Outlook for India's e-commerce sector in 2015

With the year 2014 drawing to a close, there are ample reasons to cheer how the e-commerce sector in India has grown by leaps and bounds, despite the fact that this is just the beginning of the e-commerce era in the country.

According to eTailing India estimates, the industry has witnessed an unprecedented growth of 60 per cent over 2013 and has emerged as one of the fastest growing sectors despite the fact that there were a few hiccups of not being able to live up to people’s expectations or reports of customers receiving empty packages.

These are just the initial challenges that any industry or business faces and can be sorted out in time with proper regulations and processes in place. The year gone by has so far been the best for the sector, with investors showing tremendous confidence in the potential of e-commerce companies and pumping in big money that has changed their valuation overnight and put them in the big league.

As 2015 approaches, the outlook for the sector looks even better, with eTailing India, a leading e-commerce research and advisory company, suggesting that the e-commerce market will hit the $25 billion mark, a huge 50 per cent jump over the $12-13 billion revenues for 2014.

However, there are key hurdles that regularly come in the way of e-commerce companies operating in the country and if these can be taken care of, the industry will be on a different growth trajectory altogether, since they can focus their energies on going head-on with the global e-commerce giants rather than get into the nitty-gritties of overcoming these obstacles on a day-to-day basis.

Some important aspects that need to be looked into include:

1. Government regulations for the e-commerce industry: Government regulations play a vital role in determining the fate of any industry. Time and again issues have cropped up because there is so far no regulatory framework in place for the e-commerce sector, which has been in existence for quite a few years now. A well-defined framework would help check any malpractices in the industry on part of the e-commerce company or those that serve as its key partners, such as the warehouses and the logistics companies.

Moreover, it is an established fact that funding plays a crucial role to sustain an e-commerce business or else these companies are compelled to either get acquired by larger players or shut shop. For this reason, allowing FDI in B2C commerce is another aspect that the government can look into, since it’ll give many more players a chance to survive and get a share of the pie in the industry rather than letting the power rest in the hands of two or three key players and let the full potential of the market go unexplored.

Furthermore, key decisions like implementing GST should be expedited as the industry is expected to gain significantly from uniform taxation laws across states and face-offs like that of Amazon with the Karnataka tax authorities can be avoided. The current tax situation is detrimental for the e-commerce sector and GST can ensure that warehousing and logistic strategies be designed based on what is best for the business rather than how best to minimize tax liabilities. It is expected to give a big boost to the profitability of e-commerce companies.

2. Revamping the IT infrastructure: The IT infrastructure in the country is currently not comparable with that of advanced countries where e-commerce is popular and thriving. Also, though Internet penetration has increased rapidly in recent years in India, it still stands atjust about 25 per cent as per an estimate by The Internet and Mobile Association of India (IAMAI).

Not just this, the current IT infrastructure is unable to keep up with the basic requirements of the technology-dependant industry. Every time an e-commerce portal announces flash sales, the infrastructure is unable to handle the large number of people visiting the portal to place an order, leaving the servers crashing. Not only does it leave the customers disappointed but it is a big dampener for companies that put in months of planning and effort to making such sales a success.

3. Winning the customers’ trust: Last but certainly not the least, the e-commerce game rests on customer trust. Customers visit a particular portal to order a product based on the website’s credibility, with little to do with the actual sellers on that portal.

However, despite the fact that e-commerce companies spend a sizeable portion of their earnings on customer acquisition, incidents like those of customers receiving empty packages or fake products do tremendous damage to the reputation of these portals.

Customers need to understand that these are just teething troubles for the industry rather than intentional malpractices. Experience is the best teacher in any business and it is possible that such incidents may not have been foreseen by these companies and therefore, adequate measures not taken. It is just a matter of time when with a proper regulatory framework and more foolproof processes such incidents can be avoided, be it on the company’s end or on part of its distribution partners, i.e. the warehouse and logistics companies. A proper grievance redressal mechanism will further boost the customer’s confidence in this regard.

The sector holds tremendous promise for the coming yearsfor current market players as well as for many other entrepreneurs who want to make the most of the e-commerce wave in the country. Though the e-commerce revolution has taken the country by storm, at present it accounts for a mere 4 per cent of the Indian retail market.

However, retailers, both big and small, that had so far notgone the e-commerce way are now exploring different strategies to grow their sales volumes multi-fold, using this effective sales channel. Ironing out any obstacles will make it easier to unleash its full potential and in turn, work wonders for the economy.