According to the research report by Ernst and Young titled "Rebirth of e-Commerce in India", the e-Commerce market in India has enjoyed phenomenal growth of almost 50 percent in the last five years. Although the trend of e-Commerce has been making rounds in India for 15 years, the appropriate ecosystem has now started to fall in place.
The considerable rise in the number of internet users, growing acceptability of online payments, the proliferation of internet-enabled devices and favorable demographics are the key factors driving the growth story of e-Commerce in the country. The number of users making online transactions has been on a rapid growth trajectory, and it is expected to grow from 11 million in 2011 to 38 million in 2015.
The report further states that venture capitalists (VC) and private equity players have demonstrated their faith in the growth of e-Commerce in the country. This is amply substantiated by the significant increase in the total investments (US$305 million in 2011 against US$55 million in 2010).
The online retail segment has evolved and grown significantly over the past few years. Cash-on-delivery has been one of the key growth drivers and is touted to have accounted for 50 percent to 80 percent of online retail sales. Players have adopted new business models including stock-and-sell, consignment and group buying; however, concerns surrounding inventory management, location of warehouses and in-house logistics capabilities are posing teething issues.
The report suggests that to ensure that e-Commerce maintains the steam that it has gained in recent years, the government needs to focus on the regulatory front. Unlike many other countries, India still does not have dedicated e-Commerce laws. The Sales Tax laws need to be revised, as they are posing issues for online retailers while they decide warehouse location.
However, the report establishes key points suggesting that e-Commerce is set to continue on its growth path on the back of the stabilization of the ecosystem and interest demonstrated by VC players, combined with support from the Government of India.