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Analysis: E -commerce in India

E-commerce: An Introduction

Since the inception of computers, we rely on these machines for most of our daily tasks and it makes sense, as we provide quicker and better quality results. The biggest success in the computer age has been the development of the Internet. The internet has made the world a very small place. You can communicate with anybody in the world to find any information relating to a business or product. So, it made business sense to use the internet to get the attention of customers’ worldwide. It was not long before companies started seeing the potential of the internet and started selling and buying products or services through the internet. This process of selling and buying products or services through the internet is called E-Commerce.

Types of E-Commerce Transactions
E-commerce transactions are done between two or more consumers, two or more businesses, between a business and a consumer or between the business and the government. The transactions can be from household products, online games, music, Electronic Fund Transfers, and a lot more.

E-commerce in India
The computer and Internet has been best utilized by India, though it was a late starter in understanding its potential. It was the Rajiv Gandhi government that first gave permission to IBM to sell computers in India. Since then a lot of brands like Dell, Apple, HP, Compaq and some Indian companies like Zenith, Wipro etc have also come into the market.

Later, with the concept of outsourcing (sending work to another country to be cost-effective and increase quality), India became the Leader in IT services. India was considered to be the place with low-cost labor and best quality output. The main areas of outsourcing were call centers, medical transcription, medical billing, financial accounting, e-commerce websites and many others.

Why India?
The reasons why most companies choose India are:

  1. English is most widely spoken in India, than any other country
  2. The number of graduates coming out of college every year is higher than any other country. With so much of talent everybody wanted to invest in India
  3. The Indian government realizing the potential has brought better policies
  4. Low-cost labor with best quality output

So, when the concept of e-commerce came into India there was a sudden boom where almost every company wanted to invest in E-commerce. I think everybody understood its potential and very few looked at how they should go about it, which finally brought the trend down. I remember there was a time when doing E-commerce was said to be a fashion statement more than a return on investment, atleast I felt that was the attitude. After the boom of e-commerce, came the fall, which was mainly due to a lack of understanding.

Current Scenario
E-commerce, according to me is a good concept which has not been handled properly by Indian companies. The most important criteria to look at from the company’s point of view or the question they should ask themselves is  to find if there is a good sales response for the products through the internet. Are people really willing to buy from the net or would they prefer buying from the shop? One way of trying to find out is by looking at how other companies fared by selling the product and how they achieved success or the reasons that caused failure and try improving on those strategies or implement a site on an experimental basis just to see how the response is before going for a full fledged site. This also gives a better look at the market segment the company is handling. Another interesting factor is the number of internet users in India.

In the current scenario India has 42, 000, 000 users (2007 statistics as per the Internet Usage and Telecommunications market Report) from a population of more than a billion. This clearly tells us that the ISPs have not targeted a large number of users and the e-commerce situation can improve. There is a likely increase of 5% this year in the number of users.

If e-commerce has to be successful in India few conditions have to improve:

  1. Increase in the number of Internet users
  2. Increase in the number of credit card holders
  3. Creating a better experience of shopping through the net

More number of internet users means more people that use the Net and hence, a better chance for increasing viewership. Secondly, there is a lack of credit card holders. Purchasing on the net is mainly available only to credit card holders. The number of Indians holding credit cards is also a minimal figure compared to our population and finally, some people are just too lazy to fill out those forms before they get what they want. Most of us just enjoy the pleasure of going outside.

Now, let’s take a look at what are the types of e-commerce businesses available and to what extent they have been successful in India. The list of e-commerce businesses include:

  1. Travel
  2. Electronics
  3. Digital
  4. Lifestyle products
  5. Streaming Media
  6. Bank Transactions
  7. Trading
  8. Food Ordering
  9. DVD Rental
  10. Software

Largely, travel portals have been the most successful in the e-commerce business. The revenues generated by the Travel portals constituted around 50% of the entire revenue generated from the online market in 2007-08. This clearly indicates that if the e-commerce business has to flourish in India, it has to be based on a study of the market before you launch a site. There are a lot of market research companies that can help you collect information for your needs, but it is always good to do your own check on the market. India mainly constitutes of the middle class and the mentality of these people is such that they are just not comfortable buying products from the internet. The senior citizens are just interested to check the mails at the most, so reaching out to them is another difficult task. The good news though is that India has the largest population between the age group 25-45, the working class.


If e-commerce has to be successful in India you have to understand the buying patterns of people in different cultures and how your products are going to get a response on the net. With its huge population, India is always a good market for any product or service, but which product or service needs to be provided online has to be given a good thought before investing.

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