Preface

The first real insight of an organization for management student comes only during his

preparation of project work because student first interacts with real practical work. This is first

introduction to industry and its working. This project work synthesize the theoretical concept

learn in the class room and its practical orientation in organization.

In my project I have studied the “A Study on the growth and opportunities in e commerce sector in

India”.

FIRSTCHAPTER:-

The First chapter deals with the introduction of the topic, it also describes the profile and history

of growth of cashless economy of India. In first chapter there is also mentioned objective, scope

and importance of this study. The objective of the study helps to know about aim of this research.

The importance of the study helps to know about the present situation of cashless economy in

India. The scope of the study helps to know about scope of this study.

SECOND CHAPTER:-

Second chapter deals with Research Methodology. The process of carrying out the whole

Research problem is defined in it. It contains information about the type of research, method of

data collection, data analysis and interpretation. In this chapter the methodology of this project

is mentioned in detail.

The method of data collection by which this research report is completed. The design and

technique which is used in this research report. The most important part of this report is, data

analysis and interpretation which is mentioned in next chapter. The objective of the study helps

to know about aim of this research. The importance of the study helps to know about the present
situation of cashless economy in India. The scope of the study helps to know about scope of this

study.

THIRD CHAPTER:-

Third chapter deals with data analysis and interpretation. This is the most important section of

project work. This section contains the analysis of all the data collected so far and they are

interpreted to produce the final conclusion. It contains all the tables and charts which depicts the

result.

FOURTH CHAPTER:-

Fourth chapter contains findings and recommendations of this research report. This is based on

the data analysed and interpreted in previous chapter. This is the most important section of the

report, for a report is evaluated on the validity and correctness of its findings.

FIFTH CHAPTER:-

Depicted conclusion which concludes the whole report, that gives a brief description of the

process employed so far.

Last Section contains bibliography. Which describes the list of sources from where the matter

and information is collected? It contains the list of books, authors, websites used etc.

Abhishek Kumar Singh

 Acknowledgement

Completing the work assigned by a single hand is not always possible. The same was here and

this is an opportunity to thank all of them who directly or indirectly shared their efforts to

complete task given to me.I would like to express my heartfelt thanks to Mr. Rahul Anand

Singh, Head, Department of Business Administration, T.E.R.I, Ghazipur.

This research report could not have been taken shape without the able guidance given by Mr.

Arif Sultan Assistant Professor, T.E.R.I. Ghazipur.

Lastly, I would like to express my thanks to my parents & friends for their encouragement &

support through - out the duration of Research.

Abhishek Kumar Singh

BBA 6th semester
Chapter-1

Introduction
 INTRODUCTION

In online and Upcoming: The recent impact on India a report by McKinsey stated that “ India is

on the verge of an Internet boom and is projected to have between 330 million to 370 million

internet users by 2018” . That would give India the second largest base of internet users in the

world behind China. The explosive growth in internet usage has more recently led to a

corresponding growth in online business and e-commerce. This growth presents both great

opportunities as well as some unique challenges. With the growth of Ecommerce in India

many players are attracted towards it. India, the second most populous country in the world, is

home to 1.2 billion people. Most global ecommerce players like Amazon, eBay and Expedia

have yet to find in Asia the kind of success that they have enjoyed in their home markets. While

late entry and local regulations partly explain their low market share in the region, these firms

also face unique challenges in Asia specifically India due to diverse cultures, multiple

languages and poor infrastructure. And it’s not only the big guns that are struggling to get a

handle on Asia: local entrepreneurs who clone global e-commerce firms are facing similar

challenges, and some have turned these into opportunities by innovating in unusual ways.

Question to be answerd here is that can Ecommerce show a sustanable growth in the asian

market? 2 ECOMMERCE REACH Last 15 years has a seen a rapid growth in the IT and

Telecom sectors of India Currently India has over 137 million internet users representing about

11% of its population, and it ranks third in the world China and USA being on the first and

second position. According to a study conducted by the Associated Chambers of Commerce and

Industry of India (ASSOCHAM) and Comscore in October 2012 it is also among the three

fastest growing markets for internet usage worldwide Inspite of the problems of hurdles that

Ecommerce companies are facing in India they are learning to improve their chances for

success by adopting certain strategies. The companies in India are focusing on strong customer

service and establishing trust with buyers. This leads to repeat buying, lowers the customer

acquisition and retention costs and improved profitability. Some companies are focusing on
niche product categories and market segmentation. Brand awarness and Brand Building plays a

key role in benefit of Ecommerce. This is what Amazon was able to do in the USA, and

probably what Flipkart and some of the other larger players are emulating and trying to do in

