A flavour of India’s digital and e-commerce sectors in 2010

Wednesday, January 20, 2010 | Posted by: Harish Bahl
Categories: | Tags: India, Smile Interactive Technologies Group, India E-commerce, Harish Bahl, Digital sector, E-commerce sector

India is set to see increasing e-commerce activity in 2010. With more than 26% of Indian railway tickets now being bought online, the old debate of Indian consumers do not buy online is fast being put to rest. The question now being asked is, ‘are there enough sellers on the internet in India and there are enough reasons to buy online’?

Online travel accounts for the bulk of the Indian e-commerce activity and was the single largest contributor to the sector in 2009.  Online travel retail activity soared in last year with many companies in this sector finally delivering profits, which, potentially means good returns for investors. Consumers typically shop online for a better deal. Real estate prices over the years have gone up to a level that for most brands, the cost of physical retail has gone up to as high as 35-45% and retailers are desperately looking for alternate and more effective sales channels to better reach and serve consumers.  This is perhaps what has driven the launch of four online private discount sale businesses to open over the last quarter.

Social Media is no longer seen as experimental media by the e-commerce sector in India. With most of the e-commerce sites in India being primarily in the business of demand aggregation, social media is proving to be a very effective tool to reach a wider target audience and encourage consumer conversation & engagement, thus the collective buying power of the consumers helping the brands offer an even better deal.

More than a third of digital advertising in India comes from Internet companies, despite the low level of overall sector activity currently in the country. The growth of e-commerce will naturally drive the growth of digital media and social networking is going to lead the baton amongst most preferred digital options for the marketers.

With only 45 Million people online in a country of 1.2 Billion, the current size of e-commerce market estimated at approx 3 Billion USD may seem small, but it is growing at an annual rate of around 30- 50%.  This makes the digital market space in India one of the most interesting sectors to keep a watch on and it presents a potential opportunity for investors.

At the same time, the approach to the Indian market cannot be directly compared to the West.  It is imperative to understand the cultural differences in consumer behaviour. India is an assisted culture where consumers expect a high level of service, whereas consumers in the West are more likely to be independent when shopping online.

There are local Indian sectors which may not necessarily share the same growth prospects as the West.  For example, healthcare and education are two very obvious sectors which could show significant growth opportunities and rates. Investors should be on the lookout for online business models unique to India as that is one area that has the potential to meet the scale of opportunity that still exists in the Indian e-commerce market.

 

Clearly 2010 offers exciting opportunities for operators, customers and investors in the Indian e-commerce sector.

Harish Bahl
Founder & CEO
Smile Interactive Technologies Group