INDUSTRY

Tsunamic E-Commerce in India

The Third Wave

It has been a roller coaster ride for Indian e-commerce industry over two decades. A market which was seen as
underdeveloped due to numerous reasons is now swaying at rank three worldwide in terms of Internet users and
counted as one of the most promising e-commerce markets in Asia-pacific region after China and Indonesia. Like
they say, Rome wasn’t built in a day, Indian e-commerce has witnessed both good and bad times; these phases are
delineated and discussed in this article.

Prateek Kalia,
Research Scholar, Department of Research, Innovation and Consultancy,
I.K Gujral Punjab Technical University, & Former DGM, Punjab Information and Communication Technology Corporation Ltd.

First wave the introduction of dial-up Internet in IndiaMART.com by Dinesh

Launch of DataQuest (India’s first IT
publication) in 1982 and establishment
of ERNET (one of first networks of In-
dia) in 1986 marked the advent of
Internet evolution in India. This net-
work was collaborative effort of five
IITs, IISc, NCST and DIT. This initia-
tive led to formation of ERNET India
and it connected 800 institutions and
100,000 users by 1996. First wave of e-
commerce revolution got flared up with
six cities in India by VSNL in 1995.
This wave was further speeded by
launch of economic liberalization, end of
license regime, high taxes and import
restrictions. Relaxed policies and
Internet adoption at early stage led to
growth of SMEs and information tech-
nology industry.
• B2B Directory: Growth of B2B
online portal was fast-tracked by
liberalized trade policies.
Agarwal and TradeIndia.com by
Bikki Khosla became India’s first
B2B in 1996.
• Online Matrimonial: In 1996,
Anupam Mittal came up with a
revolutionary concept of finding
matrimonial alliances through a
website known as Sagaai.com. Now
it has become World’s largest mat-
rimonial portal and rechristened as
Shaadi.com.

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Industry

• Online Recruitment: Year 1991 wit- 1998. Fabmart.com, India’s first online more reliable, cheaper and simple. It
nessed sudden increase in number departmental store came alive in 1999. was further led by growth of online retail.
of jobs due to economic reforms. Due to troubles like low Internet • Online Travel: Air travel was per-
However, employment news, maga- penetration, menial online shopper ceived as costly affair by masses be-
zines and notifications in the news- base, slower Internet, inadequate infra- fore 2005-06, therefore LCCs pro-
papers were the only source for em- structure support and little acceptance moted sales of tickets through third
ployers and job aspirants till 1997. of Internet shopping concept, first wave parties and Internet and it led to
To fill this gap Sanjeev of Indian e-commerce subsided. More growth of Online Travel Agents
Bikhchandani created Naukari.com than 1000 e-commerce business closed (OTAs). These OTAs further devel-
in 1997 to connect employers and down due to dot-com burst in 2000- oped their websites to increase their
job seekers. 2005. However, this silent era had few sales. Another big fat development
• Online Classified: Online classified positive developments like incorpora- was implementation of e-ticketing
also gained popularity because of tion of IT Act 2000, launch of online tick- by IRCTC in 2002. Within three
simplicity of use and zero head- eting by Indian Railways and acquisi- years, IRCTC churned 63% of total
aches regarding delivery, logistics or tion of Bazee.com by eBay.in. e-commerce. On March 19, 2014,
taxation. 5.80 lakh e-tickets were booked
Other significant developments Second wave through IRCTC website. Now
were launch of India’s first online bank- Low Cost Carriers (LCCs) in the Indian IRCTC has become fastest growing
ing site by ICICI Bank in 1997, incorpo- aviation sector brought life to Indian e- e-commerce website in entire Asia-
ration of NASSCOM to promote IT in- commerce in 2005. Customers liked Pacific region in terms of online
dustry and private ISP license to Sify in online ticket booking because it was money transactions.

Waves of E-Commerce Evolution in India

Source: Kalia P, Kaur N and Singh T (2016), “E-Commerce in India: Evolution and Revolution of Online Retail”, In S Dixit and A K Sinha (Eds.), E-Retailing Challenges and Opportunities in the Global Marketplace,
pp. 99-120, Hershey PA, IGI Global, USA.