India. Ecommerce market would see further acquisitions and consolidations and many more

brutal shakeouts in near future. Ecommerce has changed the way products were shopped in

good olden days it is here to make people develop the urge for a particular product and grow

many folds in years to come The definition of E-Commerce is the electronic process by which

individuals or organizations make a transaction, such as buy, sell, transfer, or exchange

products, services and/or information (Turban, McLean and Weatherbe 2004). In a nutshell, e-

commerce effectively erases the necessity of huge investments or outlays on physical

infrastructure to develop a global presence, which has led to a revolution in the way business is

conducted around the world. E-Commerce stands for electronic commerce. It means dealing in

goods and services through the electric media and Internet, without using any paper documents.

A type of business model, or segment of a larger business model, that enables a firm or

individual to conduct business over an electronic network, typically the internet. Electronic

commerce operates in all four of the major market segments: business to business, business to

consumer, consumer to consumer and consumer to business. It can be thought of as a more

advanced form of mail-order purchasing through a catalog. Almost any product or service can

be offered via ecommerce, from books and music to financial services and plane tickets.

Various advantages of E-Commerce to various segments Advantages to Organizations • Using

E-Commerce, organization can expand their market to national and international markets with

minimum capital investment. An organization can easily locate more customers, best suppliers

and suitable business partners across the globe. • E-Commerce helps organization to

reduce the cost to create process, distribute, retrieve and manage the paper based information by

digitizing the information. • E-commerce improves the brand image of the company. •

E-commerce helps organization to provide better customer services. • E-Commerce

helps to simplify the business processes and make them faster and efficient. • E-Commerce

reduces paper work a lot. • E-Commerce increased the productivity of the organization. It

supports "pull" type supply management. In "pull" type supply management, a business process

starts when a request comes from a customer and it uses just-in-time manufacturing way.

Advantages to Customers • 24x7 support. Customer can do transactions for the product or

enquiry about any product/services provided by a company anytime, anywhere from any

location. Here 24x7 refers to Growth of E-Commerce in India India first came into interaction

with the online E-Commerce via the IRCTC (Indian Railway Catering & Tourism Corporation

Limited). The government of India experimented this online strategy to make it convenient for

its public to book the train tickets. Hence, the government came forward with the IRCTC Online

Passenger Reservation System, which for the first time encountered the online ticket booking

from anywhere at any time. This was a boon to the common man as now they don’t have to wait

for long in line, no issues for wastage of time during unavailability of the trains, no burden on

the ticket bookers and many more. The advancements in the technology as the years passed on

have been also seen in the IRCTC Online system as now one can book tickets (tatkal, normal,

etc.) on one go, easy payments, can check the status of the ticket and availability of the train as

well. This is a big achievement in the history of India in the field of online E-Commerce. After

the unpredicted success of the IRCTC, the online ticket booking system was followed by the

airlines (like AirDeccan, Indian Airlines, Spicejet, etc.). Airline agency encouraged, web

booking to save the commission given to agents and thus in a way made a major population of

the country to try E-Commerce for the first time. Today, the booking system is not just limited

to the transportation rather hotel bookings, bus booking etc. are being done using the websites

like Makemytrip and Yatra. The acceptance of the ecommerce on a large scale by the Indian

people influenced other business players also to try this technique for their E-businesses and

gain high profits. Though online shopping has been present since the 2000 but it gained

popularity only with deep discount model of Flipkart in 2007. Soon other portals like Amazon,

Flipkart, Jabong, etc. started hunting India for their businesses. For India’s E-Commerce
industry, new times are approaching. The E-Commerce penetration in India may be

comparatively lower than the US and other European markets, but it continues to grow at a

rapid rate with many new entrants. Currently, E-Commerce is heavily dependent on the web and

Smartphone revolution that has essentially altered the way businesses interact with customers.

E-commerce in India is still in growing stage but it offers considerable opportunity. Over the

past few years the sector in India has grown by 34% (CAGR i.e. Compounded Annual Growth

Rate) since 2009 to touch 16.4 billion USD in 2014 (Internet and Mobile Association of India

research report). The sector is expected to be in the range of 22 billion USD in 2015.

