Assignment

On
E-commerce
(Role of e-commerce in India)

Amity business school

Submitted by:
Suneet seth, Mba 4th sem.
Roll no.-430
What is E-commerce?
E-commerce, (electronic commerce), is online commerce verses real-world commerce. E-
commerce includes retail shopping, banking, stocks and bonds trading, auctions, real estate
transactions, airline booking, movie rentals—nearly anything one can imagine in the real
world. Even personal services such as hair and nail salons can benefit from e-commerce by
providing a website for the sale of related health and beauty products, normally available to
local customers exclusively.
While e-commerce once required an expensive interface and personal security certificate, this
is no longer the case. Virtual storefronts are offered by a variety of hosting services and large
Internet presences such as eBay and Yahoo!, which offer turnkey solutions to vendors with
little or no online experience. Tools for running successful e-commerce websites are built
into the hosting servers, eliminating the need for the individual merchant to redesign the
wheel. These tools include benefits like shopping carts, inventory and sales logs, and the
ability to accept a variety of payment options including secure credit card transactions.
Though early e-commerce was stunted by security fears, improved technology has made
millions of people worldwide feel comfortable buying online. Seeing the vast potential in e-
commerce, most credit card companies helped allay fears by guaranteeing cardholders would
not be held responsible for fraudulent charges as a result of online shopping. All of these
factors have helped e-commerce become the booming industry it is today.

ROLE OF E-COMMERCE IN INDIA:

Electronic commerce (or e-commerce) encompasses all business conducted by means of
computer networks. Advances in telecommunications and computer technologies in recent
years have made computer networks an integral part of the economic infrastructure. More
and more companies are facilitating transactions over web. Although business-to-business
transactions play an important part in e-commerce market, a share of e-commerce
revenues in developed countries is generated from business to consumer transactions.
Similarly online services such as banking, ticketing (including airlines, bus, railways), bill
payments, hotel booking etc. have been of tremendous benefit for the customers. Most
experts believe that overall e-commerce will increase exponentially in coming years.
Business to business transactions will represent the largest revenue but online retailing
will also enjoy a drastic growth. Online businesses like financial services, travel,
entertainment, and groceries are all likely to grow.
For developing countries like India, e-commerce offers considerable opportunity. E-
commerce in India is still in nascent stage, but even the most-pessimistic projections
indicate a boom. It is believed that low cost of personal computers, a growing installed
base for Internet use, and an increasingly competitive Internet Service Provider (ISP)
market will help fuel e-commerce growth in Asia’s second most populous nation.
Amongst the Asian nations, the growth of e-commerce in India between 1997 and 2003
was highest in India. Cridit Lyonnais forecasts that India will have 30 million Internet
users by 2004 and that the potential Internet market will reach 47 million households in
2005. According to a McKinsey-Nasscom report by the year 2008, e-commerce
transactions in India are expected to reach $100 billion. Indian middle class of 288 million
people is equal to the entire U.S. consumer base. This makes India a real attractive market
for e-commerce. To make a successful e-commerce transaction both the payment and
delivery services must be made efficient. There has been a rise in the number of
companies' taking up e-commerce in the recent past. Major Indian portal sites have also
shifted towards e-commerce instead of depending on advertising revenue. However, many
Indian Banks have put the Internet banking facilities in place for the upcoming e-
commerce market. Modern computer technology like secured socket layer (SSL) helps to
protect against payment fraud, and to share information with suppliers and business
partners. With further improvement in payment and delivery system it is expected that
India will soon become a major player in the e-commerce market.
 While many companies, organizations, and communities in India are beginning to take
advantage of the potential of e-commerce, critical challenges remain to be overcome
before e-commerce would become an asset for common people.

