E-Commerce – Will The Bubble Burst?

Published by MBA Skool Team, Published on October 15, 2012

Few days back when I was booking my airline ticket on “makemytrip.com”. I was compelled to think of the comfort that e commerce has brought into our lives.  Getting retrospective about the 70s, 80s or 90s when standing in serpentine queues for tickets was accepted as a matter of fact, patience was taught as the most sublime virtue and a train or an air ticket queue was the perfect learning school for this virtue.

Now inquiry of various schedules, their fare etc can be accomplished in a jiffy at the mere click of the mouse. We have been relieved of the trouble of calling numerous travel agents and airline offices. Electronic gadgets, antiques, houses or virtually anything under the sun can now be purchased on the all ubiquitous internet without hopping from store to store.

Current Scenario of E-commerce in India

The current market is estimated to be about Rs. 50,000 crore (2011) and is estimated to grow to about Rs. 1,08,000 crore by 2015. About 80% of it is travel related (air travel, mobile recharge, hotel booking etc. The online shopping community is about 10 million strong and is growing at about 40-45% CAGR. There are about 360 e-commerce ventures in India. The e-commerce sector attracted a record 64 VC investments worth $238 million in 2011. The number of online shoppers is at present estimated at 14 per cent of the total internet users; and has been increasing at a rate of 35 per cent over the last 3 years. At this rate, the number of online shoppers is likely to reach 38 million by 2015.

Some Quick Facts on E-Commerce Trend in India:

  • Over 730 million people have mobile phones in India.
  • 21 million smartphones in 2010, which will grow to 100 million by 2015.
  • 10 million 3G connections within 6 months of launch, almost equal to the base of wire line broadband connections.
  • 28% of travel gets booked online; 117 million transactions on IRCTC alone.
  • 47% of the classifieds business is online.
  • 7% of bank users in India access their accounts online.
  • 25% of IT returns were filed online in 2010-11.
  • Close to 50% of music revenues in India comes from mobile downloads
  • 45 Million new Debit Cards issued yearly in India.

Do we have a replica of Dot Com bubble burst here?

Time and again concerns have been raised about the longevity of E Commerce. Can we have a repeat of the dot com bubble burst of 1999-2000? The answer is a straight and clear NO. E- Commerce is here to stay. There are about 80 million internet users in India. Billions of dollars have been transacted on various e-commerce sites. Many people are slowly and steadily moving online for their purchases. Compared to last few years there are many e-commerce companies e.g Naaptol, Flipkart, Infibeam, snapdeal, eBay etc which are selling goods worth hundreds of millions of dollars. Thus the scenario is a lot different from what we had at the time of dot com bubble burst.

One of causes of fear is failure of some ventures like “Taggle”: Not all venture capitals are expected to succeed and can succeed. Failure of a particular venture is not an indicator of failure of the entire sector.

Even if few ventures fail some will come up to take their place as there is going to be a perennial demand for online shopping.

The demand for online shopping will be further propelled by following factors:

  • More women taking up online shopping. Women are late adopters of technology but they are the decision makers in shopping and will contribute to the growth of online shopping once they get hooked onto online shopping.
  • Penetration of internet is going to increase and will bring rural population in its fold.
  • Growth of tier 2 cities and affluence of population.
  • Increase in comfort of people paying online.
  • Government schemes like “Aadhar (UID)” which encourage electronic payment.
  • Innovative methods of payments like Prepaid Cards, Cash on delivery, Swipe on delivery etc.
  • Comfort of shopping in online shopping.

Future of E-Commerce in India:

Future will see only a few category leaders and there will be funding issues for others in the category. So some unsustainable ventures will have to close shop like in any other business. Key words for survival will be innovation and making the offerings more relevant to the targeted audience. Players which have a long term plan and are differentiated will be able to survive e.g. Flipkart has more funding than its competitors. There will be many acquisitions down the line and the players having deeper pockets and better innovation strategies will survive.

This article has been authored by Ritwik Vijayan from IMT Ghaziabad.

Image courtesy of FreeDigitalPhotos.net

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