Planning a trip to another country typically requires a checklist of items, such as having a working cell service to make local calls and cash on hand (in local currency). These tasks ensure we can be self-sufficient when doing things such as calling a cab, buying a snack, contacting family or friends, and more. This has become second nature for almost all travelers alike.
It’s no secret that technology has evolved over the past couple of decades. The internet has become faster and more affordable, and ecommerce has matured exponentially. Although the growth, maturity, and adoption vary greatly across the world depending on economic and political factors. In this piece, I’ll share my thoughts on India’s ecommerce and the observations made during my recent trip there.
India is ranked sixth in the world in terms of Gross Domestic Product (GDP) and third in terms of GDP by Purchasing Power Parity (PPP) basis. PPP allows economists to compare economic productivity and standards of living between countries. Another data point states that India’s ecommerce industry is expected to surpass the US to become the second-largest ecommerce market in the world by 2034.
We know that ecommerce adoption in India will continue to be on the rise. Although for a country that is home to one of the oldest cultures, has the second largest population in the world, produces the most engineering and science graduates than any other country, and has been a first for many initiatives adopted across the globe, it so happens that the adoption of technology has been a slow ramp-up.
Why There Might be Roadblocks
Culturally, much of the Indian population has preferred to do business in person. There is a lack of trust in the online banking system and online transactions of any kind. Even when the technology was built, the customer support wasn’t seen to be trustworthy in the initial days, even though India has been a prime market to hire and train call-center resources for many companies. There is certainly a generational aspect to this as well, although that’s seen in other parts of the world as well.
However, some notable events have taken place over the last decade that have pushed the population to adopt technology a lot more, such as:
- In 2013, Amazon started its operations in India.
- In 2016, India’s government declared demonetization where two of the popular notes, Rupees (Rs.) 500 and Rs. 100, were declared invalid. This created chaos among the people and their respective buying processes, yet, forced people to use online money transfer apps or similar types of software to conduct business.
- In 2018, Walmart bought a majority stake in Flipkart, an Indian ecommerce giant, and provided additional investments as well. This was Walmart’s largest acquisition to date.
- In 2020, the challenges from the COVID-19 pandemic resulted in an ecommerce boom across the world, and India was no different. With everyone in lockdown, the home delivery services offerings increased a great deal.
Many other developments have taken place, and several startups have been on the rise. The following points about India’s ecommerce maturity stood out to me during my recent visit as we were navigating the daily routine amidst the pandemic restrictions:
Slow Ecommerce Adoption Despite Smartphone Popularity
In 2017, Jeff Bezos said, “The Indian ecommerce market is still nascent.” I feel it is still very true.
I mentioned previously that most Indian citizens preferring to do business in person. People like to build relationships with the local brick-and-mortar shops, touch and feel the products, and have a conversation with the storeowners. This is not just an experience that helps build trust and confidence, but it also gives an opportunity for the buyers to negotiate when making a purchase.
India’s smartphone adoption has been rapidly increasing, but due to the culture around in-person shopping, negotiations, and cash transactions, the adoption of ecommerce has not been as fast as it could have been. Due to this, businesses had to make sure to offer cash-on-delivery (COD) features on their websites and apps. This allowed them to attract customers since they would not have to worry about entering their personal information like address and credit card data into an online medium and be concerned about getting that information stolen. Instead, they could just make cash payments upon delivery.
This leads me to my next point.
The popularity of Mcommerce (Mobile Commerce) and Digital Payments
Traditional ecommerce requires the use of websites on a computer, tablet, or mobile device. It’s not always practical for a large part of the population to have a computer setup or to find a place with a setup. Smartphones, as we know, are already accessible and well-adopted, and developed. It’s only natural for ecommerce to be enabled directly on mobile devices.
Having websites and apps at your fingertips certainly works for the lifestyle most of the population has. They can do business from anywhere if they can get an internet connection, which is usually within a few clicks. With the help of location tracking, people can get personalized and location-specific recommendations. The availability of security features like two-factor authentication, one-time-password (OTP), and biometric verification can help put the minds of individuals at ease.
Due to the continued skepticism around online credit card transactions, a hybrid approach to commerce has become extremely popular. When traveling to India during the pandemic lockdown, I noticed more of this than at any other time. Almost everyone I interacted with was comfortable doing business via chat apps, more specifically WhatsApp. Anything from grocery delivery, food delivery, plumber, electrician, buying and selling household items, and more – everyone would interact via WhatsApp. We would place an order on WhatsApp, receive the delivery at our doorsteps, and most of them were set up to accept payment via the payment apps like Paytm, Gpay, and more. These aren’t the full ecommerce experience, but they work. You still get to meet the person you’re doing business with, check your delivery and make a COD and make sure you’re exchanging the correct personal information to pay them via the digital payment apps.
Generalist vs Specialist Ecommerce Practice
Why sell just one thing or offer just one service, when you can sell multiple? It is a perfect way to serve a population that is both culturally and economically diverse. Hence, it is no surprise that much of the ecommerce boom in India has been via marketplaces rather than the etailer websites. Marketplaces enable access to multiple brands and their products, various deals/discounts to be configured, and act as a one-stop shop serving multiple needs.
The Benefits of Promotions and Discounts
Speaking of discounts, it is important to note that the shopping culture in India heavily focuses on bargaining. Whether it is in-person shopping at a local market, a brick-and-mortar store, or a mall, people tend to always negotiate the price of an item before making a purchase. It is certainly a discount-driven market. For businesses getting into ecommerce in India, they should make sure that they are offering a lot of attractive deals and discounts on their products (or services) since buyers would want to make sure that they are getting the best price possible.
Hence, it is truly a generalist market opportunity rather than an e-store specializing in one product or segment. People love marketplaces as they can browse products from multiple vendors and compare products before choosing one. Don’t get me wrong, Indian citizens love popular brands just like many others across the globe, but there are more chances of making a sale if the buyer gets the impression that they are getting the best deal possible.
The Many Methods of Commerce
Sometimes visiting the family consists of activities like finding new trendy restaurants to try, shopping at local stores down the street, or driving around town to exploring what’s new since the last visit.
This time due to personal and pandemic-related reasons, we knew that we would be spending a lot of time indoors and maintaining social distancing by simply ordering anything and everything we need via online transactions. Thanks to the continued maturity and adoption of ecommerce and mcommerce in India, it was fun to not just use the system but also to analyze it. I hope these observations are helpful to both readers and companies thinking of expanding their operations in India. For more information or questions, contact our commerce experts today.