offering more than 500,000 products online mainly from the industrial category comprising products such as safety shoes, electric drills, heat guns & air blowers, CCTV cameras, automotive testing tools, concrete testing, domestic tool kit, access control system, detectors and sensors, helmets, work wear, gas detection system, hammers, clamps, benders, power tools, car and bike accessories and so many products.

According to Brijesh, the user feedback at Tolexo.com is quite encouraging. The first and foremost advantage to the customer is in terms of the cost. As the product is directly offered by the manufacturer to the customer through Tolexo, the margins are quite less compared to the goods purchased from the physical outlet. The second advantage is the availability of the product. Now the customers don´t have to hunt from shop to shop to find goods required. The customer has to simply login to Tolexo, identify the product, check the availability, place the order and wait for the consignment to be delivered through the effective supply chain of Tolexo. The commitment of Tolexo is another factor responsible for good customer experience. In case the product seems to be out of stock or the vendor is not position to supply in time, the backend team at Tolexo.com does the entire hunting job and ensures that within 24 hours the product is traced and queued up for delivery to the customer. In the process at the cost of customer satisfaction, Tolexo is willing to sacrifice its margin but wants to ensure a pleasant buying experience for the customer at large.

Brijesh Agrawal is quite optimistic of the portal deliverables twelve months down the line. He expects Tolexo.com to have more than 5 million products online for sale and enable 25,000 transactions a day. Tolexo strength lies in its huge database accumulated by parent company - Indiamart over the last two decades, e-commerce business experience of its core back end team and its effective supply chain management process and people.

Tolexo.com was launched in August 2014 with the aim to enable B2B buying / selling activities. Within such a short time, more than 1200 brands are listed on the portal and buyers from 900+ cities in India are transacting online at Tolexo. The products listed on Tolexo are handpicked by an expert backend team who conducts due diligence with regard to the reputation of the manufacturer. Only those manufacturers who are able to fulfill the required quality parameters of Tolexo are invited to showcase their products online. The online customer can have plethora of product options to compare with and decide on the best buy. The portal in no way tries to influence the buyer's decision, but aims to provide all the requisite information for the customer to choose the best product. The portal has partnered with Delhivery, Bluedart, Fedex and other important logistic providers to delivery ordered products in time. For Tolexo ensuring quality product and delivering in time is the essence of its business philosophy.

Brijesh highlights the larger potential of B2B e-commerce segment vis-à-vis the B2C segment in terms of revenue generation. Most of the B2B transactions are happening offline as of now. Based on certain industry reference and studies, he sees a potential of $300 billion in the B2B E-commerce space in India which is likely to touch $700 billion by 2020. The B2B e-commerce segment is not yet explored and Tolexo is the rising star in this promising category.

• Author: Sandeep Sharma
Also read our article on
TOLEXO.com | The Rising Star

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