The journey of e-commerce

After a long and tiring day at work, Millie returned home at about eight in the evening only to realise that four hours later she was supposed to celebrate her husband’s thirtieth birthday. Gosh! How could Millie be so silly to forget such an important day! She had not picked the cake and the bouquet and the present. Now all she had was a few minutes before her husband would come back from work. What could be done?

Millie rushed to grab her smartphone and hurriedly browsed the online birthday cake sellers nearby. She clicked the five star rated seller in the vicinity and shortlisted her husband’s favourite plum cake from the instant delivery section.  She was about to hit the “place order” button when a suggestion popped up saying “add a bouquet of red roses”. Millie grinned and without wasting a minute she clicked the “add a bouquet” button and there it was; roses, orchids, lilies, carnations and much more. She shortlisted a bunch of red & peach roses and clicked the “add to order” button. She noticed that the side bar of the seller’s website said “make him feel special, give him a greeting card”. Millie navigated to the link in the sidebar and selected a lovely birthday card and added it to her cart. She entered 2400 hours as the order delivery time and hit the “place order” button. Aah! A sigh of relief for Millie.

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Welcome to the world of e-commerce, a platform where buying and selling experience has been elevated to another level. Sitting at the comfort of your home, you can now buy your favorite brands of apparel, footwear, cosmetics, accessories, electronics, furniture, home decor and almost anything you can imagine.  And that’s not all. Hailing a cab at the click of a button or booking a last minute hotel room in another city or ordering grocery on a lazy Sunday afternoon, all of this has been possible with the advent of e-commerce.

How it started

The history of e-commerce dates back to the year 1991. Though the business community had been sharing documents online since the 1960s, the first instance of buying and selling via internet happened during the 1980s when a networking services company in the US called CompuServe added the feature of Electronic Mall to its offering. The Electronic Mall hosted a number of online merchants through whom users could purchase items online. Later in 1991, when the National Science Foundation in the US lifted a ban on the use of World Wide Web for business transactions, e-commerce officially became a platform for commercial use. By 1994, the security protocols like HTTPS and DSL (Digital Subscriber Line) had been developed and they allowed secured and uninterrupted connection to the internet paving the way for B2B businesses to kick start on the online platform.

The e-commerce revolution would not have happened without companies like Amazon and eBay. These were the first ever companies to experiment the online platform for commercial use. Whilst Amazon in the year 1995 started off just as an online book seller, eBay was the first company to showcase an online bidding platform for used goods. In 1997, Amazon went public and expanded its offerings whereas eBay by now had sold goods worth $95 million. The rest is history.

Where we are now

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E-commerce is a global phenomenon today. US has played the key role of the initiator of this gigantic form of business and even today they are one of the primary e-commerce markets in the world. However, in recent times, the progress of this industry has been accelerated further because of the burgeoning Asian market. As of now, Asia Pacific is the largest e-commerce market in the world, with China contributing nearly 80% to online retail sales in this region. The global e-commerce market is expected to grow at an impressive CAGR (compound annual growth rate) of 19% and above by 2020.

India is one of the fastest growing e-commerce markets. The Indian e-commerce industry is estimated to grow at a five year CAGR of 31.2 % till 2021 (as per a study by Forrester Research). E-commerce entered India in the year 2010, but initially it was not a piece of cake for the industry players to tap the stringent Indian consumer. Big players like Amazon and Uber had to improvise their technique a bit to gain eyeballs here. They introduced features like CoD (Cash on Delivery) or cash payments and “no questions asked returns” to gain the consumers’ trust. Besides, the increasing penetration of smart phones into tier 2 & tier 3 cities along with the rising disposable income in the hands of the middle class helped e-commerce enter the households of every average Indian. Also in recent times, the massive numbers of SMEs (small & medium scale enterprises) operating out of India’s far flung areas have been more inclined to register their businesses online. This, coupled with better infrastructure and logistics facilities has led to fuelling the demand for new entrants in the domestic e-commerce market. Today local companies like Flipkart, Ola and Shopclues have changed the game of this industry in India.

Having said all this it is imperative to mention that the year 2016 was not a very fruitful year for the Indian e-commerce industry though. There is always a flip side to everything. The industry that grew by 180% in 2015 in India crashed to a meagre 12% growth in 2016. The downfall was triggered by factors more than one. To gain market share e-tailers indulged in deep discounting and cash-backs which led to declining margins resulting in survival of the fittest. Smaller players were slashed out of the market due to continuous losses. Also the discount driven demand was artificially created as many brick and mortar retailers had started purchasing merchandise online (rather than the actual customers) and in turn were selling it to the end user (as per a report by RedSeer Consulting). Towards the end of the third quarter of the year, a much needed market correction was done which resulted in the fall of retailer orders. Besides, the government regulation of limiting the contribution of a single seller on this platform to a mere 25% led to a further cut down in the market share. The final smack was demonetization in November 2016. The Indian online market is heavily driven by Cash on Delivery. Due to shortage of currency notes, there was a major decline in the number of purchase orders which the industry stalwarts would otherwise receive. However, in spite of all these roadblocks, the industry is expected to pick up growth in the coming years and we can expect it to touch the $80 billion dollar mark by 2020 as estimated by analysts.

What lies ahead

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Change is the only constant. The road ahead calls for new challenges. The e-commerce players need to come up with more innovative features to suit customer aspirations. The world is gradually moving towards virtual reality. Probably the next generation will demand for an online retail store that would not only allow them to check the dimensions of that uber-chic dress but also let them virtually wear it. Seems like a distant reality ? Not really. Furniture retailers like Ikea are already experimenting augmented reality through their digital catalogue app. The app allows customers to place 3D furniture in the exact location where the actual piece is planned to be placed. In the fashion apparel sector virtual reality is yet at a nascent stage. In January 2016, Facecake launched a software called Swivel which lets users enter into a virtual dressing room and try an outfit. Perhaps the e-commerce industry will soon have to adopt such software to partially cover up the touch and feel gap that comes in the way of its customer’s purchase decision.

When it comes to India, there are other challenges like the internet penetration, which is around 31% (as per a report in livemint.com) of the total population. India is not just about the metros and tier 2 cities. A massive 69% of India lives in rural areas where internet and smart phones are yet to reach. Rural India is deprived of various basic necessities of life due to lack of awareness and availability. Brick and mortar stores in such areas cater only to the age old products that have been in the market place since pre independence times. There is tremendous scope for e-commerce in rural India. The vast array of products being sold over these online sites can trigger the need for necessities among the rural masses that are absolutely ignorant of the e-revolution happening in cities.

Another area where e-commerce can prove to be a blessing is Health-Care and Health-Services. Though a few start-ups have forayed in Healthcare e-commerce but this sector still remains largely untouched. The large chunks of Indian population living in remote areas do not have the luxury of a hospital or pharmacy in the vicinity. E-commerce can at least fill the gap of a modern pharmaceutical store that can offer lifesaving drugs to these otherwise deprived masses.

Bottom line

The opportunity is out there. But the competition is cut throat. Tiny start-ups, established domestic players as well as big multi nationals are fighting their way out to grab the biggest slice of the pie. The next few years will certainly set apart the best from the rest.

In the interim, happy shopping! 🙂


 

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