May-2015

COMMUNIQUE
E-COMMERCE
smooth running of the applications as below:
i. High cost of setting up of e-commerce enabled sales
platform on internet and even higher cost to maintain.
ii. Small units do not know where to start from, as most
of the companies do not have a full-fledged EDP/IT department.
iii. Still, most of the customers/ buyers are ignorant of
this internet technology.
iv. E-commerce is mostly dependent on customized
products. No readymade products of a customer’s choice
are instantly availed.
v. It lacks standard payment structure.
vi. It does not have a catalog.
E-commerce in India
E-commerce in India is still in a nascent stage, but
even the most-pessimistic projections indicate a boom.
E-commerce in India is definitely going to grow huge.
Taking into account of the rapid growth of internet in
the country, it would not be long before India overtakes
US regarding online sales.
As per the study of ASSOCHAM India’s retail market
is now pegged at Rs. 2700 Cr. (nearly 500mln US$) and
projected to rise to Rs. 7000 Cr. (1.4 Bln US$) by 2015.
To cash in on the vast opportunity, a number of e-commerce
start-ups have mushroomed in last few years. Most
of them have been attracting capital from angel, early stage
and venture capital investors. In Indian context, we can
say that success of ticketing websites like irctc.com and
makemytrip.com paved the way for other online ventures
like snapdeal.com, flipkart.com, naaptol.com etc. Though
70-80% of total e-commerce business is still coming from
the ticketing sites, however, other categories like Books,
electronics, high end gadgets and apparels are also generating
a lot of revenue of late. A recent white paper by
FDC and ICICI Merchant Services says “E-Commerce
in India has been growing at a 2-3 percent rate on month
on-month basis and almost 50% annually”. Looking at
these impressive figures, global players like Amazon.com
is planning to the Indian market and that will make this
sector more competitive and interesting.
It is interesting to consider whether the global economic
downturn may have negatively impacted the growth of
e-commerce or possibly accelerated it as consumers look
to new online channels which can often deliver greater
value than traditional stores. While many companies, organizations,
and communities in India are beginning to
take advantage of the potential of e-commerce, critical
challenges remain to be overcome before e-commerce
would become an asset for common people. Today, even
though there are less than 10 million internet users who
are actually engaging in e-commerce activities, there are
about 150 million internet users in India or around 75
million households that are ready for e-commerce. The
growing reach in terms of internet connectivity to the
interiors of India coupled with the positive experiences
of end consumers when buying online beyond the metros
and big cities are key drivers of the e-commerce boon
in India. Some of the highlights of the domestic e-commerce
scenario based on the findings of NASSCOM’s
survey include the following:
• Among user organizations, more than 90 percent expressed
keen awareness about the increasing adoption of
e-commerce and its potential benefits.
• More than 55 percent of corporate respondents said
that e-commerce transitions were integral of their corporate
plans. Of these, nearly 85 percent were industries
which did not have direct or frequent contact with end
consumption.
• About 23 percent of top 500 companies in India already
have started some form of e-commerce. These have
been facilitated through the up gradation of existing IT
systems or fresh installations configured or e-commerce
transactions.
Businesses in even the smallest towns and villages are
becoming increasingly aware of e-commerce and are excited
by the growth potential. The growing penetration
of e-commerce along with positive consumer experiences
is reflected in a trend towards higher value online
purchases. Today, consumers across urban India are confident
enough to make purchases that exceed Rs 20,000-
25,000. Earlier, the same shoppers stayed in the Rs 2,000-
5,000 ranges. According to a report by the IAMAI, the
current e-commerce market in India is around US$ 10
billion. But with different levels of adoption, the market
has the potential to grow anywhere between US$ 70 billion
– US$ 150 billion under one scenario and at another
level, it can grow between US$ 125 billion – US$ 260
billion by 2024-25.
Within the small percentage of people who buy online,
the distribution is very one-sided. Online travel services
with a market share of about 76% dominate the Indian
online purchase space. This is followed by e-tailing
with 8% share, financial services contributing 8%, digital
downloads comprising 2% and other online services
having 6%. Probably the major reason for the reluctance
of people using e-commerce is that the responsibility of
something being misused is on the consumer in India,
74 the MANAGEMENT ACCOUNTANT MAY 2015
www.icmai.in