48 | July 2016 | | The Global ANALYST |


• Online Retail: Many online retailers
duplicated global business models
to tap convenience-oriented con-
sumer seeking good products and
delightful customer experience.
• Group Buying: Following the global
trends, daily deals and group buying
became more popular in 2010, at-
tracting more number of visitors
and members every day.
• Using Social Networking to Reach
Out Customers: E-commerce players
realized the strength of social net-
working sites and used them to
spread product information, to cre-
ate product loyalty, advertise, cre-
ate hype and receive feedbacks and
to keep in touch with their custom-
ers. Now social commerce is emerg-
ing as phenomenon.
• Introduction of COD: Cash on deliv-
ery, which accounts for 50 to 80% of
online transactions in India became
a big success after Flipkart rein-
vented it in 2010. Indiatimes shop-
ping was first website which offered
COD during 2005-07.
Third wave
From a zero in 1995, India took 15 years
to reach $200 mn e-commerce revenue
mark in 2010. However, it took India
only 5 years (from 2010-2015) to reach
$8 bn from $200 mn. This hockey stick
style adoption marks the third phase of
Indian e-commerce. The first two waves
witnessed gradual beginning and the
evolution of basic segments of e-com-
merce. However, third phase is the “en-
richment and innovation phase”. This
phase is witnessing shift in business
model, entry of global leaders, enor-
mous funding, novel ways of payment,
digital India initiative and advent of
m-commerce.
• Shift in Basic Business Model: Dur-
ing early 2012, many popular e-re-
tailers started realizing that own-
ing goods and selling them can be
difficult business proposition.
Therefore, they started shifting to
more profitable marketplace or hy-
brid business models i.e., e-retailers
started adding other sellers to the
marketplace. Snapdeal was first to
| The Global ANALYST |
adopt pure-play marketplace model
in 2011, followed by Flipkart and
Jabong in 2012 and Amazon in
2013.
• Entry of Foreign Giants: Lured by the
growing e-commerce market in
India, Amazon launched Junglee (a
price aggregator and comparison
tool) and Rocket Internet flagged
Jabong in 2012.
• Funding Spree: In 2014, Indian
e-commerce received a whopping
US$3625.3 mn funding through na-
tional and international investors.
Frontrunner companies were
Flipkart, Snapdeal, Ola Cabs and
Quikr, raising US$1910 mn,
US$921 mn, US$251 mn and
US$150 mn respectively. Surpris-
ingly, it was not just the traditional
online formats of retail and
lifestyle, but fresh online business
segments like classified (Quikr),
real estate (Housing.com, Proptiger
Reality, CommonFloor), grocery
(Bigbasket) and healthcare also
grabbed attention of investors.
• E-wallets: As per RBI, there are
three types of e-wallets—closed
(used only for particular company),
semi-closed (can be used to transact
for goods and services) and open (al-
low redemption as well as cash
withdrawals). Most widely used
e-wallets like Paytm, MobiKwik,
PayUMoney, Oxigen, etc. are ex-
ample of semi-closed e-wallets.
Launched in 2006, by Times of
Money (Times Group),
Wallet365.com was India’s first
e-wallet which was introduced to
store money electronically for utility
bill and online shopping payments.
Various e-wallets were launched
over the time but 2014 has been the
year of e-wallets. For example,
Oxigen was established in 2004 but
it ventured into the online mobile
wallet space only in 2014. Simi-
larly, Founded in 2009 as mobile re-
charging company, MobiKwik inte-
grated its mobile wallet into e-com-
merce websites in 2014. Apart from
these companies, popular e-wallets
like Paytm and M-Pesa, which were
Tsunamic E-Commerce in India
started in 2011 and 2013 also be-
came more widely used in 2014.
• Digital India: Aim of Digital India
project is to offer a one-stop shop for
government services through mobile
phone backed delivery mechanism.
This program will give strong boost
to e-commerce sector, as Internet
and broadband access will be made
available to remote corners of the
country. Another important devel-
opment is modernization of India
Post as distribution channel for
e-commerce business to reach even
non-serviceable areas.
• M-commerce: In a country like India,
where mobile penetration exceeds
Internet penetration, m-commerce
can be game changer. Online mar-
keters see an opportunity to pen-
etrate in rural and Tier I/II cities
through mobile devices. It’s ex-
pected that the m-commerce mar-
ket in India will grow at a CAGR of
approximately 71% over the period
2012-16. By 2018, revenue through
m-commerce applications will reach
US$1.26 bn and subscriber base
will grow to 72.5 million. M-com-
merce is not just limited to payment
of utility bills or purchase of travel
tickets. Now e-tailers promote pur-
chases made through mobile apps
by offering special discount and sev-
eral companies have reported that
they are getting more than 50% of
their online orders through mobile
phones. Now m-commerce contrib-
utes to 13% of all e-commerce trans-
actions as compared to 5% in 2013.
Such is the importance of m-com-
merce that Myntra, a popular e-re-
tailer shut its website in May 2015
and now operates solely through
mobile app.
E-commerce in India has evolved
from a stage where websites were used
as display board for putting informa-
tion, to a stage where companies make
their fortunes through websites. Like a
fission reaction, this development is
moving from PC to tablets to mobile
phones. If you think that you have seen
it all in three waves of e-commerce then
just wait for the Tsunami. 
Reference # 20M-2016-07-12-01
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