India Digital Marketing Statistics – 2015

I was looking forward to write this piece for long but because of some personal commitments as well as shortage of time, haven’t been able to do so. Unlike US or UK, the digital industry in India is not that evolved, hence there are not many competent bodies who publish regular reports on the industry. IAMAI is definitely one such body, but apart from that, I haven’t heard of any.

This post is a compilation of updated statistics of digital industry in India to help students of digital marketing, agency folks as well as brand managers to take sound decisions when it comes to creating overall digital strategy. In case of any queries, feel free to get in touch with me on twitter.

As per a recent report by IAMAI and Boston consulting group, India has one of the largest and fastest growing populations of Internet users in the world—190 million as of June 2014 and growing rapidly. India already has the third largest Internet population in the world today, after China with 620 million and the US with 275 million. In addition, India already has 100 million active Facebook users today, the second largest number after the US and Canada with 152 million. As one fast forwards, it is estimated that there will be over 500 million Internet users in India by 2018—making India the second largest population of Internet users in the world. The growth in the Internet base in India has been exponential. It took 20 years from the introduction of the Internet to reach 100 million users. The second 100 million will likely be reached within three years, and the third in less than a year. In fact, the next four years will see nearly 350 million additional Internet users. The primary drivers of this exponential growth have been expansion to small town / rural India, increased affordability due to lower cost data-enabled handsets, and the ever increasing awareness of, and need for, the Internet.

The impact of this explosion of Internet users will be staggering. The Internet is already economically powerful: in 2013 alone, it contributed to USD 60 billion or 2.7 percent of India’s GDP. This means that the Internet is already one of the larger sectors in the Indian economy, larger than sectors like healthcare (2.5 percent) and military (2.5 percent), but still smaller than agriculture (14 percent). It is estimated that the Internet economy will grow to over 4 percent of GDP by 2020, comparable to developed markets like the US, EU and Japan. The Internet economy is also an employment generation engine. The ‘Internet’ sector already employs ~4-5 lakh people and is expected to create nearly 15-20 lakh jobs by 2018.

Apart from this, similar trends were reported recently by a leading social media agency named as we are social for India.

With the rise of smartphones and better internet connectivity on them, unsurprisingly the share of web traffic from desktop & laptops have been on a decline.

And, as far as social media is concerned, no doubts, internet messaging is on the rise. Apps like whatsapp, wechat are seeing tremendous growth in terms of userbase as compared to social platforms like facebook, etc.

Apart from this, there was a report published recently by one of the digital agencies in India named as Ethinos digital here, however they haven’t mentioned source in most of the slides, hence I doubt the validity of data in the current scenario.

Retail Ecommerce Sales In India 2014 – 2018: Disappointing 1% Of Total Retail Sales [REPORT]

The retail sale over eCommerce portals in the country touched an unprecedented high of $5.30 billion during CY 2014, tells eMarketer. One of the most trusted names when it comes to providing insights about digital marketing, media and commerce, eMarketer also expect it to grow by 45.2% over 2015 and touch a figure of $7.60 billion. Now while that is heartening news and augurs well for the future of online retail in India which is still in the embryonic stage, the fine print beyond this is somewhat disturbing. In spite of the industry having grown by leaps and bounds, online retails in India accounts for less than 1% of the total retail sales. And the trend is expected to continue in the future as well as the eCommerce is expected to contribute only 1.4% of the total retail sales even by 2018.

Global leaders like Amazon see the country as one of the biggest opportunity windows and continue to sell from here in spite of all odds, while also promising to step up their investment and pump up their operations. Leading Indian players like Flipkart and Snapdeal have been on a funding spree too, what with some of the biggest venture capitalists on the global front continuing to show faith in their startups.

What then is holding back the Indian online retailers and not putting them at par with their counterparts in other parts of the world? What is holding back a larger percentage of people from buying online when they want to?

Ecommerce Sales In India: A Tiny Share of Total Retail Sales

The total retail sale in India has increased from $635.25 billion in 2013 to $717.83 billion during the year which just ended, growing at a rate of 13%. It is expected to touch $818.33 billion in 2015 registering a Y-O-Y growth of 14.0%. By 2018, total retail volume will grow to $1,244.58 billion, growing steadily at 14-15% annually.

Retail eCommerce sales in India, on the other hand, which were a meager $3.59 billion in 2013 grew to a somewhat better $5.30 billion in 2014, a Y-O-Y growth of 47.6% as compared to 55.6% over the previous year. In the year 2015, total online retail in India all set to touch $7.69 billion, growing at a rate of 45.2%. By the year 2018, eCommerce retail in the country is expected to grow to $17.52 billion.

Now while the online retail is consistently expected to grow (and grow at a handsome rate too!) over the coming four years as well, the rate of growth of eCommerce is seen to be slowing down. From an impressive 55% over 2012-13, it is expected to drop to a decent looking 45.2% over 2014-15 before dipping to 23.5% in 2017-18.