E-commerce growth
During the year 2000-2001, two major Industry Associations produced separate reports on ecommerce
in India. Both the reports came out around the same time, namely June-July 2001. One was prepared
by the National Committee on E-Commerce set up the Confederation of Indian Industry (CII), while
the other was commissioned by the NASSCOM and prepared by the Boston Consulting Group. Both
the reports are optimistic about the growth of e-commerce in India. The Confederation of Indian
Industry (CII) report estimates the volume of e-commerce to grow to Rs 500 billion (US$ 10.6
billion) in the year 2003, out of which B2B will be Rs 420 billion (US$ 9 billion) and B2C will be Rs
80 billion (US$ 1.7 billion) (CII, 2001). The NASSCOM-BCG Report, on the other hand, estimates for
the same year that the total volume of e-commerce will be Rs 1,950 billion (US$ 41.5 billion), out of
which Rs 1,920 billion (US$ 41 billion) will be on account of B2B and Rs 3 billion (US$ 64 million)
will be on account of B2C (NASSCON and BCG, 2001). E-commerce volume for the year is
estimated to be Rs 150-200 billion (US$ 3.2-4.2 billion) (NASSCON and BCG, 2001).
Each year India produces roughly 500,000 engineers in the country, out of
them 25% to 30% possessed both technical competency and English language skills, although
10% of India's population can speak in English out of 100. India developed a number of
outsourcing companies specializing in customer support via Internet or telephone
connections. By 2009, India also has a total of 37,160,000 telephone lines in use, a total of
506,040,000 mobile phone connections, a total of 81,000,000 Internet users—comprising
7.0% of the country's population, and 7,570,000 people in the country have access to
broadband Internet— making it the 12th largest country in the world in terms of broadband
Internet users. Total fixed-line and wireless subscribers reached 543.20 million as of
November, 2009. More than 2.3 million people are employed in the sector either directly or
indirectly, making it one of the biggest job creators in India and a mainstay of the national
economy. In March 2009, annual revenues from outsourcing operations in India amounted to
US$60 billion and this is expected to increase to US$225 billion by 2020.
It may be added here that the software industry which is the greatest strength of
India grew at a compound aggregated growth rate of nearly 50 per cent during the last decade. The
Indian software and services industry has attained a reasonably robust growth of 30 per cent even
during the last year which was a year of turbulence, tragedy, terrorism and slowdown in world
economy. The software exports rose to US$ 7.8 billion in the year 2001-2002 form US$ 6.3 billion in
2000-2001. Majority of the Fortune, 500 companies have outsourced their software requirements to
India. The software solutions from India have been moving up the value chain and are engaging more
and more electronic commerce and web based technologies. Internet and e-commerce related software
and services export from India accounted for nearly US$ 1200 million in the year 2000-2001. This
figure is expected to rise to US$ 3 billion by 2003-2004 (NASSCOM, 2001). Many of the software
companies are specializing in supply chain and distribution management solutions which are the key
drivers of the global e-commerce solutions market. The NASSCOM-BCG Report estimates that the e-
solutions market, which worldwide is currently of the order of US$ 180 billion, will grow to US$ 640
billion in 2005. India should be able to tap up to US$ 4 to 13 billion in the year 2005. This segment
includes SCM, CRM, knowledge management (KM), Internet services and Application Services
Provider (ASP).
E-commerce has touched almost all the sectors and most
importantly IT, retail and telecom sectors. We can see the growth in these sectors
years by:
 Growth in telecom sector:
The total revenue in the telecom service sector was Rs. 86,720 crore in 2005-06 as against
