Practical Ecommerce

Ecommerce in India: Marketplaces, Cash on Delivery Dominate

Online marketplaces, such as Flipkart, are popular in India, as are Snapdeal and Amazon.

Online marketplaces, such as Flipkart, are popular in India, as are Snapdeal and Amazon.

India is the second most populated country in the world with a large, educated workforce. It is a robust market for selling online. Ecommerce started in India in the late 1990s. But it grew rapidly in the last ten years with the rise of smartphones.

India has about 100 million online shoppers. The U.S. by comparison, has roughly 205 million online shoppers, even though the U.S. population is less than 25 percent of India’s. The Indian ecommerce market, in other words, will almost certainly grow dramatically in the coming years.

This is the fifth installment in a series wherein I review the ecommerce market in countries and regions around the world — following “Ecommerce in Japan: Marketplaces Dominate,” “Ecommerce in South Korea: Aggressive Discounting, Rewards,” “Ecommerce in Australia: Cross-border Shopping Common,” and “Ecommerce in Taiwan: Thriving Market, Huge Mobile.”

There are hundreds of ecommerce sites in India. But the most popular, in terms of traffic, are three marketplaces: Flipkart, Snapdeal, and Amazon.

Amazon launched in the India in 2013 and has quickly gained significant market share. Amazon’s C.E.O., Jeff Bezos, recently announced a $5 billion investment into the Indian ecommerce market, further confirming the opportunity in that country.

Here are my key observations on the ecommerce market in India.

Heavy Discounting

Indian consumers are extremely price conscious. Retailers commonly offer promotions and discounts to attract them. This has worked well to increase ecommerce adoption in the country but at the cost of reducing margins for retailers.

With the entry of Amazon in the Indian market, this discounting trend is shifting, as the incumbents realize they cannot compete on price alone given the deep pockets of the U.S.-based retail giant. Now customer loyalty and better personalization is becoming more important.

Retailers in India commonly offer promotions and discounts to attract price-conscious consumers. In this example from Snapdeal, Puma shoes are offered at a 46 percent discount.

Retailers in India commonly offer promotions and discounts to attract price-conscious consumers. In this example from Snapdeal, Puma shoes are offered at a 46 percent discount.

Mobile Commerce Is Huge

India is a mobile-first nation. Sixty-five percent of consumers use smartphones to access the Internet. There are several reasons behind that.

The first is the cost of a smartphone. Most of the population can afford one. Desktops and laptops are, relatively, much more expensive. Moreover, the country has thousands of Internet cafes with desktop computers, as most people do not have a computer at home.

The second reason is the cheap mobile data plans that cost a fraction of U.S. plans.

Third is the convenience of being able to shop anywhere and at any time using the mobile device. The rural population is greatly contributing to mobile commerce growth, as rural residents start procuring mobile devices.

Counterfeit Products

With an extremely price sensitive market, some retailers have, unfortunately, started selling counterfeit products to make a profit. This might have led to short-term gains but has resulted in a long-term harm for the ecommerce business.

Online marketplaces are liable, legally, for selling counterfeit products. Hence the marketplaces have taken measures to guarantee product authenticity and regain customer confidence. Apart from directly working with the sellers, the marketplaces frequently use mystery shoppers to confirm that the products are authentic.

Snapdeal posts a disclosure on its site that addresses counterfeit items. It reads, in part, "All purchases on Snapdeal are new and genuine. Every seller listed with us is required to enter into a legal agreement to sell only new and genuine items."

Snapdeal posts a disclosure on its site that addresses counterfeit items. It reads, in part, “All purchases on Snapdeal are new and genuine. Every seller listed with us is required to enter into a legal agreement to sell only new and genuine items.”

Cash on Delivery Top Payment Method

Indian ecommerce companies typically support all popular payment methods. This includes “Cash on Delivery,” which is the most common.

Flipkart accepts all leading credit cards, as well as direct bank transfers and, importantly, cash on delivery, which is the most popular method in India.

Flipkart accepts all leading credit cards, as well as direct bank transfers and, importantly, cash on delivery, which is the most popular method in India.

Cash on delivery has fueled the growth of Indian ecommerce. Consumers in India are wary of using credit cards online because of fraud and security concerns. Also, credit cards are less popular in India than in the U.S.

But cash on delivery puts an additional burden on logistics and otherwise increases the order cancellation rate. Ecommerce companies are therefore eager to convert more customers to credit cards and direct bank transfers. Time will tell if this succeeds, or if the companies otherwise improve their cash-on-delivery process.

Selling to Consumers in India

Given the popularity of marketplaces in India, sellers can enter the country relatively easily. Flipkart, Snapdeal, and Amazon have easy, two-or-three step processes for sellers to register, agree to the terms, and start the selling process. Additional required information from sellers are a local bank account and tax details, if taxable products are being sold.

Gagan Mehra

Gagan Mehra

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  1. Neeraj Bhatt June 30, 2016 Reply

    Natty bio pic, Gagan but the article reads like a high-school assignment, or a ghost-written article from one of the article directories!

    No information which we, the reader, could not come up with, by a cursory search, ourselves.

    A note to the people who run Practical Ecommerce, please don’t get articles written just for the sake of fulfilling some metrics of ‘freshness’ and what-have-you. Please develop authority on the subject. Just registering the domain isn’t enough, you know?

  2. Sheila Romero July 3, 2016 Reply

    Great article. Thanks for explaining the Indian market. Really helpful for me as I am about to launch my store there.

  3. Sunaina August 24, 2016 Reply

    Great article! We used it in our future of ecommerce infographic over at Coupon Hippo.