How these 5 Factors will Drive E-Commerce Growth

Posted by Shipra Dubey on Wed, 08 Apr 2015 09:38:37 GMT
How these 5 Factors will Drive E-Commerce Growth

Online retail industry is spreading itself everywhere and has affected our lives, standard, habits and minds. Shopping for me isn’t walking miles in the shopping mall getting tired and later spending money in a coffee shop, while now its spending hour’s in-front of my laptop, filing my cart, comparing different websites and eventually buying more than I actually wanted but still feeling good about it. This was just one individual’s opinion, there will be several others backing this up. Online retail has penetrated deeply into the market and grown from a small experiment to a potential game changer.

Let’s take certain examples here:- Flipkart, one of the largest online retailers in India, is reported to have grown five times in terms of products sold, which happened between 2013 and 2014. Snapdeal, another online giant, reportedly grew six times in the same period. Amazon, which opened its Indian website in June 2013, is also competing dirty by slashing down the prices, launching same-day delivery, adding new product categories and relying on a high-voltage advertisement campaign. Amazon and Flipkart have joined in India's $13 billion e-commerce sector by marketplace along with Snapdeal, fashion e-tailer Jabong, and eBay Inc.

Do you think this rapid eCommerce growth rate is sustainable or it’s just another business flourishing now and dying eventually when the craze dies? Here i will give you five factors that will help online retail grow in coming years.

Start looking beyond metros

Almost 20 per cent of India’s population lives in cities which aren’t metros. There are several key facts that suggest this large group of city dwellers have significant and in-fact more purchasing power. Honda, for instance, sells 60 per cent of its Amaze car in tier-II and tier-III cities, isn’t that amazing! These cities account for 55 per cent of Honda’s City models. Consumer demand is rising rapidly even in small towns and cities. Talking about the potential of fast-moving consumer goods the FMCG sector, quoting the Nielsen report for 2012 that said: “While metros will remain a staple for marketers and increasing a rural footprint will be critical for volumes in the long run, and if you have a strategy then there is a growth opportunity that is vastly under-rated by many marketers today, which could emerge as a key growth engine for the next 10 years. Middle India, a region made up of approximately 400 towns each with a population of 1-10 lakh, is home to 100 million Indians.” It further says: “These cities are ready to behave like the metros of tomorrow…The annual per capita FMCG consumption of Middle India towns touched Rs 2,800”, which is much higher than the national average of Rs 1,600.

The Nielsen report clearly shows that non-metro cities offer a huge growth potential for many companies. “At, we get over 60 per cent of the sales from tier and beyond towns and cities,” says Khanna. Other online retailers have reported the same trend. The contribution of these cities in coming years is set to become even bigger. “In addition to the convenience, another factor that is driving our sales in such cities is that many of the brands do not have footprint in these areas. No physical retailer can have the kind of assortment of products that we have,” observes Praveen Sinha, co-founder of online retailer Jabong ( as stated by Business Standard)

Higher percentage of sales from existing online shoppers

While new shoppers are driving increases in e-commerce activities, existing ones are actually more of a factor. Stats predict that the average shopper will spend $1,738 annually by 2016, compared with $1,207 in 2011. So, it is imperative that retailers consider technology, Web site design principles and incentives that encourage people to fill their online shopping carts with more items.

Keep noticing for the flat sale sites

Forrester calls out sites such as Gift Groupe and Woot, which offer what we used to call "fire sales" in real world retail. These are sales where the prices keep dropping, as long as merchandise lasts.

The increasing count of online buyers in India

In its announcement, Flipkart reported that it has 22 million registered users, of which 4 million visit daily. According to Forrester’s Asia Pacific online retail forecast for the years 2013 to 2018, “the number of online buyers in India will reach 39 million by the end of 2014 and 128 million by the end of 2018”. The researchers believe that the majority of the online buyers these days were from metropolitan or tier one cities few years back. Now, companies are seeing increasing sales from tier two and tier three cities, as well. It is important to note that only 31% of the total Indian population lives in urban India whereas 69% of the population lives in rural India. An important question is how many online buyers will come from rural India in the future.

The huge opportunity from mobile ecommerce

Flipkart and Snapdeal recently reported fast uptake in transactions from mobile devices. While mobile transactions as a percentage of total online transactions was in the single digits 12 to 18 months ago, several companies have recently reported 40% to 50% of their transactions coming from mobile. Forrester had also expected online spending retail growth to come from mobile. This is because of “mobile-only” Internet users. According to the Forrester global online population forecast for 2014 to 2019 “of the total 206 million Indian online users in 2013, nearly half of them are mobile-only Internet users”. This number will only increase in the future as more people in rural India experience Internet through their mobile devices first.

In a report, which was on the India online retail forecast for 2013 till 2018, it was mentioned that Indian eCommerce is still in a nascent stage. This is because online buyer penetration has yet to reach 25%. India’s online retail industry has lot of demand-side potential. India had a total population of 1.28 billion in 2013, nearly 16% of which are online. Of all Indian online users, just 14% currently purchase online. These numbers have lot of headroom for growth. Those who have realized this are planning big investments for the future. The race to capture mind share and market share has begun and shall continue till one of them rules the market.