E-commerce growth, challenges, and rural inclusion

More than 4,000 active e-commerce start-ups in India are also pushing the advantages of digital commerce and driving growth at a rapid speed.

ecommerce exports
The funding in the e-commerce sector grew by more than 1000 percent in 2021 compared to the previous year (Image: pixabay)

By Ankur Dayal

The Indian e-commerce industry has been witnessing an upward growth trajectory. After a tidal increase in digital adaptation during the Covid-19 pandemic, India witnessed a massive surge in real-time online transactions in 2021. Tier-2 and Tier- 3 cities in India transacted more than ever and a large number of the rural population were shopping online. As per the Indian Brand Equity Foundation, an initiative by the Ministry of Commerce and Industry, the e-commerce market in India will surpass the US to become the second-largest market in the world by 2034. The report suggests the e-commerce market will reach US$ 111.40 billion by 2025 from US$ 46.20 billion in 2020, growing at a 19.24% CAGR. In 2021 alone, the industry saw a whopping 77 percent rise compared to the previous year.

From the presence of multiple players and the emergence of new business models to the growth and rapid rise of social commerce, there are numerous factors behind this exponential growth. More than four thousand active e-commerce start-ups in India are also pushing the advantages of digital commerce and driving growth at a rapid speed. Impressively, this growth story and the country’s massive e-commerce potential have attracted strong investor interest. The funding in the sector grew by more than 1000 percent in 2021 compared to the previous year.

Challenges facing the e-commerce sector and its solutions: Though the e-commerce market trends look promising, for India to become a global e-commerce leader, there are still many hurdles that it must overcome:

1) As the internet penetration is slowly increasing owing to a robust digital infrastructure, cheap data, and an increase in the number of smartphones, there is a need for the corporate sector to join hands with the government to ensure smooth, seamless transactions with minimum disruption. A holistic e-commerce framework should be established with best governance practices to cater to the needs of the new consumer base. 

2) While the government has introduced significant steps to promote a digital economy, more efforts are needed to ensure easy and safe credit facilities

3) As consumers are emerging from tier-2 and tier-3 cities, the smooth integration of new entrants into the e-commerce ecosystem is crucial. This can be achieved by developing and implementing an omnichannel strategy combined with an offline-to-online model that will efficiently cater to their needs.

4) It is essential to make the logistic sector which is, as it stands, disorganized and fragmented, effective and efficient. New-age technologies such as AI and ML should be implemented to offer solutions to the existing logistical issues.

Rural inclusion

For e-commerce to realise its full potential, it is necessary to tap the Indian rural market. According to a recent study published by data and market measurement firm Nielsen, the Indian rural market has a 20 percent higher presence of internet users than urban parts of the country, and as per Boston Consulting Group, will account for over half of e-shoppers. Therefore, a well-established e-commerce market will bring opportunities to rural communities and give them a sense of ownership and economic engagement. It will create job opportunities and lead to industry development in rural India and will also allow rural sellers to practice broader and more dynamic business.

Also read: Is marketing crippling the e-commerce growth story?

Open Network for Digital Commerce

All set to launch next month, the government-led ONDC is a step toward solving most of these existing challenges including democratizing digital commerce for small sellers in tier-2, tier-3 cities, and villages. ONDC strives to standardize operations such as cataloguing, inventory management, order management, and fulfilment in a format similar to that used in the Unified Payments Interface (UPI). It is claimed that ONDC, through a network-enabled application, will act as a catalyst in accelerating the efforts to reach a wider audience of buyers and sellers by covering a larger part of the country and boosting hyperlocal e-commerce. All in all, ONDC is a pragmatic step that will allow small and niche-based businesses to be discoverable and increase their customer base while removing the existing barriers that large platforms currently have.

The bottom line

Though a collaborative partnership is in the making to develop a stronger and more robust e-commerce ecosystem, and change the way India does e-commerce, we must cover and find the gap between diverse topics such as omnichannel retailing, marketing, warehousing, payment solution, retail exports, etc. for the country to realize its true potential as one of the top e-commerce destinations in the world.

(The author is CEO and Co-Founder, Primarc Pecan Pvt. Ltd. Views expressed are his own.)

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.