India’s Growing E-Commerce Sector Goes Mainstream – Part 1
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The E-commerce sector in India has come a long way – from being a rare choice for consumers in the past to becoming firmly established as the predominant preference for a large segment of customers during the post-COVID era. In a way, e-commerce has been through varying business cycles and its highs and lows. Amidst burgeoning demand, fuelled by increased disposable incomes, rising urbanization, high Internet and smartphone usage, favourable young demography, a wide variety of convenient digital payment options, reforms undertaken by the present Govt of India, and rapid technology adoption, India’s e-commerce market size is estimated to cross $188 Bn (CAGR 2015-25: 25.1%) with an expected 1.2 Mn transactions being processed daily, catering to a projected online shopper base of 220 Mn by 2025.
The E-commerce sector in India – Driving the consumption-driven economy
Economic growth is sustained by 4 key pillars — Government spending, exports, private investment and private consumption spending. E-commerce is closely linked with the last factor i.e. private consumption spending by consumers. A Grant Thornton Bharat report highlights the robust growth prospects, predicting that the e-commerce sector in India would zoom ahead to become the 2nd largest market globally by 2034.
Digital payments: The indispensable link
A common thread running across all successful e-commerce business models is the smooth integration of the crucial payments page to ensure final sales conversions and the prevention of cart abandonment. At Simpl, we work with thousands of leading e-commerce players, across e-commerce business models – D2C, B2C, B2B, marketplaces and beyond to deliver a unique, seamless, prompt and convenient payments experience for end customers.
Leading by example
In August 2016, the Government of India embraced the e-commerce business model towards bringing in further efficiencies in the public procurement process and launched the Government e-marketplace (GeM), an online, digital B2B marketplace.
Business Models prevalent in e-commerce
Broadly, e-commerce may be categorised based on:
1. The seller-buyer criteria
This may be further divided into
• Direct to Consumer (D2C): The manufacture, marketing, sale, order fulfilment and delivery of goods and merchandise is made directly to consumers.
• Business to Business (B2B): In this business model, business is conducted online between two or more business entities i.e. institutional players
• Business to Consumer (B2C): Business enterprises sell to customers via an online platform
• Consumer to Consumer(C2C): Individuals can bid for and buy products sold by other individual sellers via an online platform
• Consumer to Business (C2B): Consumers can mention their bulk requirements and business entities can offer specific customised products.
2. Website structure
There are 2 popular options under this.
• Online marketplace
•e-commerce webpage
With the demand to maintain a digital online shop, sellers need to decide whether to invest in one’s own e-commerce website or simply list products and services on an already available online marketplace in return for a fee. Both have their own set of pros and cons. We shall look at the salient features of both options:
3. Operating model
A digital presence complements the physical offline store towards higher customer reach and product access.
• E-commerce webpage: This is a popular option for D2C brands that run their own e-commerce website. The platform would showcase and host the complete product catalogue with product details and pricing. This also allows the option to expand and include new products.
• Online marketplace: Similar to a bazaar with many shopkeepers, here, one can list products along with products sold by other sellers. Interested customers would browse and compare products prior to deciding to buy. The company owing the website allows third-party sellers to sell products to customers. Sellers are charged a fee for availing of the website services.
4. Cost aspects
• E-commerce webpage: There is a higher cost involved in managing one’s own e-commerce site. Since customers can buy anytime and from anywhere, the website needs to be running 24*7 with investments by way of money and time required to develop, host, design, domain name selection, content inclusion, integration of shopping cart etc. It also needs skilled talent to maintain and resolve technical issues.
• Online marketplace: There is minimal cost borne by the seller under this model. The seller needs to register, upload a products list and start selling products in a digital manner.
5. Reaching end customers
Though e-commerce enables convenient access to goods in a remote manner, there are considerable marketing efforts needed to build a loyal community of customers and ensure sales conversions.
• E-commerce webpage: This allows the business to exclusively showcase in-house products, with the scope to attract higher traffic and realise better margins.
• Online marketplace: Here, since one competes with several other sellers, one needs to have a product differentiation strategy or offer price discounts to attract customers. This may result in lower margins.
6. Brand equity
• E-commerce webpage: Here one is in a better position to build one’s brand with customization. Customised pages suited to customer preferences could be built with information on promotions, discounts or special offers, and loyalty points, helping develop customer loyalty.
• Online marketplace: Marketplaces try to enhance visitors to the website. Thus, there is limited scope to directly engage with customers. Further, the payment methods offered and end transaction completion is managed by the website.
7. Navigation and intuitive website:
• E-commerce webpage: One can offer products listing based on categories for customers to easily filter the search and directly reach the desired category.
• Online marketplace: The products catalogue is organised as subsets with each product comprising multiple competing sellers. Due to the larger volume of data sets, the product search and final selection might take more time.
8. Better control:
• E-commerce webpage: Here, from start to end, the e-commerce company has complete control of all aspects – be it design, content, layout, security, payments options offered and integration tools. There is no restriction on the character limits or any pre-set guidelines to be followed. One can provide a unique customer shopping experience.
• Online marketplace: Limited flexibility in the selection of templates, payment gateways, etc. for the seller as the customization is as per the marketplace platform owner.
A one size fits all does not apply to a successful e-commerce business. An online marketplace might be suitable for a new business with low capital available for investment. On the other hand, a brand-driven business with a loyal customer base might prefer an in-house e-commerce portal.
In the next article, we shall understand how e-commerce localisation can be done for each market.