Recommended measures to boost growth of E-Commerce The term ‘digital divide’ is often used

in reference to the “disparities between groups and societies in the adoption and diffusion of

electronic information and communications technologies (ICTs) and E-business practice”

(Genus and Nor 2005). With reference to the adoption and growth of e-commerce, the gap

between developed and developing countries is gradually narrowing down. However, one of the

major critical success factors of E-Commerce is training and education. Developing countries

face the digital divide primarily because they lack the requisite intellectual human capital. Mass

illiteracy and little to no command over the English language render E-Commerce an exercise in

futility. Hence, the most important measure which needs to be taken is to engage in capacity

building in E-Commerce skills. Training and education can be imparted via various means using

the internet itself, such as distance learning and specialized links with universities. The

government has a very strong role to play as state policy, specifically legislation, significantly

affects adoption and growth of E-Commerce. One of the most important measures that can be

taken and that will counter multiple barriers to E-Commerce growth is the development of a

supportive regulatory and legal environment. E-Commerce strategies will be successfully

owned only when consumers and businesses trust the concept and its premise, and are sure of its

security and reliability (Zaied 2008). For them to feel confident, a solid regulatory umbrella

must include enabling laws pertaining to E-Business, regulations on consumer protection, E-

Transactions, and cybercrime as well as carefully laid out processes for redress in the event of
abuse. UNCTAD (2015) statistics reveal that developing countries are slow to adopt these laws

including India. These laws are vital for doing business online as the Internet by its very nature

exposes customers to possible instances of deception and fraud. Financial systems need to be

restructured to enable online payment mechanisms and credit facilities. India is lagging behind

in this regard. Therefore steps are needed to be taken to get away from these obstacles.

Inadequate infrastructure acts as a major obstacle for e-commerce in and the government should

invest in legal, financial, logistical, and telecommunication infrastructure which is the backbone

of any E-Commerce initiative.

At present, Indian e-commerce employs just under one million people, but

the study concludes that the number is set to grow by at least 700 percent by 2020. Like

India, China is the only other economy confronted with creating jobs at this grand of a

scale. E-commerce in China has already spread to rural areas; in Chinese rural centers

called Taobao, villagers have a means to set up digital shops, facilitating business for

millions.

The growth of the Indian e-commerce sector presents a huge opportunity for commercial

success but also rests heavily on the progress of other parts of the economy. Indian e-

commerce has such potential because it can bring three changes more profound than

convenience and keen prices:

1.FinancialDevelopment

2.Overcome India’s ropy infrastructure and vast geography

3. Impact of e-commerce in India is on retailing itself

E-commerce players will swiftly adopt multiple channels to provide a suave and seamless

consumer experience. Omni-channel retailing will offer a very strong value proposition.
 The forthcoming years will witness newer technologies and will continue to revolutionize

the consumer shopping experience and churn more and more money into online sales.

In 2017, there are going to be more major developments in the Indian mobile industry as

4G grows more rapidly and covers more areas and more people acquire smartphones

which are going to present unique opportunities for retailers. As the promising Indian e-

commerce market growth continues to shift in a positive direction, consumers can expect

more mergers and acquisitions.

No battle for the online future of India is more intense than the one now being waged in

e-commerce. E-commerce in India is a local battle for customers, but it is also a battle for

the future. THE MAIN CHALLENGES FACED BY E-COMMERCE IN INDIA

1. Cash on Delivery: Low credit card penetration and low trust in online transactions

have led to cash on delivery being the preferred payment option in India. Unlike

electronic payments, manual cash collection is laborious, risky, and expensive.

Although with the ban on Rs 500 and Rs 1000 currency notes in November 2016, e-

Commerce players were forced to stop “cash-on-delivery” payment modes on their site.

According to the statement of Amrish Rau, CEO of PayU India, “About 40% of CoD was

driven by black money according to a study done two years ago.” But since e-commerce

gives different options for payment, de-monetisation has a limited effect on it.

The definition of E-Commerce is the electronic process by which individuals or organizations

make a transaction, such as buy, sell, transfer, or exchange products, services and/or information

(Turban, McLean and Weatherbe 2004). In a nutshell, e-commerce effectively erases the necessity

of huge investments or outlays on physical infrastructure to develop a global presence, which has
led to a revolution in the way business is conducted around the world. E-Commerce stands for

electronic commerce. It means dealing in goods and services through the electric media and

Internet, without using any paper documents. A type of business model, or segment of a larger

business model, that enables a firm or individual to conduct business over an electronic network,

typically the internet. Electronic commerce operates in all four of the major market segments:

business to business, business to consumer, consumer to consumer and consumer to business. It

can be thought of as a more advanced form of mail-order purchasing through a cataloge. Almost

any product or service can be offered via ecommerce, from books and music to financial services

and plane tickets.

Various advantages of E-Commerce to various segments Advantages to Organizations

• Using E-Commerce, organization can expand their market to national and international

markets with minimum capital investment. An organization can easily locate more customers, best

suppliers and suitable business partners across the globe.

