February 4, 2013, 10:45 AM

Mobile shoppers and social media drive growth in India’s emerging e-commerce industry

Mobile shoppers and social media drive growth in India's emerging e-commerce industry.

Mark Brohan

Research Director

Lead Photo

Nine thousand miles from the United States on the shores of the Arabian Sea and in Mumbai, a city of 20 million people and home to Bollywood and the legacy of peace activist Mahatma Gandhi, e-commerce is alive and growing in India.

During the week of Jan. 8, Internet Retailer had an opportunity to assess the progress of Indian online retail by attending the eTailing India Expo e-commerce conference in Mumbai. Compared to the more mature and far bigger online retail markets in the United States, Europe and such Asian markets as China and Japan, India's e-commerce sales are small. They are estimated at about $1.6 billion by market research firms such as Forrester Research Inc. and some Indian e-commerce venture capital firms.

But the Indian direct-to-consumer e-commerce market is likely to double in size to more than $3 billion within three years, and could grow to $15 billion by 2017, says Avnish Bajaj, co-founder and director of Matrix Partners India, one of India's most established e-commerce venture capital firms.

Speaking to Internet Retailer at eTailing India Expo, Bajaj says India's online customer base of around 20 million shoppers could increase as much as 1400% and reach 300 million shoppers within 10 years. "It's an exciting time to be in e-commerce in India, because even though the market has been developing since 2000 it's still very early on in the development stage," he says.

As a developing economy and early-stage e-commerce market, India faces several hurdles, Bajaj says. Retailing in India is fragmented and dominated by tens of thousands of mostly small proprietors.

Secure payments processing remains a challenge, order fulfillment is problematic when delivering packages to the 60% of the Indian population that lives outside of major cities and few carry credit or debit cards compared with North America and Europe. On the plus side, the number of Indian consumers with a smartphone connected to the mobile Internet could approach 220 million within 10 years, Bajaj says.

A new generation

With the market years away from maturity, there is also ample opportunity for online retailers to build a lasting business, says Harish Bahl, an Indian e-commerce entrepreneur and founder of Fashion and You India Pvt. Ltd., one of India's largest private-sale sites.

Within a decade India's online retail market could increase by as much as 50% annually, Bahl told attendees in his eTailing India Expo keynote address. Driving that growth will be the swelling ranks of educated men and women under the age of 25 with growing disposable income and more web-enabled mobile devices.

Despite payments and logistics challenges, Fashion and You India has been able to build up FashionandYou.com, a three-year-old private-sale site, into a viable e-commerce organization. Today, Fashion and You India says it has more than 3.6 million members, and FashionandYou.com generates monthly traffic of about 2.8 million visits, according to web measurement firm comScore Inc.

Bahl didn't disclose annual sales, but says Fashion and You is growing because the company is taking advantage of Facebook and other forms of social media to reach out to fashion-conscious online shoppers. Fashion and You, which has more than 1.1 million Facebook fans, also offers Indian consumers a diverse shopping experience, Bahl says.

Fashion and You India has been able to add more inventory and grow to 1,200 the number cities across India where it makes deliveries in part because it has attracted more than $48 million in outside investment. "There are obstacles to overcome in Indian e-commerce," Bahl says. "But retailers can overcome obstacles by earning trust from shoppers and that happens by giving very long-term value."

mark@verticalwebmedia.com

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