Together with our colleague Manish Bahl in Forrester’s New Delhi office, we just published our first report analyzing the eCommerce landscape in India. The report looks at the changing demands of the online shopper in India and the way in which companies in India are adapting to meet these demands.
In this report, we note that:
India’s eCommerce market is at an early stage. India’s eCommerce market today is small but growing rapidly. From a revenue perspective, India is on par with other early stage eCommerce markets such as Mexico, while substantially smaller than more mature online retail markets such as Brazil and China.
Online buyers in India are not all concentrated in metropolitan areas. Where India differs from its BRIC counterparts is in the degree to which rural buyers have embraced eCommerce. In early stage eCommerce markets, it is typical for most sales to come from major urban areas. In India, however, rural consumers have already started to buy online. This dynamic is partially due to the large percentage of rural households in India: The United Nations estimates that just 31% of India’s population lives in urban areas, compared to 50% in China, 74% in Russia and 85% in Brazil. As a result, sales from consumers outside of metropolitan areas already make up half of total sales at some leading online retailers in India.
Companies tend to work with multiple logistics partners. India’s diverse online buying population presents challenges to retailers interested in serving all parts of the country effectively. To overcome logistical issues, retailers and brands selling online tend to have to partner with multiple providers: They will often work with global logistics companies for part of the delivery process, but rely on bicycle couriers for the last mile. Online retailers like Flipkart operate their own delivery networks, as do a variety of other emerging market eCommerce leaders including Ozon in Russia and 360buy in China.
Just like in other emerging markets, a variety of localized payment options is a must. Consumers in India have the option to pay online using bank transfers from a wide assortment of banks, credit cards, debit cards, “card on delivery” and cash on delivery (COD). COD tends to be a highly popular payment option in emerging markets, with India being no exception. High return rates on COD orders, however, can be a rude awakening to online retailers unused to offering this type of payment method.