Online Trading Market Penetration in India

What do you think about e-commerce market penetration in India? Do you think FDI should be allowed in e-commerce in India? How FDI will help in evolving e-commerce market. What are the bottlenecks for growth of online trading or e-commerce?

During the last few years due to technological advancement and huge penetration of smart phones have made online trading a viable option for buying goods and services however there are a few drawbacks.

Presently FDI is not allowed in e-commerce, however, there are lots of players like Snapedeal, Flipkart are selling products through a marketplace model where they attract  buyers and sellers. These companies are attracting investment from private equity, HNI etc. Marketplace model is working, however in order to attract physical retailers to participate in online trading FDI should be allowed in e-commerce.

Apart from allowing FDI there are few other bottlenecks that should be removed.

Internet Penetration: Internet penetration in India is very low. In 2014 only 20% people have internet, however the figure was only 15% in 2013. China figure is more than double that of India.

Fear of online trading: In India people fears in using their credit card, debit card while doing online trading. This is one of the major drawbacks in the growth of online trading. In the absence of online payment model retailers are offering cash on delivery model which has its own issues like taxation as in a certain state logistic company has to pay tax on cash receipt. Another area where online traders feel heat when a customer rejects the product and the product has to return back to the warehouse and recorded in the inventory, it takes time to do.

Poor Infrastructure: In India logistics and transportation is very poor, particularly in below tier 1 cities. Poor infrastructure makes it difficult to deliver product in tier 2 and tier 3 cities and it hinders the growth of online trading. If FDI will allow in e-commerce then lots of foreign players will participate in developing infrastructure to take a pie of India’s 1.25 billion population. Foreign players can contribute in a big way to India’s e-commerce story as they have requisite capital, expertise, sustaining and staying power.

At present, online trading model in India is not sustainable as customer base is very low, only 40 million people buy products through online. Lots of players are fighting by showing various promotional events and offering discounts to get the limited number of businesses. India has a huge geographical presence so logistics and deliver costs are also very high and it hurts bottom line.

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