• E-Commerce helps organization to reduce the cost to create process, distribute, retrieve

and manage the paper-based information by digitizing the information.

• E-commerce improves the brand image of the company.

• E-commerce helps organization to provide better customer services.

• E-Commerce helps to simplify the business processes and make them faster and efficient.

• E-Commerce reduces paper work a lot.

• E-Commerce increased the productivity of the organization. It supports "pull" type supply

management. In "pull" type supply management, a business process starts when a request comes

from a customer and it uses just-in-time manufacturing way. Advantages to Customers

• 24x7 support. Customer can do transactions for the product or enquiry about any

product/services provided by a company anytime, anywhere from any location. Here 24x7 refers

to everyday.

• E-Commerce application provides user more options and quicker delivery of products.

• E-Commerce application provides user more options to compare and select the cheaper and

better option.

• A customer can put review comments about a product and can see what others are buying

or see the review comments of other customers before making a final buy.

• E-Commerce provides option of virtual auctions.

• Readily available information. A customer can see the relevant detailed information within

seconds rather than waiting for days or weeks.

• E-Commerce increases competition among the organizations and as result organizations

provides substantial discounts to customers. Advantages to Society

• Customers need not to travel to shop a product thus less traffic on road and low air

pollution.
• E-Commerce helps reducing cost of products so less affluent people can also afford the

products.

• E-Commerce has enabled access to services and products to rural areas as well which are

otherwise not available to them.

• E-Commerce helps government to deliver public services like health care, education, social

services at reduced cost and in improved way.

Barriers to growth of e-commerce Regardless, there are many obstacles which seriously hinder the

growth of E-Commerce industry. E-Commerce has the potential to provide many opportunities in

a manner unprecedented by other technological advancements, with its positive impact on trade,

investment, business transactions, and market penetration (Wresch and Fraser 2011). But the

conclusion reached by many researchers who have tried to search for the realization of these

benefits in developing countries has been, by and large, disappointing. According to Molla and

Heeks (2007), “the majority of businesses do not appear to have obtained E-commerce benefits in

terms of expanding their access to markets, improving their reach or linkages to customers or

suppliers, or in relation to cost savings or other efficiency gains”. The obstacles may vary between

regions but the commonly reported barriers include a severe dearth of managerial skills requisite

to formulate and implement an e-commerce strategy for business. Internet connectivity with regard

to the cost, quality, and speed of the service provided is another stumbling block while lack of

effective branding and trust issues is another important barrier to e-commerce growth. The latter

has succeeded in pricking the E-Commerce bubble as buyers feel more secure conducting

transactions from renowned companies and brands rather than from unknown companies online

(Travica et al. 2007). Another common obstacle these countries face is the absence of a sound legal
and regulatory environment for E-Commerce, which acts as a deterrent for both buyers and sellers

to conduct business over the Internet (UNCTAD 2004).

Growth of E-Commerce in India India first came into interaction with the online E-Commerce via

the IRCTC (Indian Railway Catering & Tourism Corporation Limited). The government of India

experimented this online strategy to make it convenient for its public to book the train tickets.

Hence, the government came forward with the IRCTC Online Passenger Reservation System,

which for the first time encountered the online ticket booking from anywhere at any time. This

was a boon to the common man as now they don’t have to wait for long in line, no issues for

wastage of time during unavailability of the trains, no burden on the ticket bookers and many more.

The advancements in the technology as the years passed on have been also seen in the IRCTC

Online system as now one can book tickets (tatkal, normal, etc.) on one go, easy payments, can

check the status of the ticket and availability of the train as well. This is a big achievement in the

history of India in the field of online E-Commerce. After the unpredicted success of the IRCTC,

the online ticket booking system was followed by the airlines (like AirDeccan, Indian Airlines,

Spicejet, etc.). Airline agency encouraged, web booking to save the commission given to agents

and thus in a way made a major population of the country to try E-Commerce for the first time.

