The digital commerce market in India is likely to touch USD128 billion in 2017 from the current level of USD42 billion on the back of higher mobile and Internet penetration and mobile-commerce sales, says a joint study by ASSOCHAM and Deloitte.
“Increasing mobile and Internet penetration, m-commerce sales, advanced shipping and payment options, exciting discounts, and push into new international markets by e-businesses are the major drivers of this unprecedented growth,” the study said.
Mega M&A deals (Softbank’s USD627 million deal with Snapdeal, Flipkart acquired Myntra for USD370 million, Ola Cabs acquired TaxiForSure for USD200 million) and sky-rocketing valuations of e-commerce giants rising in last one year shows that the sector is heating up. However, the question would be whether these valuations are sustainable despite showing no signs of profitability. Global players like Amazon and Alibaba have deep pockets to rely on their parent companies for continuous funding support; hhe homegrown players would definitely need different metrics to preserve the investor confidence build in the sector, the report notes.
ASSOCHAM Secretary General DS Rawat said the supply chain and logistics in e-commerce business are highly complex to manage in a vast country like India where infrastructure is not well-developed to reach every remote and rural area.
“The taxation policies for the e-businesses are not well- defined depending on different business models and transaction type. The complexity has further amplified with transactions happening across borders for online selling of goods and services,” Rawat said.
Newer technologies that could significantly bring a paradigm shift in the online businesses are analytics, autonomous vehicles, social commerce, and 3D printing. Companies have started to invest in data analytics to gain real-time insights into customer buying behavior and thus offer personalised user experiences. The e-commerce companies are building communities on social media networks to better understand customer needs and to drive effective marketing strategies, noted study.
It also said that the government’s ambitious ‘Digital India’ project, which aims to offer a one-stop shop for government services, will further bolster the sector by introducing internet and broadband to remote corners of the country and increase trade.
This initiative through a targeted investment of nearly USD17 billion will transform India into a connected economy, attract investment in electronics manufacturing and create millions of jobs, said Rawat.
The study further pointed out that dedicated e-commerce laws are required to address issues in the sector’s legal and regulatory framework and banks must play a leading role as ‘facilitators’ by offering cost effective cash management solutions, secure payment gateways and other relevant banking services.