India’s ecommerce setup - are we there yet?

September 2015

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  • Non-English speaking audience has an untapped market opportunity of US$800 million
  • Low internet speed, negligible credit card penetration, absence of proper laws and prohibited FDI in B2C eCommerce are major roadblocks to explosive growth

Mumbai, 16 September, 2015: Expanding accessibility of e-tailing to the non-English speaking audiences presents an untapped market opportunity of US$800 million, which is 15% of the segment revenues of US$5.2 billion in 2014, notes a recent EY study whitepaper titled ‘India vs. BRICs: a comparison of the e-commerce ecosystem’.

Additionally, in terms of actual numbers, the available pool of internet users that can be targeted is only third in the world, next to China and the US. Further, India is poised to surpass the US to become the country with the second-largest internet user base in 2015. India also has a higher proportion of internet users between the age of 15 – 35 compared to other BRIC countries.

Also, while fewer women are online in India compared with the other countries, the report quotes studies that have found that more than 80% of women shoppers recommend their online purchases to other women. Therefore, the ability to tap the women segment will help expand the overall e-commerce pie.

However, the sector’s growth depends on other aspects of the ecosystem, all of which will together determine success for them. For instance, India has an average data connection speed of 2 Mbps as opposed to 3 Mbps for Brazil, 3.4 Mbps for China and 9 Mbps for Russia. Credit card penetration at 4%, with Brazil leading at 32% amongst BRIC countries makes the Indian eCommerce ecosystem the least mature amongst BRIC countries.

Additionally, only 14% of the Internet users shop online, compared to 30-35% in Brazil and Russia and 55% in China. Further, the ticket size of online transactions in the India scenario is close to 70% lower than all the three BRIC countries, making the Indian e-commerce ecosystem the least mature amongst BRIC countries

“The lack of laws pertaining to the industry, and a prohibited Foreign Direct Investment in B2C eCommerce is limiting growth for the sector. The eCommerce players also need to leverage analytics to increase conversion, improve efficiencies in the logistics cycle and the entire value chain, and look to localize content to continue on their current growth trajectory,” said Milan Sheth, Partner and Technology Sector Leader, EY India.

Logistical challenges are another key factor driving down eCommerce adoption. Delivery charges account for about 10% of the transaction value. Additionally, fragmented logistics and poor physical infrastructure causes a delay and errors in delivery. Lack of warehouse automation is further driving down order fulfilment speed and accuracy. Lastly, a product return rate between 5% and 25% is driving down consumer confidence in the sector.

India also has the lowest average mobile connection speed at 1.9 Mbps. Only Brazil, with 1.8 Mbps, fares lower than India amongst BRIC countries. Interestingly, not only does India have more internet-enabled mobile connections than Brazil and Russia combined, the time spent online using the mobile is also among the highest. However, the internet usage on mobiles is not resulting in online shopping.

With more than 80% mobile penetration in the country, mobile wallets are expected to lead to a significant change in the payments landscape. Thus, regulations around the use of mobile wallets need to evolve further to promote m-commerce, according to the study.

The report can be accessed at

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