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Monday, April 4, 2016

Comparative Dynamics of Ecommerce in India: Insights from Top MBA Colleges in Delhi NCR

Top MBA colleges in Delhi NCR are engaging in serious conversations with ecommerce companies these days. These conversations are meant to tap the employment generation potential that these ecommerce companies are bringing to the table. While some ecommerce firms have been able to scale up their operations and have gained market share, many others are still in stages of infancy. It makes enormous great sense for top MBA colleges in Delhi NCR to look at the ecommerce vertical with not just a sense of urgency but also with a sense of importance of purpose. Ecommerce is here to stay in India and the vertical is expected to register growth in the coming years. With all the rhetoric surrounding he ecommerce boom in India, it is worthwhile for top MBA colleges in Delhi NCR to objectively assess the comparative strengths and weaknesses of India and rest of the world. More over it is also worthwhile to assess of the current growth spree is a bubble or is here to sustain itself in the long term.

Ecommerce Insights: How do the Numbers Stack Up?

After all the hullaballoo on ecommerce explosion, it is obvious to ask for the relative performance of India against the other major ecommerce markets in the world. In countries like United States of America and China, the ecommerce market size exceeds U.S. $ 150 billion. In comparison to these countries India is still in stages of infancy although there are no doubts about the growth rate. An estimate made by PwC asserts that in the last five years the ecommerce market size in India has had a CAGR of 35% which is impressive. The market size has grown from U.S. $ 3.8 billion in the year 2009 to U.S. $ 12.6 billion in the year 2013. Studies conducted by IAMA (Internet and Mobile Association of India) show that online travel leads in terms of market share with a clean 70% followed by other verticals like electronic consumer goods. Both the market place and online segments of e-tailing have grown by 10%.

In the domestic e-tailing segment the market share by revenue is split as shown above. The data collected by IAMA for the year 2013 show that electronics is the largest product segment with 34% followed closely by apparels and accessories with 30%. Books have a market share of 15%.

Comparative Factors that Will Fuel Growth of Ecommerce
According to Ecommerce Europe, the United States, United Kingdom and China together account for more than 57% of the world’s total B2C ecommerce sales. In the year 2013 China had total ecommerce sales of U.S. $ 328.4 billion and India had total ecommerce sales of US. $ 10.7billion. This effectively meant that India’s total sales stood at 3.3% of that of China in the year 2013 despite having a strong demographic dividend profile just like China. Probably the reason behind this deficit is the fact that India’s internet penetration stands at 46 million households against 207 million households of China.
However studies by PwC, ASSOCHAM, Ernst & Young and IAMA offer conclusive evidence on the growth prospects of the ecommerce vertical in India and the rest of the world. Here is a capsule form of the findings of the major research works conducted so far.

India has a relatively low but very fast growing internet population of roughly 243 million people as measured in the year 2014. 

India also scores pretty badly in terms of internet population as percentage of total population. As such only 19% of the total population of India consists of internet users. 

The analysis of the demographic dividend that India has its disposal further bears testimony to the prospects of growth that India has in the ecommerce vertical. The demographic segmentation of the total internet population of India reveals that more than 75% of the internet users in India belong to the age group of 15- 34 years of age. This age group consist of the biggest customers of online merchandise and thus reflects growth potential.

Financing Ecommerce Growth in India
With the new government being elected in 2014, investor confidence has found its way back into corporate board rooms. In the year 2014 investors had strongly rooted for the ecommerce vertical with big investments in some of the top companies and financed their expansion strategies. Several of India’s PE funds have been very active in financing expansion of ecommerce companies in India enabling them to achieve a scale up.
Here is a list of the major investments made by PE funds in ecommerce companies in India in the recent times.
The above data had been collected by students for their summer internship project on ecommerce for MBA courses that mandate research work. The data was collected from a publication of Venture Intelligence and mentioned in the bibliography.

At Ishan Institute of Management & Technology, the top MBA College in Greate Noida the academicians and students of the faculty of business administration have collaborated on various research projects to bring you industry specific insights.