What will it take to sustain e-commerce growth?

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New-age digital consumers are becoming smarter, better informed, more demanding and less tolerant. To understand this growing base of audience better, we polled about 700 online respondents in 6 cities in India. Our report will help ecommerce players understand their buyers better and adopt to fast-changing market conditions.

We have identified seven key points that could help sustain e-commerce growth.

1. It’s all about consumers

Indian consumers have become more digitally savvy. The “digital consumer” is able to shop anytime anywhere, thereby, driving growth for e-commerce. To succeed over the long term, companies must fully become omni-channel. Pure play online portals will also have to be nimble enough to reinvent themselves to keep pace with fast changing consumer preferences. Companies will have to develop sustainable business models keeping consumers at the center.

2. Fickle consumers – delivering on promise key to retention

Customers are turning to the online market for seven key reasons – (1) convenience, (2) discounts and cheaper prices, (3) multiple product options, (4) multiple payment modes, (5) availability of brands, (6) good return policy and (7) timely delivery. Companies will now have to go the extra mile by enhancing consumer satisfaction, beating consumer expectations and providing additional value for money.

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3. Middle aged consumers – the cream of the pie, not just the youth

Potential market segments for ecommerce players are:
(1) Middle-aged consumers: Consumers above 35 years of age are more financially independent and have high spending power.
(2) Rural consumers: The rural user base is growing and there is rising penetration of internet and smart phones.
(3) Women consumers: Tech-savvy women are increasingly turning to online portals to fulfil their needs in diversified categories such as fashion, footwear, apparel and accessories, food and drink, baby care, hair care and skin care.

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4. Assisted buying to drive volumes

Ecommerce players need to players will have to understand characteristics of categories sold online. Electronics, especially mobiles/tablets/accessories and lifestyle products (apparels/shoes/ accessories) are popular. On the other hand, furniture, food/groceries, etc., are challenging sells. The use of big data and advanced analytics can help companies understand the needs of an individual consumer, track their buying journey, offer improved products as the consumer matures, provide targeted discounts, differentiated pricing, etc. This will help companies improve a consumer’s buying experience, loyalty and stickiness over the long run.

5. CoD – a necessary evil; cashless transactions crucial for sustainable growth

Cash on delivery (CoD) was instrumental in making online shopping popular in India, accounting for a huge 60% share in sales. However, CoD has its own challenges - players have to provide additional working capital, logistics costs in case of returns and fear cash pilferage. Players now have to encourage customers to go cashless by providing incentives, solidifying cyber security and encouraging mobile/online wallets.

6. Targeted medium only way for effective communication

The most influential modes of communication are: (1) television, (2) family and friends, (3) promotions and offers and (4) social media. Companies need to decide on the right channel for communication based on targeted consumer segment. Using local languages will help companies reach an expanded section of the society to drive future growth.

EY - How to communicate effectively with consumers?

7. It’s not about discounting alone, quality and efficiency matter equally

The discount-based model is effective only in the early stages to attract consumers, but will not be sustainable over the long run. Ecommerce players will have to craft a cautious strategy to gradually reduce discounts and devise new ways to provide value to consumers by addressing their operational issues, charging for fast delivery for commoditized categories, etc.