Indian eCommerce Space Takes a New Turn

Onkar Sharma
New Update
Ecommerce business

Internet penetration has opened up a whole new market in India. Myriads of business models have emerged in the eCommerce space, attracting buyers from all parts of the country. The good sign is that the Indian eCommerce has moved up to the next level. Numerous innovative eCommerce startups have also cropped up in the past few years. Even the first movers—Flipkart and Snapdeal—are keenly experimenting to stay ahead of the curve and be leaders in this space. However, in this story Dataquest has endeavored to look through the eyes of the startups and evaluate the market prospects and challenges. Both Flipkart and Snapdeal have successfully gone past the startup phase and grappling with challenges which most enterprises face. However, in many cases they are facing challenges of profitability and regulatory, among others. “Last year the Gross Merchandise Value of top 3 eCommerce players was $13.8 mn, and it’s only slated to get bigger as more people get access to Internet,” says Abhinav Choudhary, Co-Founder,


Boundless scope

Experts believe that India's eCommerce space will continue to be a hotbed of activities. And this seems true when we look at Assocham's predictions and assessments. Assocham notes that the eCommerce in the country is likely to be worth $38 bn by 2016, a 67% jump over the $23 bn revenues for 2015. It further says that India’s eCommerce market went up to $17 bn in 2014 and to $23 bn in 2015. “There are challenges at policy level, infrastructure level, and deep discount-led unsustainable growth. Having said so I would reiterate that growth of this sector is linked to Internet penetration and the lifestyle that's becoming busy hence growth is certain,” opines Saurabh Rai, CEO,

By 2020, India is expected to generate $100 bn online retail revenue out of which $35 bn will be through fashion eCommerce. Online apparel sales are set to grow four times in coming years. By 2030, more than one billion people are expected to be online. And as the mobile telephony industry underestimated the exponential growth of mobile growth, expect that for the eCommerce industry too. India is the fastest growing economy and the largest millennial population—these two make for a heady combination to create an extremely large marketplace.


 “To understand eCommerce in India, we have to understand the variable factors—mobile telephony, Internet, and the love for shopping. The average Indian loves to shop. With festivals almost every month, there is a plethora of things to buy, and gifts to be sent,” opines Samir Kazi, Managing Director,

 Business challenges

Many challenges stare in the face of eCommerce companies in India. Indian consumers are slowly moving towards cashless transactions. However, it will take a long time for them to embrace credit cards for online shopping. Large number of users still prefer to opt for cash-on-delivery (COD). This often results into non-delivery. Besides, most of the startups are not able to move away into the small cities and villages. Untapped markets challenge even the established companies like, Flipkart, Snapdeal, Shopclues, and others.


 “There has been a huge untapped potential for the eCommerce players in India, especially in the last 10 years. Over the last 5 years we have seen an unprecedented growth in this segment. This has made the life of Indians very simple and comfortable given the traffic congestion in India, rising fuel prices, time crunch, and the like. However, to tap all kinds of consumers in cities is not easy,” says Urvesh Goel, CEO & Founder,

 Goel also believes that engaging customer for a longer time is not easy as there are a lot of distractions. “Keeping the customer focused on his objective (shopping on a particular site). It is most likely for the customer to lose focus due to pop-up ads, opening other social networking sites parallely, etc. It may also happen that the potential customer is so smart that he chooses to buy the product from a brick-and-mortar store after comparing all the deals, prices online,” adds Goel.

India's length and breadth poses a huge challenges to eCommerce players especially while the goods have to shipped from one state to another. India's tax structure is pretty complex. Different states have different taxes. Consumers often react badly to the price difference caused by state taxes. It also eats up into the profits of eCommerce players.


 In our conversation, we discovered that most of the startups in the eCommerce space are concerned about reaching out to the last mile consumer. They are struggling to figure out how they can reach out to people in the remote locations. Most experts believe that eCommerce startups quickly need to solve issues such as COD, managing delivery costs, order cancellations and order returns in order to stay in business. Many of the small players are not even able to provide 24*7 customer service.


Flipkart recently faced the biggest backlash when its valuation was reduced. Morgan Stanley marked down its stake in Indian e-commerce company Flipkart to $103.97 per share, 27% below the price of its last fundraising round. Last year, Morgan Stanley had valued Flipkart’s per share little over $142 per share. In a flash Flipkart's valuation came down to $11 bn from $15 bn. Experts believe that this was long overdue as the company did not show its investors a path to profitability. Almost every eCommerce company in India is not even closer to profitability. Only one eCommerce company has gone public that is Infibeam. But Infibeam's model is a little different as they have increased their dependence on their technology and hosting business. All in all, it is important for eCommerce companies to find out ways to make profits sooner or later.

“Major eCommerce players these days are operating under significant pressure. All major players have been burning investor money for some time in order to win loyal customers, but the losses incurred are now too big to ignore. This has led to drastic reduction in discount offers across all major stores,” adds Kazi of


Technological challenges

Technology has been the greatest driver of eCommerce sector. However, it has been a challenge for many online shopping websites. There is a lot more than just the bare website or mobile app. In order to get true insights into customer behavior and what is trending, online shopping stores need to make ample investments in analytics and big data. Besides, they have to make choices between platforms for their business. “It is the medium and enabler which plays the role of place and promotion. However, the product proposition is the ultimate winning proposition considering. The cost of tech resources in a competitive capability landscape is and will be an issue,” says Saurabh Rai, CEO,

While the big eCommerce players invest a lot in technology and analytics, they are not able to make most of the data they own. “Primary Technology based challenge for us are big data challenges while handling sudden burst in traffic, and infrastructural expansion. We are sourcing talent from around the country to resolve these issues and strengthen our position,” says Abhinav Choudhary, Co-Founder


Who benefits from 100% FDI

Recently the Government of India allowed 100% FDI in eCommerce, although it is only in the online marketplace. It is believed that the decision will impact the likes of Flipkart which have long lobbied against the FDI. The new guidelines will allow Alibaba to make full entry into India. It is possible that Flipkart loses its leadership position in the Indian market. “New DIPP guidelines clarifies Government stance on FDI and eCommerce markets, addressing several key issues like price regulation and service liability. This lucidity will assure and motivate big retail giants to invest in India, and that shall consequently help more local sellers extend their reach online, thus leading to overall growth of the eCommerce sector,” says a startup. On the contrary, competition will be good for start-ups who aim to simplify online shopping space. Even the fate of Amazon and others needs to be seen as it may have to change its business strategy to stay active in the market.

Compared to developed markets, eCommerce in India is still at a nascent stage. There is a tremendous opportunity for growth because of which major global prayers are treating Indian market as a top priority. Smartphone market is already booming and with efforts of IT players like Google, Facebook and Microsoft, a number of new Internet users will increase exponentially over the course of next few years.

e-commerce e-commerce-industry cash-on-delivery infibeam infibeam-com fdi-in-ecommerce