Investors ready for India’s e-commerce development

World Today

Screenshot of India’s E-commerce website Snapdeal.

India’s e-commerce sector is booming. One Google report said that by 2016, it will reach $15 billion. Investors were lining up, but Internet infrastructure continues to lag behind. CCTV America’s Shweta Bajaj reported from New Delhi.

Investors are ready for India's e-commerce development

India's e-commerce sector was booming. One Google report said that by 2016, it will reach $15 billion. Investors were lining up, but internet infrastructure continues to lag behind. CCTV America's Shweta Bajaj reported from New Delhi.

It had been a roller coaster ride for India’s online retailing marketplace Snapdeal. A recent $627 million investment by Soft Bank, which also holds a 32 percent stake in Alibaba, had catapulted Snapdeal into the biggest bet that an international investor ever made in the India e-commerce sector.

India’s e-commerce market was growing exponentially. Most investors were banking on the fact that India would have the youngest population in the world a few years from now, but one of the biggest challenges that remained for this industry is Internet penetration.

Co-founder of Snapdeal, Kunal Bahl, said Softbank’s investment showed confidence in India’s e-commerce sector. Three years ago, Snapdeal had 10 employees. Now it had 3,500 people, and sales have gone from zero to $3 billion. This year alone, the e-commerce sector in India had seen an investment of $3 billion.

However, challenges remained.

“I would say there are three catalysts largely, one is Internet penetration. Right now there are 200 million Internet users in India across mobile and PC. We have to take that to 600-700 million,” Bahl said. “Second is the increase of supply and the increase of sellers in our market place, because the more supply there is the more selection there will be and the better prices consumers will get. The third is improvement in logistics infrastructure.”

It’s the sales of low-cost mobile phones and expanding internet access that was fueling confidence among online retailers. Indians were buying everything from clothes to even homes online. By the end of the year, the number of people with Internet access was expected to reach 300 million.

However, research also showed that over 60 percent of online shoppers are not happy with their experience. Experts said that was one of the biggest challenges.

“When I look at the last mile delivery part of it, I think that’s the big challenge, and if millions of consumers are going to buy online, they need the product to be delivered their house,” Nitin Bawankule, e-commerce director of Google India, said. “We will need to invest in two things. The technology to ensure that those orders are processed properly, and then the logistical infrastructure to deliver that.”

Excitement in the e-commerce space in India grew when Alibaba went public which became the largest e-commerce player in the world. Investors now looked at India, hoping the large and young population means more online shoppers.

In terms of numbers though, the Indian market remained small compared to Alibaba which clocked a massive $9 billion in one day. In 2013, India’s total online business was worth only $11 billion. E-tailing in India was only 6 percent of the size of traditional retail, and that meant a lot of room to grow if online and logistics infrastructure becomes stronger.