Rs. 71, 674 crore in 2004-2005, registering a growth of 21%. The total investment in the
telecom services sector reached Rs. 200,660 crore in 2005-06, up from Rs. 178,831 crore in
the previous fiscal.
Telecommunication is the lifeline of the rapidly growing Information Technology industry.
Internet subscriber base has risen to 6.94 million in 2005- 2006. Out of this 1.35 million were
broadband connections. More than a billion people use the internet globally.
Under the Bharat Nirman Programme, the Government of India will ensure that 66,822
revenue villages in the country, which have not yet been provided with a Village Public
Telephone (VPT), will be connected. However doubts have been raised about what it would
mean for the poor in the country.
It is difficult to ascertain fully the employment potential of the telecom sector but the
enormity of the opportunities can be gauged from the fact that there were 3.7 million Public
Call Offices in December 2005 up from 2.3 million in December 2004.
The value added services (VAS) market within the mobile industry in India has the potential
to grow from $500 million in 2006 to a whopping $10 billion by 2009.
 1994 National Telecom Policy – 1994 announced
 Aug 1995 Kolkata became the first metro to have a cellular network
 1997 Telecom Regulatory Authority of India was setup
 1999 Tariff rebalancing exercises gets initiated
 March 1999 National Telecom Policy – 99 announced
 Aug 1999 License fee (revenue share) reduced from
 provisional 15% to 12%, 10% & 8% on
 Circle wise basis (A type, B type & C type circles)
 2000 TRAI Act amended & separate tribunal
 proposed
 Jan 2001 TDSAT started functioning
 Jan 2001 Policy announced for additional licenses in
 Basic and Mobile Services
 Jan 2001 Limited mobility allowed to Basic Services
 (CDMA spectrum allotted to Basic Service
 Operators)
 Oct-2002 BSNL entered in to GSM cellular operation
 w.e.f 19th October, 2002. Made incoming
 call free & initiated tariff equalization process
 Tariff for GSM cellular mobiles reduced
 Nov 2003 Unified Access (Basic & Cellular) Service License (USAL) introduced as a
first step
 towards Unified License Regime
 Technology neutral and allows provisioning
 any kind of service
 Apr 2004 License fee reduced by 2% across the board for
 All the access licenses.
SOME FIGURE AND FACTS:
 Growth in Internet:
The total subscriber base for internet users in India is 81 million as of 2009. Although,
internet penetration in India is one of the lowest in the world which is about 7.0% of the
population, compared to other nations like United States, Japan or South Korea where
internet penetration is significantly higher than in India. The number of broadband
connections in India has seen a continuous growth since the beginning of 2006. At the end of
January 2010, total broadband connections in the country have reached 8.03 million. BSNL,
Tata Teleservices, Airtel, Reliance Communications, Sify, MTNL, STPI, Netcom, Railtel,
GAILTEL, You Telecom, Spice and Hathway are some of the major ISPs in India. TRAI has
defined broadband as 256 kbit/s or higher. However, many ISPs advertise their service as
broadband but don't offer the suggested speeds. Broadband in India is more expensive as
compared to Western Europe/United Kingdom and United States.
After economic liberalization in 1992, many private ISPs have entered the market, many with
their own local loop and gateway infrastructures. The telecom services market is regulated by
TRAI. ADSL providers include:
  Tata Communications Ltd. (VSNL)
 MTNL/BSNL
 Bharti Telecom (Airtel, Bharti Televentures)
 Reliance Infocomm
Because of the increase in ISPs and the quality of service Qos, It became cheaper to call India
from around the world. Many Indians today, studying or living all around the world, are using
calling cards to India to speak with their families back home. It used to be much more
expensive prior to 2002.

