E-commerce can help usher the informal economy into a formal financial architecture mode
If I told you that a professional marriage photographer today is a recipient of FIEO’s (Federation of Indian Export Organisations) e-commerce gold award presented to him by the President of India for exporting camera equipment to the US, the UK etc., you would think I am joking. Truth be told, this is the real story of an entrepreneur who has taken advantage of the infinite possibilities made available to him, thanks to e-commerce.
India has emerged as one of the most exciting e-commerce markets globally in recent years. About 60 million Indians will shop online this year thanks to an increased internet user base of 354 million and a significant adoption of smartphones, making India the third largest smartphone market in the world. Rising disposable incomes, easy access to information, changing lifestyles, access to payment options and fabulous deals and discounts have propelled this revolution of sorts for over 300 million middle-class Indians.
India has a long runway ahead in comparison to, say, a South Korea where 15% of the retail sector is in the e-commerce space and where even a fisherman takes a photograph of his catch, uploads it on an e-commerce portal and before his trawler reaches the port, his catch has been sold to a restaurant. Such is the endless opportunity for e-commerce in India.
India’s retail market is estimated to be worth $600 billion of which only 8% falls in the organised sector—the rest dwelling in what we call an ‘informal economy.’ E-commerce can contribute immensely by ushering this ‘informal economy’ into a formal financial architecture mode and energizing the entire ecosystem of buyers, sellers, product developers, logistics providers, contact centers, micro lenders etc.
India is a land of entrepreneurs and many retailers are taking advantage of e-commerce to not only sell domestically but also export to global customers. The opportunity available to over six crore small retailers of Confederation of All India Traders (CAIT) with whom eBay India has a tie-up, for example, is unfathomable.
Increased entrepreneurial e-commerce activity can create significant job opportunities. As per the eBay India Online Business Index, online domestic entrepreneurs employ an average of 4.8 full-time staff and 1.6 part-time staff. This is projected to soon increase to 5.2 full-time staff and 2.1 part- time staff.
The industry has provided buyers availability of a wide variety of products, convenience of shopping and discounts. Over 4 million buyers access more than 3 crore products on eBay India. These buyers seek quick access to products and also the ability to touch and feel the product, besides timely resolution to their queries, faster delivery and various payment options.
Every touch point connected to the internet is a potential customer. This will create new opportunities for innovation in areas like local language products, logistics and payments besides creating an immense treasure trove of data about consumers in various socio-economic categories.
The e-commerce industry is creating business opportunities for product development companies who are enabling customer experience through apps and augmented reality. Ancillary industries like contact centers, logistics service providers, banks, m-wallets, etc. are also thriving. With the sector estimated to have over 100 million buyers by 2016, the demand for such services will continue to scale.
There are certain impediments to the growth of the sector. Faster implementation of Goods and Services Tax (GST)will eventually lead to uniformity in taxation across all states, reduction in overall tax cost, favourable impact on tax compliance and greater tax revenue collections, besides economies of scale, supply chain efficiencies, and thus higher economic growth.
Recent government initiatives with a focus on start-ups, manufacturing and digital penetration will further fuel the growth of online commerce.
We are just seeing tip of the pyramid for e-commerce in India. The real story will get played out in times to come.
By Latif Nathani
The author is vice president &managing director, eBay India