2016 could be another banner year for ecommerce in India. The Associated Chambers of Commerce & Industry of India (Assocham) forecasts that Indian ecommerce will grow 67% this year to $38 billion. And according to a survey sponsored by PayPal, cross-border ecommerce – Indian consumers shopping from international online stores – is expected to jump almost 79% to $14.6 billion.
Value-based Indian ecommerce startup Shopclues reportedly secured a round of venture funding that pegs its value north of $1 billion. Analysts from Bank of America Merrill Lynch say that India will be “the next ecommerce battleground.”
Despite the growth, all is not well in ecommerce land, especially for international brands that may not be familiar with the unique environment in India.
Industry leaders are sacrificing margins and burning through cash to grab market share. Start-ups are relying heavily on advertisements and promotions to acquire new customers.
Flush with private equity funds, companies are finding it harder to find and retain talent.
Further, the Indian government has yet to define clear rules for ecommerce. The current policy doesn’t allow foreign investment in B2C ecommerce. Most industry leaders are positioning themselves as “marketplaces” to allow for private equity investments that the start-up ecosystem has come to rely upon. Manufacturers are permitted to sell its product manufactured domestically through online retail.
This last point is the key. Without clear policy definitions and expansion, ecommerce growth in India will be restricted to marketplaces (Amazons of the world, rejoice) and locally manufactured brands.
Given all this, it’s likely that the government will open up its restrictive policies in a calibrated manner. However, this is unlikely to happen this year. At the same time industry leaders will continue to burn cash in an effort to grab market share in an industry growing by double digits.
Given all this, brands looking to enter or expand in India would be wise to 1) apply learnings from their experience selling through marketplaces elsewhere in APAC and 2) explore strategic partnerships with locally established marketplaces like Snapdeal and Flipkart to start capturing greater mindshare of the Indian online shopper.