IAMAI releases report on online commerce in India - shows a whopping 31,598 crores in ecommerce transactions
Posted on 23rd March 2011

IAMAI in association with IMRB International has just released their 'Report on Online Commerce' in India.
You can download the report from here

The report overall seems bullish on India's growth in ecommerce services. The report predicts  net commerce in India as INR 31,598 crores which is a mind boggling sum for a country like India which is still  mostly rural.

1. Travel industry spend dominates - no surprise there - other services continue to lag

Some things were quite predictable such as the dominance of   the Travel industry (76%) with the other services making up the rest. In fact the report predicts a further decline in non-travel related ecommerce spends. Is that something to worry about? Even within the other services the figures are skewed towards certain few services and products.

2. Digital Downloads is a new and growing category of online spends in India

Thanks to the mushrooming of apps stores selling everything from iphone apps to ringtones to wallpapers, paid digital download is growing. Another serious contributor is the gaming industry.

This is a significant growth for a public which is very used to getting stuff free.

The question is whether service providers will be able to generate more quality content which will entice more paid customers. Some of the paid stuff available for download is still quite shabby. Digital content providers will have to bring their A-game to the market.

3. Ecommerce still remains a small part of online activities of Indian net users

Although the trends are heartening, ecommerce still remains a small part of the net users online experience. Out of this small percentage repeat customers who have bought more than once is even smaller. India is still very much behind the curve when it comes to online trade and commerce.

Ecommerce Penetration in India

Source: IAMAI Report on Net Commerce in India

4. Air Tickets continue to dominate the Travel Commerce business

This one is a no brainer - people who purchase air tickets are the ones mostly likely to be online more regularly as well as own a credit card. Its the perfect intersection of the three important criteria.

Person who  needs to Travel a lot +  Is online all the time + Owns  a credit card = Ideal ecommerce customer

What is heartening to see is that Railway bookings is also growing and that shows a better penetration into the mass market.

5. Online shopping is pretty much dominated by electronic goods and peripherals

Computers, accessories, storage, cameras and mobiles account for a whopping 61% of the online shopping purchases. Is this lack of imagination of online sellers or is the demand just not there yet.

This is not a good statistic as much of this revenue will benefit foreign multinationals whose goods are ultimately being sold.

Local merchants goods which makes up most of the remaining percentage of online sales does not fare well. Do we need to start a Swadeshi movement to buy local online? Not a bad idea.

6.   Increase in Financial related transactions is heartening - shows growing trust and convenience in the upper middle class.

This shows a pretty much balanced distribution between the various services such as buying insurance, paying bills and buying mutual funds etc. Growth in this segment is steady and growing and shows increasing trust and confidence among upper middle class net users who make up a bulk of financial service users (not in report, my assumption).

Since these are trust based services, a slow and steady growth bodes well.

7. Digital download services making a lot of Hungama but not much to show for it.

Of all the ecommerce services I think digital downloads segment makes the most noise, is the most flashiest but the share in ecommerce revenue is very small. You may attribute it to small ticket size of each purchase or that its a fairly new industry.

What might be hurting it also is that many of this segements prospective customers have become used to Free stuff and will take time to jump on the paid bandwagon. Also the quality of many of the items for sale is not upto the market. Efforts must be made to provide more high and exclusive quality products and services.

8. Other online segments - Lots of startups but not much traction - still a long way to go.

The report lumps jobs, movie tickets, matrimonials, food and gaming into 'Other Online' services. Considering the number of dotcoms, portals and broohaha surrounding these services there share of the ecommerce pie is still quite small. I am wondering whether all the money invested into these services is worth the returns. Considering that most of the sites offering these services are yet to be profitable it tallies with the figures.

9. Credit Cards & Debit Cards dominate the payment options - Offline methods like COD and Cash cards are catching up

No surprises here. Credit (37%)  and Debit cards (35%) continue to rule the roost. Offline methods such as COD and Cash cards is also growing. Overall as expected.

10. Trust still remains  a huge obstacle in online purchases. Online retailers have to  come up with  a strategy for creating trust.

I would define 'Trust' in ecommerce  in terms of prospective customers expectations for the quality of service and delivery. Many e-tailers harp on prices but don't do much on reassuring the customer on delivery and reliability. This remains the achilles heal of online commerce in India. This is especially true among the older generation of online shoppers. I would like to see more of purchase insurance and stronger returns policy coupled with on the dot customer support. That also means 24?7 customer support and  effective complaint handling.

It may not be a bad idea for many online e-tailers to come togther and launch an initiative to foster trust in online shopping.

Trust as they say has to be earned.

Conclusion - Am worried about the bulk of online transaction skewed in the favour of a few services. Would like a more balanced online growth.

I will leave you with a excerpt from the report under the heading 'Promising Future'

"The online users in India have evolved and are actively seeking to include their digital interactions into their daily activities - making purchases and indulging in transactions being one of them. Although the behaviour in online transactions has been a little skewed in the past wherein travel comprised the majority of the market; this has changed since 2009. As per the primary research, e-Tailing is one the primary growth driver and will remain so in the near future."
Source IAMAI Net Commerce Report

A Vote of thanks to IAMAI and IMRB International for this work.

Disclaimer: Please note that all facts and figures mentioned are part of the report and are to be intepreted as such without prejudice.

Cheers,
Ron

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