Scribd
Upload
141 views14 pages

E Commerce Challenges in India

The document discusses several key challenges and opportunities for e-commerce in emerging Asian markets: 1. Logistics are difficult due to poor infrastructure, so companies like Alibaba have invested billions building their own delivery networks for reliability and competitive advantage. 2. Digital infrastructure is lacking as internet penetration is below 30% in most countries, and integrating smaller businesses was challenging for early companies. 3. Many areas remain cash-based with limited banking and low consumer trust, so companies offer cash on delivery but this increases costs. 4. Cultural differences also exist, as seen when an Indian matrimonial site opened physical centers for personal guidance that consumers preferred. 5. Consumers have low

Uploaded by

Abhay Srivastava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
141 views14 pages

E Commerce Challenges in India

The document discusses several key challenges and opportunities for e-commerce in emerging Asian markets: 1. Logistics are difficult due to poor infrastructure, so companies like Alibaba have invested billions building their own delivery networks for reliability and competitive advantage. 2. Digital infrastructure is lacking as internet penetration is below 30% in most countries, and integrating smaller businesses was challenging for early companies. 3. Many areas remain cash-based with limited banking and low consumer trust, so companies offer cash on delivery but this increases costs. 4. Cultural differences also exist, as seen when an Indian matrimonial site opened physical centers for personal guidance that consumers preferred. 5. Consumers have low

Uploaded by

Abhay Srivastava
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 14

Challenges & Opportunities in e-

commerce
1. Logistics
As most emerging Asian markets are large and
fragmented with poor logistics infrastructure, local
logistics firms have only partial coverage in large
countries like India and China and are generally viewed
as unreliable .

This has forced e-commerce firms to build their own
logistics systems at enormous cost and time outlay.
Chinas Alibaba, which owns taobao, Chinas largest
consumer e-commerce firm, has invested in local
logistics and delivery businesses. It announced in 2011
that it planned to invest $4.6 billion over five years to
build a network of warehouses across the country.

Building logistics from scratch involves enormous time
and cost investment. Additionally, it has three
important implications:
it has a substantial impact on profits;
it provides significant competitive advantage against
new local and global entrants;
it opens up a new business opportunity for these
players by allowing competitors to use their delivery
networks for a fee. Amazon encourages small firms to
use its marketplace or cloud computing services. In
December 2010, Flipkart piloted a similar system in
India, called Flipkart Logistics.
2. Digital Infrastructure
Although Internet penetration in Asia is rapidly increasing,
except for a few countries such as Malaysia and Singapore,
less than a third of the population in most emerging Asian
countries have internet access.

However, linking businesses to create centralized systems
for e-commerce can bring its own challenges. When online
travel services such as Cleartrip started in India, they soon
discovered that many smaller airlines in the region were
not part of the Global Distribution System (GDS) a
computerized reservation network used as a single point of
access for reserving airline tickets worldwide. They
undertook a long and laborious process of building
software to link these smaller carriers to GDS so that their
customers could access the inventories of all airlines
3. Payment
Many emerging markets in Asia continue to be cash-
based societies due to:
limited banking and credit card penetration,
the existence of parallel cash economies (in some
cases)
lack of consumer trust in online merchants

It has prompted several leading e-commerce firms such
as Flipkart in India, 360buy and Taobao Mall (Tmall) in
China, and Rakuten in Indonesia, to offer cash
collection on delivery (COD).
While COD solves both the concerns of
payment and theft, it often involves several
trips by the delivery person, thereby
increasing costs substantially. Some e-
commerce players such as Rakuten in
Indonesia therefore allow customers to collect
their packages at convenience stores across
the city.
4. Cultural Differences
Indian matrimonial site Shaadi.com had a
similar experience. Consumers lacked
confidence in their ability to use the site
effectively, and were looking for the human
touch. As a result, the company opened over
70 Shaadi Centers that are staffed with
relationship advisors who recommend
potential profiles to families and help them
find suitable matches.
5. Price Sensitive Consumers
Even though average incomes in Asia are rising and the
middle-income group is growing, the per capita income
of most consumers in emerging Asian markets remains
less than a tenth of those in developed countries like
the United States and Singapore.

Low incomes and a mindset of every penny counts
make Asians among the most price sensitive
consumers in the world. This mentality has been
compounded by e-commerce offers price-sensitive
shoppers the ease of being able to compare prices
online.
Online retailers in Asia face price pressure not only
from competing websites, but also from offline stores.
The latter run such highly efficient and low cost
operations that even powerful corporate houses like
Indias Reliance Group have found it challenging to
make inroads in the local retail industry.
To compete with local merchants most Indian e-
commerce firms like Flipkart, myntra etc. offer free
shipping and flexible return policies in the hope of
making their online services more palatable to the
price conscious consumer base they wish to attract.
Profit potential
E-commerce is a thin-margin business. In
2011, even after 17 years of operation in the
US, Amazon had a meager profit of $631
million from sales of over $48 billion or an
operating margin of less than 1.5 per cent. By
the second quarter of 2012, its profit was
down to $7 million as the company continues
to invest in new products and logistics.

E-commerce firms in emerging Asian markets are likely
to have even thinner margins. They need to invest
heavily in logistics and infrastructure that substantially
increases their fixed costs; overcome payment
problems; build offline presence to earn consumer
trust; manage highly price sensitive consumers; face
both local and global competition; and compete
against a highly efficient offline retail sector.
It is therefore not surprising that Flipkarts founders
had trouble convincing General Atlantic Partners to
invest $150-200 million in their business despite their
projected 2012 sales of nearly $500 million, a 400%
year-over-year growth.

You might also like