What else affects E-commerce in India?

A few weeks back, I was working on a proposal for marketing of an e-commerce portal. One look at the stats showed that the e-tailing in India never took off. While categories like travel (led by IRCTC, and the OTAs) and Hotel bookings has taken of in a big way…it has been a dismal performance, when it comes to e-tailing.

e-tailing can be defined as a business to consumer transaction through direct sale of limited quantity of goods or services..

The industry experts have been talking about the rise of e-commerce in India, but what is being missed out is that most of these e-com transactions are done on the B2B space. The data shows that the B2C industry size of ecommerce in India is around INR 11,000 crores*. About 80%* of the B2C e-com transaction is from the Online Travel Industry, followed by online classifieds

The e-tailing pie is only about 9%*. While the numbers and growth might be encouraging, it is nothing great to make a big noise about

(* Guesstimates by classical extrapolation of data from IAMAI report of 2006/07)

The experts also point out the various reasons for B2C ecommerce not taking off to issues like:
- Low bandwidth/connectivity
- Limited penetration of credit cards

Customer behaviour:
- Apprehension of using credit cards online (security)
- Not sure of the product quality
- Waiting period in terms of delivery
- No real-time bargains available
- Miss the touch and feel of the product

(Most points comes from i-cube report 2006)

Digging deeper into the type of products that is being e-tailed, one gets to see that the most popular are the technology related products – software, hardware, computer accessories, mobiles, cameras etc along with books (you can never go wrong over here :))…

While the above reasons are valid enough barriers to arrest the effective growth of e-tailing in India…but, are these the only ones??

Step back into the real world, how does this channel looks like, with different stakeholders involved in the chain
Company>>Distributor>>Dealer>>Retailer>>Customer (with Govt. involved with their excise, duty, taxes etc)

Predominantly, e-tailing is an activity that would be directly happening from Company>>Customer or Retailer>>Customer – where does that leave the other stake-holders in the system – I’d say that they are in a state of disappointment :|

Traditionally, we have been an economy which was dominated by traders and middlemen. In fact, even today middleman plays a crucial role in almost all the industries to facilitate the smooth flow of goods and services from the company to the market… Also, as the chain is longer, there are a lot of allied and dependent industries that flourishes and has a share of the revenue pie. For example, if a company has a direct connection with its customer base – then a lot of the middleman would disappear. Allied industries like promotion, logistics, C&F agents, advertising all would play a smaller role…

A typical Indian customer however is driven by price. Even today, you will find people bargaining with the street vendor to an automobile salesman. Bargaining from the customer is the act of getting the perceived benefits that has been assured at the start of the deal…but at a lower cost than mentioned. Hence if a company can pass on all the commission benefits that gets seeped into the selling price due to various stakeholder be passed on to the customers…the customer would be most happy
While in the best interest of the customer e-tailing would be more beneficial, as the customer not directly deals with the company and hence is eligible for all the price benefits that would occur – there are a lot of stakeholders involved in the traditional channels and they would do everything in their power to see that they do not lose control of their share of business…

Unless, unless companies take a drastic approach in terms of bringing the benefits (of price) and take the brunt of rubbing the existing stakeholders in the chain wrongly…. E-tailing would lag how much ever the technology infrastructure increases…

As long as there are a lot of people involved in bring the pie from the kitchen to the dining table… the diners would have to pay more…




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