While it might just be a beginning of the second round, e-commerce is looking promising in India. Even as travel related e-commerce continues to boom, non-travel e-commerce is picking up beyond the metros and big cities.
Experts are predicting the return of e-commerce as deals and discounts, group buying sites and attractive online sales schemes are breaking the barriers to online purchasing, drawing more consumers to the proposition in India.
The business model for the increasingly popular group buying sites is simple. They access stocks that brands want to liquidate. Consumers buy them at heavy discounts. Even brands such as CK, Burberry, Victoria's Secret, Samsung, Nokia and several others across consumer electronics and IT, apparel and others are coming at highly attractive prices online. Deals are getting clinched at anywhere between 30-70% lower prices.
Consumers too, according to published reports, are getting hooked to online shopping. They are not fighting shy of deal sizes that cross Rs. 20,000-25,000 today. Earlier, they stayed in the Rs. 2,000-5,000 range.
The proliferation of the internet and a much younger online audience are among the reasons why e-commerce is picking up so rapidly. A report from comScore, an online media measurement agency, says that three-fourths of India's internet audience comes under the age of 35, and that 15-24-year-olds are the most frequent internet users. Younger people have fewer reservations about buying online. Besides, e-commerce sites are making a big effort to be efficient on quality, availability and delivery.
A comScore media report says that in June 2011, 4.6 million internet users aged 15 years and above accessed coupon (deals) sites from a home or work location in India, representing 10% of the online population. SnapDeal.com led as the top site in the category with nearly 1.5 million unique visitors during the month, followed by DealsandYou.com and Mydala.com, both with one million unique visitors.
"There is some resurgence from the consumers' side. In 2009, a lot of search was for travel while now, the non-travel segment is seeing some growth. Internet growth this year has been good but only if a similar growth of around 30-35% is seen for at least the next two years will the situation become more lucrative for online portals,” said Sanjay Tiwari, CEO, JuxtConsult.
Market research firm JuxtConsult claims 2011 is will be an important milestone in terms of how this market fares in the future. The number of online buyers, it says, has already jumped by 70% — from 10 million to 17 million — while active Internet users have grown by 28% from 100 million in 2010.
"The earlier e-commerce models were not sustainable but now, a variety of factors including internet penetration and brand consciousness, is driving this growth,” said Ishita Swarup, founder and CEO, 99labels.
The emergence of homespun e-commerce models of business is an indicator that the e-commerce proposition is catching momentum in India. Sites such as SnapDeal, FashionAndYou, Flipkart, Homeshop18, Rediff.com's DealHoJaye, FutureBazaar and many others have come up with India-specific propositions.
All these sites are looking beyond the metros and tier I cities to tier II and III cities and towns. Deals and You talks business across 60 cities. Homeshop18 ships its products — covering 450 well-known brands and seven million SKUs — across 3,000 locations. It boasts of 1.4 million unique visitors.
Rediff.com's Deal Ho Jaye, a local buying platform offering region-specific discounts, covers 40 cities. Fashion and You swears by its success in non-metro India with designer apparel.
"Brands are saying they need to go online. Of our five lakh member base, 42% is from metros and mini metros and the balance 58% is from the rest of India. The internet buying audience in India is 80% men and the rest is women, but more women are now buying online,” said Swarup.
"Right now, we are seeing 70% of our growth coming from beyond the metros,” said Manu Agarwal, founder & CEO, Naaptol.
Venture capitalists are putting money into the new e-commerce ventures, giving the sites new wings and intensifying competition.
"There will be more funding but so far, the funding is far more than what the market is ready for. In the long-term, most of these websites will provide a sure-shot market place, with a definite revenue model," said Tiwari.
Suddenly Indian e-commerce firms are seeing new-found valuations. Flipkart, India's very own Amazon, valued at $ 1 billion in less than four years of operations, is rumored to have received a Rs. 700 crore investment from General Atlantic Partners. SnapDeal, a group dealing website, recently received a second round of funding of Rs. 200 crore.
With news that Amazon is set to enter India, things certainly seem to be hotting up. A major consolidation is on the cards, and in the future, it's going to be a game of volumes, say experts.
"Consumers are just getting to align themselves with the e-commerce phenomenon. There is constant growth and competition is intensifying. While the market is yet to be defined, there is true opportunity," said Agarwal.
"100 million internet users is the tipping point. The whole market becomes very attractive from the size perspective. This time around, the business models are robust. Most players have set a three-four years gestation period for profitability to emerge. Truth is, once you acquire the critical mass on the net, it is difficult to break the momentum," said Gautam Sinha of My First Cheque, a venture capital firm. Sinha recently funded mericar.com.