TOP 20 COUNTRIES WITH HIGHEST NUMBER OF INTERNET USERS

Population, Users % Population Growth % of World
# Country or Region
2009 Est Latest Data (Penetration) 2000-2009 Users
1 China 1,338,612,968 360,000,000 26.9 % 1,500.0 % 20.8 %
2 United States 307,212,123 227,719,000 74.1 % 138.8 % 13.1 %
3 Japan 127,078,679 95,979,000 75,5 % 103.9 % 5.5 %
4 India 1,156,897,766 81,000,000 7.0 % 1,520.0 % 4.7 %
5 Brazil 198,739,269 67,510,400 34.0 % 1,250.2 % 3.9 %
6 Germany 82,329,758 54,229,325 65.9 % 126.0 % 3.1 %
7 United Kingdom 61,113,205 46,683,900 76.4 % 203.1 % 2.7 %
8 Russia 140,041,247 45,250,000 32.3 % 1,359.7 % 2.6 %
9 France 62,150,775 43,100,134 69.3 % 407.1 % 2.5 %
10 Korea South 48,508,972 37,475,800 77.3 % 96.8 % 2.2 %
11 Iran 66,429,284 32,200,000 48.5 % 12,780.0 % 1.9 %
12 Italy 58,126,212 30,026,400 51.7 % 127.5 % 1.7 %
13 Indonesia 240,271,522 30,000,000 12.5 % 1,400.0 % 1.7 %
14 Spain 40,525,002 29,093,984 71.8 % 440.0 % 1.7 %
15 Mexico 111,211,789 27,600,000 24.8 % 917.5 % 1.6 %
16 Turkey 76,805,524 26,500,000 34.5 % 1,225.0 % 1.5 %
17 Canada 33,487,208 25,086,000 74.9 % 97.5 % 1.4 %
18 Philippines 97,976,603 24,000,000 24.5 % 1,100.0 % 1.4 %
19 Vietnem 88,576,758 21,963,117 24.8 % 10,881.6 % 1.3 %
20 Poland 38,482,919 20,020,362 52.0 % 615.0 % 1.2 %
TOP 20 Countries 4,374,577,583 1,325,437,422 30.3 % 359.9 % 76.4 %
Rest of the World 2,393,227,625 408,556,319 17.1 % 461.5 % 23.6 %
Total World - Users 6,767,805,208 1,733,993,741 25.6 % 380.3 % 100.0 %

Growth in IT companies:
Some of the preliminary findings on e-commerce/e-business software exports potential are as follows:
 In the year 1999-2000, Internet and e-commerce related software and services export from India
brought in US$ 500 million out of an estimated US$ 4 billion software and services exports.
 Supply Chain Management optimization is one of the strongest drivers of the global e-commerce
solutions market, as it spurs business-to-business transactions. More than 68 per cent of Indian software
houses have informed of strong expertise in supply chain and distribution management solutions.
 Almost 32 per cent of IT company respondents have identified web based consumer business
 As a major opportunity area, with expected paybacks beginning in three to four years.
 Some of the emerging hot areas of e-commerce services are: legacy application integration; Internet
application integration; Customer Relationship Management (CRM), Customer Service Management
 (CSM), Enterprise Resource Planning (ERP) and Electronic Data Interchange (EDI) migration to web
based models; new IT frameworks and integration with business strategy (strategic IT consulting); e-
commerce training services, business web site development and maintenance. The user side, e-
commerce means business. Some of the highlights of the domestic e-commerce scenario based on the
findings of NASSCOM’s survey include the following:
 Among user organizations, more than 90 per cent expressed keen awareness about the increasing
adoption of e-commerce and its potential benefits.
 More than 55 per cent of corporate respondents said that e-commerce transitions were integral of their
corporate plans. Of these nearly 85 per cent were industries which did not have direct or frequent
contact with end consumption.
 About 23 per cent of top 500 companies in India already have started some form of e-commerce.
These have been facilitated through the up gradation of existing IT systems or fresh installations
configured or e-commerce transactions

