Is India an ancillary market?

 

Though India is second most populous country in world, big brands hesitate to enter Indian market based on its world ranking or “Slumdog Millionaire” imaginations that they have. In this article let us prove that every bit of those assumptions is incorrect. In spite of having high poverty, India qualifies as a primary market due to liberalization of the Indian economy, massive Investment options, well developed equity markets, moderately developed debt markets, good GDP growth rate and progressive reforms in the last two decades.

India is becoming a hot bed for international brands. The fact that India is now among the fastest growing and highly competitive fashion markets in the world is fairly clear by the interest that the global brands have shown in the last few years. A legion of fabled international fashion brand s entered the Indian soil in this fiscal — Armani Exchange, Muji, Innamorata, North Face, Massimo Dutti, Cath Kidston, etc., to name a few. On the other hand, a whole line of brands like like Hermes, Louis Vuitton, Gucci, Chanel, Jimmy Choo, Burberry, Dior, Bvlgari, etc., are expanding business rapidly, after having successfully established a stronghold in the yesteryears.

Many of our clients’ first reaction would be, India is a secondary market for us and we don’t have a strong presence in India. Accept it or not the last few years have paved the way for a global India; the data itself proves how large the wave is considering the scale of trade. Counterfeiters, brandjackers and fraudsters don’t care. If left unmonitored it can result to despicable marauding activity where misusing existing brand values that have been cultivated and nurtured over a period of time are commonplace.

  • The Indian economy has been consistently showing good signs of growth, with the average GDP growth rate at 7.5% in 2015-16. The retail sector is showing a promising trend of 11% CAGR, growing from an estimated size of USD 600 Billion now to USD 1 Trillion in 2020.
  • In November 2015, India beat the United States of America to become the 2nd largest market after China, for smartphones with 220 Million users. Mobile phones (including smartphones) internet users are likely to grow 2.5 times by 2019, to touch 457 million thereby enabling a corresponding growth trend for the online shopping industry in India. More than 50 per cent of the orders for e-commerce retail giants are generated via mobile apps. In terms of traffic, bigger e-commerce retail companies draw as high as 50% to 70% of their total traffic through mobile.
  • At present, the e-commerce retailing industry is witnessing approximately 1 to 1.2 million transactions per day, led by categories including apparel (approximately 43%), electronics (approximately 24%) and books (approximately 22%). The number of transactions may however fluctuate with seasonal variations, including holiday season and discounts.
  • Around 75% of Indian internet users are in the age group of 15 to 34 years. This category shops more than the remaining population. Peer pressure, rising aspirations with career growth, fashion and trends encourage this segment to shop more than any other category and India, therefore, clearly enjoys a demographic dividend that favors the growth of e-commerce. In coming years, as internet presence increases in rural areas, rural India will yield more e-commerce business.
  • What differentiates the Indian e-commerce market from that of a country like China is that while market concentration in China is largely on account of Alibaba-owned Taobao and Tmall (with these players holding a higher percentage of market share than the top players in most of the other major markets), in India the market share is divided amongst several e-commerce companies, each coming up with its own business model. As a result, customers have a wide range of products and services to choose from. The e-commerce industry is expected to form the largest part of the Indian Internet market with a value of approximately USD 100 Billion by 2020.
  • Even as the world economy struggles and many developed countries are trying to alter their consumption through austerity drive, India could end up as the third largest consumer economy by 2025 according to a report by the Boston Consulting Group (BCG).
  • According to a study done by Indian Institute of e-commerce, by 2020 India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce. Online apparel sales are set to grow four times in coming years.

 

The steady growth of e-commerce in the India is thus, ultimately seen at both ends of the spectrum. India’s rank for ease of doing business went up by 12% in just one year due to an improved regulatory framework thus creating a conducive business-friendly environment. These factors have positively impacted Private Equity and Venture Capital investments into the country touching USD 20 Billion in 2015.

The present economic climate, while fostering competition and growth, has also exposed organizations to fraud and counterfeit problems. Given the mounting pressure on margins and the need for cost optimization, losses due to fraudulence can significantly impact the profitability of organizations, in particular in emerging industries such as e-commerce. Counterfeiters have made the e-commerce businesses susceptible to the risk of fraudulence all the more.

References:
https://www.ecommerce-europe.eu/app/uploads/2016/10/India-B2C-E-commerce-Light-Country-Report.pdf
https://assets.kpmg.com/content/dam/kpmg/in/pdf/2016/08/E-commerce-retail-logistics-India.pdf
https://en.wikipedia.org/wiki/E-commerce_in_India
http://www.forbesindia.com/ecommerce-in-india/1499/1
http://www.pwc.in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf
http://italiaindia.com/images/uploads/pdf/april-2016-e-commerce-in-india.pdf
https://webforms.ey.com/gl/en/industries/consumer-products/ey-india-ecommerce-report
https://www.ibef.org/research/insights/242
https://www.ibef.org/The-Rise-and-Rise-of-E-commerce-in-India.pdf

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