A few weeks ago we wrote about why a Lafayette, Louisiana-born American began an e-commerce business in Vietnam.
Vietnam’s e-market is seeing healthy year-on-year growth as the economy powers along, smartphone usage increases, and users become more comfortable purchasing items online.
But the scale of the Vietnamese market pales in comparison to what is the world’s fastest growing e-commerce marketplace: India. By 2020, India’s e-commerce market is expected to have revenue in the range of US $100 billion, up from just about $2.9 billion today, according to Morgan Stanley.
To learn more about what it takes to actually doing business in the sector I spoke with Gurpreet Singh, a founder and the CEO of BrownTape, a Goa-based business that helps traditional brick and mortar shops expand into the e-commerce arena. The company provides a solution for vendors looking to manage their listings across multiple platforms, while also assisting with inventory control. Graduating from the GSF Accelerator in 2012, the firm has since expanded to over 125 people, with a subsidiary office now in Mumbai.
There are a host of cultural reasons that explain the tremendous growth India expects to see over the next five years – Gurpreet delves into these factors and more in the podcast, which is well worth a listen. But the numbers do not lie either. India has an economy whose growth is the envy of many other emerging markets, a population demanding access to consumer goods at competitive prices, and growing smartphone adoption (check out last week’s story about the smartphone revolution).
Right now, purchases related to travel dominate the e-commerce market in India, accounting for about 70% of the market, according to PWC. While e-retail is experiencing double-digit growth, it still accounts for only 1% of India’s entire retail market. One of the fastest developing areas within this segment is technology and accessories. Indeed, Gurpreet reports that the predominant number of sales through BrownTape involves smartphones and related items.
As with all emerging markets, India poses a unique set of challenges for businesses operating in the B2C e-commerce space. For instance, the majority of purchases are made via cash on delivery, where the courier receives payment for a particular product purchased online. But perhaps one of the greatest challenges facing e-commerce businesses in India involves getting products to their delivery point. The country’s infrastructure is in need of significant maintenance and upgrades, and such underinvestment can impact business decisions. For example, BrownTape opted to be based out of Goa because commuting times in major metropolises such as Delhi and Mumbai would involve journeys lasting over three hours for employees.
Courier businesses working to deliver products in these cities are also certainly burdened by the high levels of congestion. E-commerce platforms like Amazon India and Flipkart have taken note, and are now building subsidiaries that provide logistics to e-(re)tailers and others to better navigate product delivery. In the coming weeks we will have a series of posts about infrastructure challenges, and the opportunities for investment in frontier and emerging markets that such issues might present.
It is important to note though that it’s not just the B2C e-commerce segment seeing growth and investment. Right now, the wholesale market in India is worth about $300 billion, of which Wal-Mart sees $50 billon as addressable. Wal-Mart, which entered the wholesale business in India in 2009, is now moving into the B2B space with the recent launch of an e-commerce platform. This development came shortly after the retail giant announced a $103 million capital investment in 2014 with aims to expand its presence from 20 to 70 wholesale stores over the next five years.
Stay tuned for the next podcast where we’ll be speaking with the founders of Chaldal, an e-commerce platform founded by a Wharton-educated entrepreneur in Bangladesh, the world’s eighth most populous country, to close out our series on e-commerce entrepreneurship in South Asia.