Talking in percentage terms, online retail sales which formed only 0.6% of the total sales volume in 2013 is expected to ‘improve’ and account for a 0.9% share of it in 2015 and account for 1.4% of the total sales volume in the country by 2018.

What Ails The Indian Online Retail?

Though the trend of purchasing online is catching up in India, only 12% of our population has ever made an online purchase till date. This figure looks pathetic when compared to the neighboring China where more than half their population has had some sort of online buying experience. Sadly enough, even by 2018, only 29.0% of our population is estimated to begin to make online purchases while the figure will have leaped to 81% in Japan and 55.2% in China.

The opportunity window for online retailers in the country is huge. The main reasons behind that being the rapid urbanization, rising literacy levels, a large percentage of young population, increased smartphone penetration, increasing adoption of computers, rapidly growing access to the internet and the falling rates at which the internet can be accessed.

The increased revenues of some of the leading online retailers in the country are witness indeed to the fact that e-commerce is here to stay. But at the same time, we cannot evade the question staring us in the face: Why are the online sales not keeping in pace with the total retail sales? What has held us back so far and what are the major obstacles that will hinder the growth of this sector, putting us behind our Asian siblings?

The e-commerce sales could have grown exponentially instead of adding up gradually to the sales figure.

Government policy: One of the main factors holding back an otherwise robust growth is the government restriction on FDI. As per the existing policy, FDI is not allowed in B2C segment though B2B segment can invite foreign investors too. As a result of this crippling policy, overseas players in India have to operate along the marketplace model which not only reduces their profit margins but also gives them little control of products or services being offered and their delivery. This sector, which requires huge amount of liquid capital and experimentation before online sellers can adopt a model which works best for them, is hugely restricted by this handicap.

CoD and High Rate Of Return: The most popular mode of payment for online purchases in India is Cash on Delivery (CoD). This affects the profits of the online retailers in two ways- the courier service charges extra for making a CoD delivery. In addition to that, the rate of return which is higher in this mode of payment ultimately translates into higher costs and longer credit cycles.

Touch and Feel Factor: The mindset of the people in the country has not changed with the times. A majority of buyers prefer to touch and feel the goods before they buy them. That also explains why travel is one of the best converting segments- the customers do not need to see the tangible good before them before affecting the purchase.

Cybercrime: A larger part of our population dreads the prospect of having to pay online. While they are comfortable with NEFT and RTGS transfers, they are reluctant using their debit or credit cards for purchasing online, the reason being cyber crime. That includes criminal activities like phishing, DDoS attacks, viruses, malware, etc. Fear of cyber criminals deters credit card holders (though their percentage is extremely low) from using their cards to purchase online. While most of their fears are unfounded, they cannot be entirely blamed because such cases are not completely unheard of.

Logistics: No matter how much we hate to admit it, we have third world logistics. The huge success of online retail in developed countries is largely because of their rock-solid logistics.

As someone who frequently makes online purchases, we personally relate to this person’s woes. The courier delivery guy MUST call up every time before the packet is finally delivered, though the address is easily locatable. The courier companies do not have even bar code readers to scan the items during transit. Compare this with the U.S. where the companies give minute by minute details of the delivery of their package. Though Flipkart has worked hard on that front and we now get regular SMS messages informing us about the progress of our package, we sincerely feel that the major eCommerce players have a long distance to cover before they can give their buyers a WOW level of experience.

Apart from that, the tax rates in India vary from sector to sector which is not the case in countries like UK and USA- they have uniform tax rates. This adds to the woes of online sellers. Add to it the fact that the average order value is very low, bringing down their overall profitability.

From the consumer’s point of view, the quality of goods and services delivered to the consumers has been a cause of concern. There have been cases of fraud, late delivery and damaged goods which only erode away buyers’ faith.

Overall, the online retail in India is still in a very early stage. Because of the various hurdles that come in the way of the development of this sector, its growth continues to be slower than in other parts of the world and forms only a tiny percentage of the total retail sales. The government can help by stepping in and easing some of the FDI restrictions, though they seem to be in no mood to do so. At least, not for now!

E-commerce in India

India has an internet user base of about 243.2 million as of January 2014. Despite being third largest userbase in world, the penetration of Internet is low compared to markets like the United States, United Kingdom or France but is growing much faster, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point.

In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities. However, COD may harm e-commerce business in India in the long run and there is a need to make a shift towards online payment mechanisms. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.Grocery websites like bazaarcart is also emerging as a big player in the market.Grocery Market is also increasing by rapid speed

As of Q1 2015, six Indian E-Commerce Companies have managed to achieve Billion-Dollar valuation. Namely, Flipkart, Snapdeal, InMobi, Quikr, OlaCabs, and Paytm (wing of,One97).

Market size and growth

India's e-commerce market was worth about $3.8 billion in 2009, it went up to $12.6 billion in 2013. In 2013, the e-retail segment was worth US$2.3 billion. About 70% of India's e-commerce market is travel related. According to Google India, there were 35 million online shoppers in India in 2014 Q1 and is expected to cross 100 million mark by end of year 2016. CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.

