E-commerce in India will double in three years Innovation in India

If you are thinking of selling in India, then go online. With some 690 million active Internet users, India is the second-largest online shopping market in the world. The e-commerce industry in the country is snowballing. In the last three years, market turnover has doubled from 20 to more than 40 million dollars. Plus in a national survey at the beginning of 2020, 74% of Indian internet users indicated that they had made at least one online purchase in the past month. Online shopping giants such as Wal-Mart, Alibaba and Amazon are investing billions in India. For now, the corona crisis is not throwing a spanner in the works.

The effect that the global COVID-19 outbreak, and the Indian lockdown that followed, will have on the country’s economy is only a guess at this time. But what is already clear is that the Indian eCommerce sector has benefited from the lockdown so far. Indians can no longer go to supermarkets or malls and have moved quickly to getting daily products numbers online. “We see a significant jump in orders, which increased by some 20 to 30% in March and we expect online shopping to grow even faster in the coming months,” said Vipul Parekh, one of the founders of BigBasket, India’s second-largest online supermarket.

Industry update by MaierVidorno

An online shop in India is essential

Online sales in India were unlocked for international investors by Modi in 2016. Since 2019, Foreign Direct Investment (FDI) is also allowed for online B2C retail. In simple terms: as a foreign company, you are allowed to sell directly to Indian consumers since 2019, and the American giants jumped at the opportunity. Last year, Wal-Mart bought Flipkart, the largest online department store in India and Apple announced in January that all Indian sales would be via their online store, no longer through resellers.

Amazon CEO Jeff Bezos even went on a kind of state visit in India. He promised to invest billions in ‘digitising the country’s small and medium businesses’.

The expectations of the Indian eCommerce market are high: a growth of another 50% in the next four years, and by 2034, the second largest e-commerce market in the world. It is not only American mega-companies that can benefit from this.

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Dutch companies such as Hunkemöller and Scotch & Soda also know that having a webshop in India is crucial. They both have been benefiting from the rapid growth of the retail sector online for years. Apparel already accounts for 40% of total eCommerce turnover by 2020. That amounts to some 16.5 million dollars. According to the Mckinsey Global Institute, the online retail sector has the potential to grow 12 times in turnover over the next five years. Hunkemöller and Scotch & Soda both give new Dutch entrepreneurs on the Indian market the same advice: “Make sure you have a good and reliable local partner.”

Logistics and distribution in India

Participating in the Indian eCommerce market has unique challenges. Two of the most important are the distribution of the products and payment by the customer. Although the introduction of the Goods and Services Tax has made it easier to transport products from state to state, it still does not solve all logistical problems. In many large cities such as New Delhi, Bangalore and Hyderabad, for example, big commercial trucks are is not allowed into the city during rush hours. Besides, the Indian road network is currently undergoing a significant overhaul, which leads to more congestion and higher tolls.

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Especially the distribution of products to remote places inland is still a challenge. For this reason, major international players such as FedEx and DHL often have to work with small, local parties to deliver packages to the doorstep. Having a local partner in setting up your distribution network is therefore essential. If only to understand the rules of the different states, and who are the right players within those states. You need to know this to fulfil Indian customer expectations.

Online payment is growing due to COVID-19

Finally, payment also offers a challenge in setting up a successful online shop in India. Indian consumers still prefer to pay cash on delivery (COD) and not online. There are drawbacks to this for the seller who will have to pay extra taxes for COD. Also, the customer cannot be held responsible for the delivery costs if he refuses the product at the door. The corona crisis now seems to have changed customer behaviour. Last month the number of online payments via the Indian online payment portal Paytm increased by about 20%, after the Indian National Bank started a campaign to encourage people to bank online as much as possible

This article is translated from the original Dutch from our partner India Connected.