E-Commerce: The changing picture of business in India
E-Commerce:
The changing picture of business in India
Mains Exam: General Studies Paper 3
(Indian Economy)
August 19, 2023
Foreword:
- At present, the way of shopping in India is changing rapidly. Online buying and selling i.e. e-commerce has changed the concept of business. It has affected everyone who was or is a part of the business. Be it the consumer, the seller, the advertiser or the business model itself. Anything can be bought on the Internet.
E-Commerce:
- It is one of the fastest growing markets in the world. Only 6% of India's $9 trillion retail market comes from e-commerce
- In the year 2022, 200 million people in India will buy something online, whereas a few years ago this number was less than 1 million. However, the 'business-to-business e-commerce market' in India is still less than 1 per cent of the USD 1 trillion market.
- In a country of 1.4 billion people, where the economy is growing faster than any other part of the world, companies and analysts say these figures still only reflect the surface.
Causes for the growth of e-commerce sector in India:
- The e-commerce sector has suddenly seen a remarkable growth as there has been no change in the way Indian people shop for decades.
- For ten years this sector has been dominated by two American companies. Not only do they hold about 75 percent of the online market share, but they are also the country's two largest market players overall, given the lack of commercial chain monopolies in India.
- Presently the e-commerce sector is being expanded by the Government of India to bring the economy of India, which is the fifth largest economy in the world, to the first position.
- According to e-commerce companies, most of their growth comes from smaller Indian cities with a population of 20,000 to 100,000.
- It has expanded due to large number of local and retail traders joining the e-commerce sector.
- This has been made possible by the expansion of access to cheap internet.
- Social media has also made people of all social strata aware of new things.
- 659 million people in India have smartphones and the cost of mobile internet data is among the lowest in the world. One billion Indians are expected to have access to the internet by 2025 and 33 per cent of them will be online shoppers.
- India's Tier-3 and Tier-4 cities are digitizing very fast. Internet has reached even in rural India and the pace of its penetration is very fast in other areas. Due to this, there has been a lot of change in the behavior of the customers or consumers there. Online shopping has become a necessity for them, not a luxury anymore.
- The COVID pandemic also played an important role in this direction. This suddenly inspired new e-commerce ventures. The increasing trend of digital payment system further fueled this. A few years back India was predominantly a cash-based society, with credit and debit cards being used by only a small section of the society.
- There has been a boom in the last few years due to the transition to the 'Unified Payments Interface' (UPI), in which millions of Indians have their bank accounts linked to apps and small items. Not only has this made a large section of the population more digitally literate, but it has also made it much easier to pay for goods purchased online.
- Interestingly, the total market share of buyers from Tier-2 and Tier-3 cities was over 61 per cent in FY2022 as compared to 53.8 per cent in FY2021. While the growth rate of e-commerce in Tier-I cities is less than 47.2 percent. Tier-2 and Tier-3 cities saw an increase of 92.2 per cent and 85.2 per cent, respectively.
Opportunities in E-Commerce Sector in India:
- India's e-commerce sector has huge potential due to 'Business to Business' (B2B), 'Direct to Consumer' (D2C) to various sectors of commerce i.e. Consumer to Consumer (C2C) and Consumer to Business (C2B).
- Given access to the Internet and smartphones, it is estimated that the size of e-commerce in India will increase to $ 40 billion by 2030, from just $ 4 billion in 2019.
- By 2027, the number of online shoppers is expected to reach 500 million in a $170 billion market.
Concerns related to the e-commerce sector:
- The economic profits derived from the e-commerce sector in India are concentrated in the hands of a few companies and their billionaire owners.
- The business of India's traditional local grocery stores has been affected to a great extent.
- Currently India's grocery market is about eighty percent, while currently only one percent of groceries are bought online.
- Online shopping has also had a negative impact on the business of local retailers and retailers.
- Also, while e-commerce platforms have created employment for lakhs of gig workers, the laws relating to their employment have lagged behind. Even today 23 million gig workers in India are working without proper legal protection.
- As competition has increased, many e-commerce companies are cutting costs, directly targeting gig workers for profit. Resentment of local merchants has proved somewhat problematic for the government, as the network of shopkeepers and small businesses wield great power through local influence and strong associations, and are an important electoral group.
- Despite the widespread growth and spread of e-commerce, India is still hampered by a significant digital divide.
- More than fifty percent of the country is still deprived of internet access. It is much higher in rural areas. The aspirations of online shopping are beyond the reach of even the poorest of the poor.
- Digital transformation is also changing consumer behavior, which could be a major challenge for the retail industry in 2023.
- There are many other challenges in the field of e-commerce in India. Many problems are arising in this sector including digital privacy issues, cyber security issues, logistics inefficiencies, lack of ease of payment processing, and the issue of prioritization of purchases in higher installments.
Conclusion:
- The e-commerce sector in India is currently growing and is expected to contribute significantly in the future as well. In this, it will be important to take care of the changing preferences of customers along with new and innovative technological measures, so that this sector can become a part of even greater social and economic development.
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Mains Exam Question
In the recent years, the e-commerce sector has completely changed the picture of business in India. Discuss.