India 2015: THOUGHT LEADERSHIP | E-commerce
E-commerce is growing rapidly, overcoming barriers to reaching consumers in rural areas
Leading brands and India Post partner on delivery and payment innovations
| Ajay Tawde
Group Head, Planning
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In the past decade, India’s population has crossed 1.25 billion. The 356 million youth aged 10- to-24 make India the youngest nation in the world. Indian youth are coming of age at a time when Internet and mobile technology are taking their biggest leaps yet. However, growing evidence points to the capabilities of digital media going beyond building brand awareness and advocacy and taking concrete steps towards driving sales.
According to the latest report by the Internet and Mobile Association of India (IAMAI) and the Indian Market Research Bureau (IMRB), the e-commerce industry in India reached a value of INR 81,525 crores (USD $13.5Billion)in2014.Howeverthereal story was online retail, which reached $3.7 billion in 2014, a 60 percent increase over 2013.
Most e-tailing players in India have latched on to offering large scale discounts as a quick and effective means of attracting new shoppers to their sites. Massive online flash
sales have become the norm. The benchmark of the flash sales was set last year around Diwali when the top three players – Amazon, Flipkart and Snapdeal – spent about INR 200 crores ($10.6 million) to attract festive shoppers through advertising. The “Big Billion Day” sale by Flipkart recorded a Gross Merchandise Value (GMV) of INR 600 crores ($31.8 million) sold in 10 hours with Snapdeal recording a GMV of INR 1 crore ($160 million) every minute as well on the same day.
E-commerce is experiencing its newest growth from Tier 2 and Tier 3 cities in India. This growth is unsurprising as people here have limited access to brands but high aspirations. According to several e-tailers these cities have seen a 30-to- 50 percent rise in transactions.
A pilot project run by Snapdeal into the rural market revealed that while the average ticket size of purchase in urban India was about INR 2000 ($31.50), rural was not far behind averaging at INR 1400 ($22.10) per ticket. While the potential for growth of e-commerce in rural markets exists, there are two key hindrances for growth:
1. Deliveryoptions:Ageographically vast rural India is spread out among small cities, towns, townships and villages.
2. Payment mechanisms: E-commerce for urban customers with access to Internet banking payment is just a matter of a few taps on the phone, however a majority of rural India would depend on the COD (Cash on Delivery) system.
The current hindrances faced by the e-commerce Industry are small when compared with the potential for growth. Various online retailers are finding inspiring solutions to establish presence in areas that have low Internet penetration.
For example, Snapdeal recently partnered with FINO Paytech, a company that stands for financial inclusion of all sectors. Through this partnership kiosks are being planned
in 70,000 rural areas by the end of this year. These kiosks will be manned by village level entrepreneurs and will serve as order and delivery centers. The potential of these offline kiosks also extends into low-income households in slums in all the major metros.
With 154,866 offices and 466,903 employees, India Post has emerged as the unlikeliest hero to turn Rural India to Digital India. With 90 percent of all post offices located in rural areas and with each office being able to serve 21.2 squarekilometres(8.2squaremiles), India Post almost seems like a tailor- made solution for e-tailers
Several e-commerce players like Snapdeal, Flipkart, and Naaptol have already partnered with India Post. An official statement by a government official mentioned that India Post collected over INR 280 crores ($44.4 million) from customers and remitted these funds to e-commerce firms as part of their COD solutions.
Besides its wide network, India Post has another dormant asset that can revive due to e-commerce. This is its cash handling services, which include competencies like core banking services, money transfers and postal account systems. Forward thinking e-tailers are already exploring setting up e-commerce kiosks inside post offices, while other entrepreneurs have managed to convince India Post to set up booking counters on their premises.
While, business, delivery and payment models are being tried and tested, a digitalized India is ready to trigger an explosion of e-commerce in India. It won’t be long till we get back our (now nostalgic) sense of excitement upon seeing that khaki clad postman smiling at the door.