Growth of E-Commerce in India

E-commerce is one of the fastest growing businesses in India, which also serves as a promising market for huge investments, both domestic and financial. E-commerce is a subset of e-business and is an influential method of selling. It follows a straight distribution system. Through the medium of websites and applications, goods and services are directly transferred from producers to end consumers by eliminating middlemen from the distribution process. Information Technology (IT) has radically transformed the methods and techniques of carrying out business functions globally, while the e-commerce sector has turned digital over the years.
Over the past two decades, India has witnessed rising internet and mobile phone penetration which has changed the way Indians communicate and do business. E-commerce evolved in India over two phases: 1995-2005 and 2005-present.

The Liberalization, Privatization, Globalization (LPG) reforms set in 1991 led to Multi-National Corporations (MNCs) entering the Indian market which eventually lead to significant growth in the IT industry. Business to Business (B2B), virtual marital portals and virtual recruitment portals were the emerging sectors in the first phase of this revolution. In the second phase, post relatively slow business activity between 2000-2005, entry of Low Cost Carriers (LCC) in the aviation sector in 2005 lead to Indians trusting the web for travel related information and booking of tickets, therefore making them further comfortable with shopping online. This led to the rise of the e-tailing sector comprising of Flipkart, Amazon, Snapdeal, Shop Clues, etc. Social networking was the next big addition to the list, with social networking platforms such as Facebook, Instagram, LinkedIn, Google becoming popular among Indians. Companies then began using these platforms to reach out to the consumers for branding, advertising and promotions.

A lot of research studies the corporate and business strategies employed by India’s biggest e-tailers, Flipkart and Amazon, to understand the challenges faced by both while striving to obtain the higher market share. Flipkart, founded in 2007, and Amazon, founded in United States of America (USA) in 1994 and launched in India in 2013, both started operations with books and are now present across multiple product categories, with widespread national reach.

Flipkart advertises in traditional media i.e. newspapers and primetime television, and on the web with targeted and personalized banner ads, e-mail promotions and discount incentives. Amazon uses the one-to-one marketing, personalized e-mails, cross-linked websites and networks with popular websites for ads and tags promotions. It has invested heavily in innovation through proposing usage of drones for delivery, Kindle and Google App Store products; this is where Flipkart lagged behind. However, with respect to ease of use, Flipkart is the preferred choice for accessing the website and placing orders.

Oddly similar outcomes emerged at the time of the first sales conducted by both the e-tailers: the Flipkart Big Billion Day and the Amazon Diwali sale. As Flipkart aimed to achieve sales worth one billion, it provided massive discounts on variety of products in electronics and fashion. However, owing to an overload on its servers, the company faced a lot of backlash from consumers who faced numerous issues while placing orders and making payments. Amazon experienced a similar situation during its Diwali Dhamaka Sale. However, the latter held the sale for 6 days, making it the likely winner.

With the entry of Amazon in India, e-commerce has received more competition and has undergone a significant change. Although Flipkart dominates the market, Amazon is a bigger business and has a bright future in the expanding Indian economy. Both Flipkart and Amazon have a strong presence on the digital map through highly active Facebook, Instagram, Twitter and Youtube accounts. While Flipkart has more likes on Facebook, Amazon follows close. Additionally, research encircling the websites of both the e-commerce companies revealed that Amazon has more visits than Flipkart. Both occupy the 6th and 7th ranks in the most visited websites list for India. Youngsters mostly engage in online shopping in India, and although they use the website more frequently than other modes, mobile apps and social networking sites are the way forward. Amazon recorded growing web and mobile traffic as compared to Flipkart, although Flipkart still remains India’s no.1 in desktop traffic.

When Amazon was launched in USA, the business model was to source a single product type from wholesalers and publishers and, sell it directly to consumers through the web. When Amazon came to India, 67% of the population was below the poverty line, 35% of India’s population was connected to the internet and cash, was still the rule. India had a rigid FDI policy restricting foreign multi-brand retailers from selling directly online. Amazon had to incorporate various strategies, such as tying up with local retailers, recruit local suppliers for delivery fulfilment, collaborate with courier and transportation services among other things to capture the size it has today in the e-commerce arena. Clearly the Indian markets have come a long way in terms of the business conducted through E-commerce channels. Looking at the current scenario, the future seems pretty bright too.

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