E-commerce in India: And the time starts now

BANGALORE: With the explosive growth of Internet economy, it is quite natural to see a wave of e-commerce start-ups in India. The success of these startups in the US and also the potential of e-commerce in the US and Europe to a certain extent, have been a major factor in the growth of such new ventures in the country.

Like in any other part of the globe, e-commerce is the economy of the future. Unlike the West, it may not become a mainstream activity immediately in India, due to certain infrastructural issues and also because of the mindset of the Indians. There is a certain amount of reluctance and sensitivity involved to part with credit card and other information over the Net. Unless the cyber laws become effective and can be easily enforced, there will be some issues.

According to Aztec Software and Technology Services chief technology officer V.R. Govindrajan, "It is not enough if there are laws, how easily can they be enforced and the kind of deterrents to prevent Internet frauds. Equally important is the lack of basic infrastructure such as telecom facilities. Without reliable and good bandwidth, it is difficult to conduct serious e-commerce."

Netkraft Pvt. Ltd. director Atul Jalan points out, "There are a few issues here - infrastructure, cultural, & regulatory. The basic infrastructure in terms of PC and telephone penetration in India is very low. There are only two million PCs in India for a population of close to one billion. The number of telephone lines should also increase from its current 19.1 million connections to facilitate the take up of Internet services. Then there are regulatory issues like taxation, consumer rights, frauds and financial services that need to be addressed. The cultural factor is a paradigm shift from the earlier known ways. Even credit cards took a long time to achieve acceptance level in India."

It is human psyche to touch and feel a product before it is bought and there is also a social angle involved in shopping offline- meeting people. However, certain goods such as books, music, booking tickets for a movie/travel, financial services etc. will be bought or transacted over the web easily, over a period of time, transacting over the web will become natural and may not be an issue at all. So, what we need in India for e-commerce growth and penetration is good infrastructure and cyber laws to happen.

TekEdge Solutions Pvt. Ltd. Vice President Asia Operations S. Srinivasan says, "Once the necessary infrastructure is in place, Business-to-Business (B2B) will take off. The bigger players will drive their associates into this model. Business-to-consumer (B2C) is a different proposition, it's a longer cycle. There are some products and services which will work very well and others may not be that easy." Mr Jalan says, "The real challenges will lie in enabling B2B commerce." He also added, "The value of e-commerce transactions in India is forecast to explode over the next five years. One of the factors driving this will be the cyber law guidelines and liberalization of ISP industry that drives the growth of Internet user base. IDC forecasts that the value of e-commerce transactions in India will rise to more than U.S.$1.7 billion in 2003 from U.S $3.5 million in 1998." Although today e-commerce is at a very nascent stage in India, the size of the Indian market can be huge if there is good infrastructure.

To nurture the penetration of e-commerce in India, we have venture capitalists (VC) investing in these start-ups. It is advantageous to have the backing of a VC as they help cross quite a few hurdles, in terms of investment, management, customers, etc. and the kind of motivation and pressure to keep you going. The involvement of VCs is proof enough of the kind of potential in India. Mr Jalan says, "Generally, a good VC apart from the money brings branding, network & board experience to the table." VC's work with people, who have a clear idea and who build the brand image and thereafter they await the boom. From the perspective of a VC, the game is to buy at the right price while the market is at a nascent stage and wait for the burst of growth, based on growth perceptions.

One of the changes, that Internet has brought, is the shift from a seller's economy to a user economy. In case of sales and service, Internet will be used as an additional channel to the physical one. This will involve some problems for the distributors/dealers because the buyers' interaction with the seller will be direct, without the involvement of distributors/dealers. Mr Govindrajan comments, "In my opinion, more than anything else, e-commerce has a certain appeal to the Indian rural economy. One of the problems in today's Indian producer/consumer chain is that it is the middlemen (powerful distributors) who make most of the money, while the poor producer gets pittance. I think e-commerce has the potential to change this scenario dramatically." They will have to offer lot more value additions than what they are doing today. The dealers/distributors in the supply chain will have to reconfigure themselves to offer a new set of value proposition, to survive and grow. The improvement of infrastructure and the passing of cyber laws will provide the fuel for many start-ups, which will help change the mindset of the people, which in turn will enable them to transact via the web.

Whatever said and done, the Indian corporate world also had a role to play in taking India ahead in e-commerce. Companies should start preparing their e-commerce strategy. Fortunately, some of the consumer durable companies are preparing for the future e-commerce economy. They can perhaps prepare the future e-commerce consumer for the Net onslaught and teach the latter with the advantages that the new medium promises.