E-COMMERCE: The Upswing Begins

E-commerce

spending has continued to grow after it picked up speed in 2000, despite the

meltdown of dot-com stocks at bourses worldwide. According to IDC India,

e-commerce spending in India reached $51 million in 2000 from just $12 million

in 1999. IDC predicts that the Indian e-commerce figures will reach $6 billion

by December 2004. These figures are not surprising. With the relatively small

but quickly growing base the growth is bound to happen. Agrees Bonny Malik,

country manager, Interact Commerce, "India has a very low e-commerce base,

so the figures are naturally higher.

Also spending at the time of the dot-com hype was very high."

Worldwide, according to IDC, the e-commerce spending in 2000 stood at $268

billion, up by about 105% from the previous year’s figure of $130.5 billion.

B2B: Strongest growth

The Nasscom-McKinsey study 1999, in highlights of its e-commerce survey,

predicted that Rs 1,100 crore out of the total e-commerce transactions of Rs

1,200 crore would come through B2B portals. For buyers, B2B marketplaces promise

not only to deliver more competitive prices but also to rid the supply chain of

a host of inefficiencies. Malik sees maximum action on the B2B sites, "B2B

vertical application sites where the business is focused, vis-a-vis verticals on

pharmaceutical, real estate, automobile, steel and chemicals will generate

maximum business."

The B2B market is expected to grow following greater investment in the

telecommunications infrastructure, and after the apprehensions regarding

intellectual property rights and legal protections for business over the Net are

resolved.

B2C yet to catch up

B2C e-commerce needs excellent back-end services to hook consumers and get

them to come back repeatedly. "In India, the e-tailers have just

concentrated on building the front end. There is not much integration on the

back-end processing side," says Malik. Rohan Ajila, CEO, Indiamarkets.com

agrees, "Honestly, one doubts whether the multitude of portals that

mushroomed in the last couple of years gave much thought to this logistics

aspect."

Then there are the security issues. Most of the customers are skeptical in

giving their credit card numbers across the Web and the validity of a card

transaction without a physical signature is still doubted. Pradeep Saxena,

President, eFunds International points out; "The e-tailers in India are in

the evolution phase. The payment and logistics industry needs to develop to kick

off big business numbers on the Net." So while online shopping has caught

on in a big way in developed markets like the US, it is yet to click in India.

Also, the existing Indian mindset does not facilitate the purchase of ‘unseen’

things. The average Indian needs to touch and feel the product before making a

purchase. Rohan Alija, CEO, Indiamarkets.com agrees, "In online business

the major concern is that it does not lend itself to face-to-face interaction

with the prospective business partner."

The Internet phenomenon being relatively new in India, penetration levels are

not high enough as yet and the Internet has not gained widespread acceptance.

This too is a major reason why online shopping has not picked up. The

insufficient penetration level of the PC and the Net, bandwidth and lack of IT

awareness in some sectors also pose problems. But Malik does not see this as too

much of a trouble, "The silver lining is that these are not technology but

infrastructure issues, which would get sorted. The Internet infrastructure is

being boosted with a large number of ISPs in the fray. Setting up of

international gateways, technologies like broadband, DSL are also promising to

address the connectivity issue."

Experts argue that the low cost of personal computers, a growing installed

base for internet use, and an increasingly competitive Internet service provider

(ISP) market will help fuel e-commerce growth in India. Implementation of

e-commerce applications can provide an organization with significant benefits in

reaching new markets, reducing costs, improving cycle times and enhancing

service levels. As Ajila puts it, "Though India is well placed to take

advantage of the e-commerce phenomenon, the transition from off line to online

business would be evolutionary rather than revolutionary, since we are talking

of a change in the traditional mindset and business practices." DQ