Key drivers in Indian e-commerce are:

• Large percentage of population subscribed to broadband Internet, burgeoning 3G internet users, and a recent introduction of 4G in few cities.
• Explosive growth of Smartphone users, soon to be world's second largest smartphone userbase.
• Rising standards of living as result of fast decline in poverty rate.
• Availability of much wider product range (including long tail and Direct Imports) compared to what is available at brick and mortar retailers.
• Competitive prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs.
• Increased usage of online classified sites, with more consumer buying and selling second-hand goods
• Evolution of Million-Dollar startups like Jabong.com, Saavn, Makemytrip, Bookmyshow, Zomato Etc.

India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 Bn by 2020, – estimated CAGR of 7%..[citation needed] According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.

As per "India Goes Digital", a report by Avendus Capital, a leading Indian Investment Bank specializing in digital media and technology sector, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India is expected to grow at a rate of 22% over the next 4 years and reach Rs 54,800 Crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 mn) in 2011 and estimated to grow to Rs 53,000 Crore ($11.8 billion) in 2015.

Overall e-commerce market is expected to reach Rs 1,07,800 crores (US$24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.

Closures

Though the sector has witnessed tremendous growth and is expected to grow, a lot of e-commerce ventures have faced tremendous pressure to ensure cash flows. But it has not worked out for all the e-commerce websites. Many of them like Dhingana, Rock.in, Seventy MM amongst others had to close down or change their business models to survive.

Infrastructure

There are many hosting companies working in India but most[citation needed] of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting.[citation needed] Cyber security issues of e-commerce business in India would be required to be managed by Indian e-commerce stakeholders in the near future. In fact, Indian government is planning to introduce cyber security breach disclosure norms in India very soon. Recently Target corporation suffered a cyber attack that has put it under litigation threat in multiple jurisdictions. Trends are changing with some of eCommerce companies starting to offer SaaS for hosting webstores with minimal one time costs.

There could be various methods of ecommerce marketing such as blog, forums, search engines and some online advertising sites like Google adwords and Adroll.

India has got its own version Cyber Monday known as Great Online Shopping Festival which started in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day. Most recent GOSF Great Online Shopping Festival was held during Dec 10 to 12, 2014.

In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns.In July, Amazon had said it will invest $2 billion (Rs 12,000 crore) in India to expand business, after its largest Indian rival Flipkart announced $1 billion in funding. Amazon has also entered grocery segment with its Kirana now in bangalore and is also planning to enter in various other cities like delhi Mumbai and chennai and faces stiff competition with Indian Startups like onedaycart.com, bazaarcart, bigbasket etc. Flipkart is also planning to enter grocery segment soon

Funding

As of 2012, most of the e-commerce companies are yet to start making money. However, due to their growth prospects, many venture capital firms such as Accel Partners have invested considerably. In one of the biggest fund raising, Flipkart.com, till November 2014, has raised about USD 2.3 billion. Entertainment ticketing website BookMyShow.com raised 100 crores investment by Accel Partners.

On 10 July 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital. New investors making up the additional $160 million include Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.

Snapdeal - USD 50 million in 13 April.

In February 2014, online fashion retailer Myntra.com raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for 2,000 crores. However, cyber law and e-commerce due diligence are still being ignored by investors and financial institutions while investing in India.

In October 2014, KartRocket, an Indian e-commerce platform, announced granting of a Series A round led by technology investor Nirvana Venture Advisors and 500 Startups, together with Tokyo-based Beenos, previously known as Netprice.com.

Regulatory violations and unfair practices

Legal issues of e-commerce in India are generally ignored by e-commerce websites. This may change in the near future as foreign companies and e-commerce portals would be required to register in India and comply with Indian laws.[30] E-Commerce websites dealing with nutraceuticals, Bitcoin, Ayurvedic products, online pharmacies, online payment, online poker, etc. are violating laws of India.

Enforcement directorate (ED) of India has already initiated legal actions against companies dealing with Bitcoins in India. Tax liability of foreign companies like Google, Facebook, etc. is also under consideration in India.

Similarly, illegal online sales of prescribed drugs by illegal online pharmacies of India are also under scrutiny of regulatory authorities of India.

Myntra, Flipkart and many more e-commerce websites are under regulatory scanner of ED of India for violating Indian laws and policies. US-based transport application provider Uber Inc has also been questioned by the service tax department of India. In January, 2015, the Kerala Commercial Taxes Department imposed a fine of INR 54 crore on Flipkart, Jabong, Vector e-commerce, and Robemall Apparels, for doing illegal business in the state and from which Flipkart had to pay the bulk of fine with INR 47.15 cr.

The Federation of Publishers’ and Booksellers’ Associations in India (FPBAI) has also questioned the predatory pricing tactics adopted by various e-commerce websites in India. The Confederation of All India Traders (CAIT) has also decided to approach the Competition Commission of India to oppose the predatory pricing tactics of Indian e-commerce websites.

Demands for introducing suitable provisions to regulate taxation, anti competitive practices and predatory pricing of Indian and foreign e-commerce websites have also been raised.