E-Commerce Ecosystem in India - GD PI Series for IIM-IIFT-MDI-XLRI

                                                        

 E-Commerce Ecosystem

The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest e-commerce market in the world by 2034. India’s e-commerce industry is expected to grow from US$ 38.5 billion as of 2017 to US$ 200 billion by 2026. India’s internet economy is expected to double from US$125 billion as of April 2017 to US$ 250 billion by 2020, majorly backed by e-commerce.

Much growth of the industry has been triggered by increasing internet and smartphone penetration. Internet penetration in India grew from just 4 percent in 2007 to 34.08 percent in 2016, registering a direct increase of 89 percent in 2016 over 2007. The number of internet users in India is expected to increase at a CAGR of 15.6 percent from 450 million as of June 2017 to 700 million by 2020.

A young demographic profile, rising internet penetration, and relatively better economic performance are the key drivers of this sector. The Government of India's policies and regulatory frameworks such as 100 percent foreign direct investment (FDI) in B2B e-commerce and 100 per cent FDI under automatic route under the marketplace model of B2C e-commerce are expected to further propel growth in the sectors.

Types of E-Commerce verticals based on types of Services Provided:

1.       Online Ticketing - Ticketing for Air, Rail, Bus, Movies, and Events. Constitutes about 70% of the total e-commerce market. Profitable business.

2.       Online Marketplace - A platform for buyers and sellers to interact. Usually, there is no control over logistics or fulfillment.  A small pie of the e-commerce industry.

3.       Online Retail - Can fall into any of the multiple models.  The second biggest chunk of Indian e-commerce.  All major players are running huge losses

4.       Online Deals - Couponing sites are growing in number by the day.  Primarily dominated by buyer forums. Big players have also entered this segment

5.       Online Classifieds - Consist of car, job, property and matrimonial portals. Small chunk of the e-commerce pie 

E-commerce Models (Based on control of the entity over operations)

1.       Pure Inventory Led

a.       Sell only owned inventory

b.      No 3^rd party products

c.       No used goods

d.      Fixed Prices

e.      Control Fulfilments and Returns

2.       Managed Marketplace

a.       No owned inventory

b.      Only 3rd party products

c.       No used goods

d.      Fixed prices

e.      Control Fulfillment and Returns

3.       Pure Marketplace

a.       No owned inventory

b.      Only 3rd party products

c.       Used goods are allowed

d.      Control over payments

e.      No control over fulfillment and returns

4.       Hybrid Model

a.       Sell only owned inventory

b.      Sell 3rd party products

c.       No used goods

d.      Fixed prices

e.      Control Fulfillment and Returns

Stay tuned to this page for upcoming articles on various aspects of E-Commerce industry in India. This will work wonders for both your GD and PI. Next article we will be covering – E-Commerce Glossary, Key Trend Drivers, and Challenges faced by B2C and B2B online companies.

You can view the 2nd part of this article here - E-Commerce Ecosystem in India Part 2

About the Author - Pranav Raj has been an E-Commerce enthusiast for a long time. He did his Summer internship with Flipkart in 2016 and was the Senior Coordinator of Systemix - The Systems Consulting, E-Commerce and SMAC Club at IIFT Delhi from Feb 2016 until March 2017.