India telecom & IT statistics, facts

and figures

1. Stats on e-commerce and online shopping:

- Estimated value of total e-commerce market (end 2005): 1,180 crore (11.8 billion) Rs
[HT; Jan 2006]
 - Projected growth in online transactions in two years: 300%
   (2004-05: Rs 570 crore (73m GBP) -- 2006-07: Rs 2,300 crore (295m GBP) ) [DNA Jul 06]
 - Percentage of internet users who buy train tickets online: almost 30% [DNA Jul 06]
 - Most common payment method for online shoppers: 38% credit card --
   32% cash on delivery [DNA Jul 06]
 - Credit/debit card users in India: approx 40 million [DNA Jul 06] 
 - Value of the online matchmaking industry: financial year (FY) 2006-07:
   expected 90crore Rs (11.5m GBP) -- FY 2005-06: estimated 58 crore Rs
   (7.4m GBP) [EI Jan 07]
 - Number of marriages performed in India: 1 crore (10 million) [EB Jan 07]
 - Total registration base of India's biggest online matrimonial portal shaadi.com:
   9.1 million [EI Jan 07]
 - Number of yearly registrations for online matrimonial portal shaadi.com:
   fiscal 2007-08: expected 11.2 million -- 2005-06: 6.2 million [EI Jan 07]
 - Number of reported marriages through shaadi.com: 7.2 lakh people
   (720,000) [GG Jan 07]
 - Total registration to online matrimonial portal to Bharatmatrimony.com
   over the years: nearly 9 million [EI Jan 07]
 - Number of yearly registrations for online matrimonial portal
   Bharatmatrimony.com:
   2006-07: expected 2.5 million -- 2005-06: 1.5 million [EI Jan 07]
 - Percentage of internet users that search for a spouse online: 12% according
   to online survey by JuxtConsult research firm [DNA Sep 05]
 - Turnover in online shopping between Dussehra and Diwali 2005 (13/10 - 03/11/05):
   Rs 115 crore (excluding travel related transactions) [ConSu; Nov 2005]
 - Turnover in online shopping between Dussehra and Diwali 2004: Rs 53 crore
   excluding travel related transactions) [ConSu; Nov 2005]
 - Number of e-commerce transactions between Dussehra and Diwali: 2005: 810,000
   online sales -- 2004: 345,000 online sales (excl travel related) [ConSu; Nov 2005]
 - Total online shopping revenue 2004: Rs 570 crore (of this 63% travel related)
   [ConSu; Nov 2005]

Mobile gaming, music, SMS, MMS etc:

-Number of prayers sent by text message to Shree Siddhivinayak temple in Mumbai:
   more than 10,000 SMS within a week of start of SMS prayer service [BSNL; Jan 2006]
 - Percentage of mobile subscribers using MMS (Multi Media Messaging):
   pre-paid: 27% -- post paid: 37 % [ConSu; Nov 2005]
 - Number of game downloads onto mobiles: 0.45 million per month [ConSu; Nov 2005]
 - Mobile phone owners who use mobile games: 5 % [ConSu; Nov 2005]
 - Mobile data users who play games on mobile every month: almost 32 %
   [BSNL; Dec 2005]
 - Prognosis for growth in Indian mobile gaming market: growth of 700 % by 2010
   to annual revenues of 200 million USD [BSNL; Dec 2005]
 - Mobile users who would prefer music from their mobile: 26 % [ConSu; Nov 2005]
 - Mobile owners actually listening to music on their mobile: 9 % [ConSu; Nov 2005
 - Amount of digital music revenue: over Rs 400 crore (approx 73m Euro) [DNA May 06]
 - Percentage of digital music revenues from the mobile sector: 85% [DNA May 06

Conclusion
A developing country can become industrialized and modernized if it can extensively apply
IT to enhance productivity and international competitiveness, develop e-commerce and e-
governance applications. An information-based society or knowledge based society is
composed of IT products, IT applications in society and economy as a whole. Many countries
in Asia are taking advantage of e-commerce through opening of economies, which is
essential for promoting competition and diffusion of Internet technologies. The Internet is
boosting efficiency and enhancing market integration in developing countries. The developed
world has had a long lead over the developing countries in the telecom infrastructure. The
world average of teledensity is 15 per cent compared to the developed world average of 55 to
60 percent. Same is true of PCs, Internet connections, and the number of Internet hosts. All
these traditional indicators for India as seen above are still small. But the total number of
Internet connections is large in absolute numbers. Large enough to have a critical mass of 10
to 20 million users to be able to make an impact on e-commerce and e-governance. In the
next 3 to 5 years, India will have 30 to 70 million Internet users which will equal, if not
surpass, many of the developed countries. Internet economy will then become more
meaningful in India. The number of e-transactions will be large enough to sustain the Internet
economy.
At the last it can be said that E-commerce has played and is playing a very
important role in the growth of many sectors specially IT, Telecom and retail sectors. And the future
of E-commerce is going to boom in the whole market.