e-commerce - The Road Ahead

I still remember the first time when I ordered a book online as a second year college student three years ago. I was pretty skeptical but my friend convinced me that it saves a lot of time and the prices are reasonable for a new book. When few hostellers felt comfortable with the delivery of books, others followed. Two years later, recalling the last months in college I could remember a guy with a bag standing in front of every hostel block delivering a range of goods.

(From livelaw.in)

The growth of e-commerce in India has been nothing short of extraordinary. In monetary terms it is fairly good to say that the growth of the industry is exponential. The principal factors which aid the industry are internet penetration and increasing use of smart phones. The number of Indians who have access to the internet is only close to 10% and the percentage that uses smart phones is not high either. In such a scenario, it wouldn’t be surprising if the exponential growth of the industry is maintained for at least a decade. The impact of the industry has been significant that Google called off its great India sale just three years since its inception. It is not a surprise considering that so many offers are dished out all the twelve months.

The growth of the industry provides employment for many individuals. It benefits not only the consumers but also the sellers by providing an opportunity for them to showcase their products online. It is set to see huge investment in the following years which could make it a rival to reckon with. But a closer observation reveals that e-commerce could invoke a lot of issues which have not come into prominence.

Two issues which have been widely debated are predatory pricing and the negative impact on brick and mortar retail stores. Both reinforce each other. To quote myself as an example, I have not stopped buying books from retail shops since the rise of e-commerce. But I do agree that the frequency of my visits has reduced. Second hand book shops and book festivals have not lost in this game. But the others have certainly taken a hit.

Extending this scenario to all products the shops which have been the most affected are the ones in malls. Malls occupy costly spaces and their revenues have been declining steadily. The other reason they are taking a hit could be because most of the ‘branded’ stores which sell on malls also sell on online retail stores. Though it seems to have an impact it hasn’t affected the revenue of the original manufacturer of the product.

(From novonous.com)

Predatory pricing is an aggressive marketing strategy employed by all online retailers to literally kill their competitors. The virtual gainer in this competition is the consumer but it is worth mentioning that this could be detrimental in the long run. Predatory pricing could also be an illusion to make the consumer ‘buy’ products and promote ‘consumerism’ in the longer run. My friend who worked a corporate company narrated me the incidents which happen on the first of every month in his office.

“They go on a rampage. With the salary credited just then, they add items to the cart mindlessly. It had to partly do with the offers too. Something flashes as buy 3 get 2 and they ask you to join the party. If you ask them the reason for the purchase they simply say, ‘We have an offer’ “. In the current scenario, where e-commerce has not penetrated deeply this might not seem important. But with time, there could be a situation where the reusability of products will reduce and we might start purchasing goods though we can live without them.

An aided consequence will be the impact on the environment. We live in a country where we do not have proper methods of disposal. Our population will have to consume resources is an accepted fact but it might well be aggravated by the advent of the e-commerce industry. This is especially true for electronic products. The other fear is that this could become a back door for FDI in multi brand retail. Without any legislations, which govern the industry it does operate like multi brand retail. Hence it is mandatory for the government to draw the boundaries before they grew bigger.

Customized advertising based on your browsing history is another issue on which you do not have control over. Gone are the days when I used to get frustrated, now I smile when I see the line “You might want to buy this”. But there are a few factors which could slow down the growth of the industry.

The first being not all kinds of products are preferred online. The domains consumer electronics, apparels and accessories and books cover more than 75% of all the items sold on ecommerce. This clearly reveals that there are a lot of products which may never go online. The second factor is the ‘touch and feel’ mindset of generation X. During the offer which was launched on online stores few days ago, I failed to convince my mother to buy a mobile phone. Her argument was simple, “How can I buy something without feeling it on my palm?” I am not suggesting that ecommerce will take a hit because of Gen X’s mindset. Ecommerce is clearly not for Gen X but for Gen Y and Gen Z. But it cannot be denied that Gen X could never be brought into the domain of ecommerce.

Though ecommerce generates a lot of opportunities it is not a ‘manufacturing’ industry and at the end of the day we are not creating any world class Indian products. Nevertheless, if there could be one Indian company which can grow like the ‘Alibaba’ of China, I will be happy man.