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Growth Of eCommerce In India – Market Research

Puneet Bhalla

Associate Director - Marketing @ Shiprocket

August 4, 2017

3 min read

According to reports published by International Monetary Fund (IMF) and Central Statistics Office (CSO), India is among the fastest-growing economies in the world. Among several factors, a conscious patronization of online commerce, and an emergence of retail as a dominant market segment have contributed to the unprecedented growth of eCommerce in India. For the financial year 2016-17, eCommerce sales reached US $16 billion with a projection of a seven-fold growth within the next two fiscals as estimated by Morgan Stanley. By 2020 online commerce sales are expected to cross $120 billion.

The three principal driving factors for this growth in the Indian eCommerce sector are:

  • Participation of niche companies in online trading
  • Unmatched FDI (Foreign Direct Investment)
  • Uniform GST (Goods and Services Tax)

Participation Of Niche Companies

With the increase in awareness about the benefits of online trading, there has been a significant rise in investment in an eCommerce business. Hand in hand with offline trading, many established business houses have set up online transaction channels. Online retailing is the ‘in-thing’ in today’s commerce. Every other day a new company is being set in the online retail segment.

Specialization and customization are the underlining features of online trading. eCommerce companies are specializing in exclusive items and have consciously moved away from the ‘one for all’ concept. Every new company is focusing on a definite item or targeting a particular demographic segment. So instead of addressing universally, it is better to concentrate on a single area and execute it to your best ability. Consumers prefer this kind of preferential treatment and personalized attention.

India, being a land full of diversity offers ample scope for new companies to join in this eCommerce business tirade. Business opportunities are limitless considering the innumerable clothing, food, and cultural habits of Indian communities.

Role of FDI

Foreign Direct Investments (FDIs), till lately, was not allowed in eCommerce for a single brand or multi-brand retail companies. It was only allowed for B2B businesses. Now, FDI is allowed in cases of wholesale trading or in cases where involvement is limited to the use of technology platforms. The ever-expanding Indian eCommerce market has attracted companies from Europe and United States who are joining as conglomerates.

Though FDI has been successful in lending variety to the online market of India, their full participation is limited by government laws.

Implementation Of GST

A uniform taxation structure, which GST (Goods and Services Tax) purports to achieve would contribute to the success of the eCommerce business in India. Online business is carried out pan-India, and a uniform tax structure makes calculations easier and uniform. The same tax for the same product or service across the Indian Territory would certainly help in maintaining price uniformity. For online business operators, the differential tax structure was a deterrent.

Inclusion Of food And Grocery In Online Retailing

Earlier, food and grocery were never thought of as items for online trading. However, with the change of working habits, and consumers opting for adaptability and convenience, there are now innumerable small and large eCommerce companies selling provisions and food items.
Indian eCommerce industry is in a position to sustain itself as a viable business opportunity not only for established names but even for start-ups.

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