Today, the booking system is not just limited to the transportation rather hotel bookings, bus

booking etc. are being done using the websites like Makemytrip and Yatra. The acceptance of the

ecommerce on a large scale by the Indian people influenced other business players also to try this

technique for their E-businesses and gain high profits. Though online shopping has been present

since the 2000 but it gained popularity only with deep discount model of Flipkart in 2007. Soon

other portals like Amazon, Flipkart, Jabong, etc. started hunting India for their businesses. For

India’s E-Commerce industry, new times are approaching. The E-Commerce penetration in India

may be comparatively lower than the US and other European markets, but it continues to grow at
a rapid rate with many new entrants. Currently, E-Commerce is heavily dependent on the web and

Smartphone revolution that has essentially altered the way businesses interact with customers. E-

commerce in India is still in growing stage but it offers considerable opportunity. Over the past

few years the sector in India has grown by 34% (CAGR i.e. Compounded Annual Growth Rate)

since 2009 to touch 16.4 billion USD in 2014 (Internet and Mobile Association of India research

report). Factor behind Growth The growing population and demographics of India will probably

be the major driving force behind the explosion of E-Commerce in the near future. According to

the IAMAI, India had 213 million internet users in 2013 – which was projected to reach the 300

million mark by end of 2014. With this projection, India will attain the position of the second-

largest internet base in the world after China (600 million) and ahead of the United States’ internet

users (207 million). India has an internet user base of about 354 million as of Q2 of 2015 (The

Economic Times 2015). Some factors are: • With 870 million mobile phone subscribers in India,

mobile commerce will grow and become one of the main ways consumers shop. • The young

generation on the internet has emerged as the driving force behind the growth of the E-Commerce

industry in India, with nearly 90% of online shoppers aged between 18-35 years. • With more

families joining the workforce, consumers are more likely to engage digitally and make fewer trips

to stores for their shopping. • Over the next two decades, India’s rising middle class is expected to

grow to over 40% of the population, creating the world’s fifth largest consumer market. • The

brick and mortar stores will continue to face an uphill battle competing with online retailers on

product range and variety. • Unlike retail stores, E-Commerce websites can base their premises

anywhere they like-drastically reducing the cost of rent on a property. • Another factor that

favours E-retailers to high street stores includes holding more stock. As online stores can be based

anywhere, they can be located in a large warehouse, or even a home garage which means that much

more stock can be ordered in. The brick and mortar retail models for music, books, electronics,
footwear and cosmetics are looking extremely vulnerable at the moment, and could lead to store

closures .

2. Location: If you place an online order in India, you will quite likely get a call from the

logistics company to ask you about your exact location. Clearly, your address is not

enough. This is because there is little standardization in the way postal addresses are

written. Last mile issues add to Indian e-commerce logistics problems.

3. Returns And Exchange: Though consumer remorse is a global problem, it is all the

more prevalent in a country like India, where much of the growth comes from new buyers.

Returns are expensive for Indian e-commerce players, as reverse logistics presents unique

challenges. This becomes all the more complex in cross-border e-commerce.

4. Online Payments: For most e-commerce sites, the success of online payments is

around 65 per cent.This coupled with the low penetration of credit and debit cards and

the reluctance of Indian consumers to put payment information online are major

challenges. To overcome the lack of trust that often keeps customers from making online

payments, players in this space are setting up wallets and trying new methods to build

customer trust.

5. Law: Marketplaces are now prohibited from having one vendor or group company

contributing more than 25% of their total sales. This change poses a challenge to both

Flipkart and Amazon India, majorly. In practice the changes mean that these marketplaces

will need to encourage more and more sellers onto their platforms to become compliant,

opening the doors for international sellers to take advantage of this opportunity.
 6. False Orders: Despite having a host of genuine shoppers who believe in the utility that

e-commerce brings, false or spam orders are also a genuine logistical hindrance for e-

commerce companies. The trend has been mainly in the Tier II or Tier III cities of India,

where people are known to be motivated with the goods and services they see online,

place and order, then develop cold feet about the order, end up canceling the order or not

receiving it.

Online and offline were once two very separate worlds. But with the rise of e-

commerce and in particular mobile e-commerce, the distinction between online and offline

is blurring rapidly.

E-retailing or online is growing at faster pace in India. It has witnessed steady growth of 50-

60% over the years. E-retailing accounts for 10% of e-commerce activities in India. Even

though there are growth prospects for online retail in India we have challenges which need

to be addressed. The article focuses on the opportunities and challenges for online retailers

in Indian business environment.

Even as ordinary citizens queue up for cash and economists are busy estimating the extent

to which economic growth will be hit because of the ongoing drive to replace high-value

banknotes, there has been a lot of discussion on whether the government can use the

current situation to push India towards a cashless future. In his radio address on Sunday,

Prime Minister Narendra Modi once again pitched for creating a cashless society.

Reducing Indian economy’s dependence on cash is desirable for a variety of reasons.

India has one of the highest cash to gross domestic product ratios in the word, and
lubricating economic activity with paper has costs. According to a 2014 study by Tufts

University, The Cost Of Cash In India, cash operations cost the Reserve Bank of India

(RBI) and commercial banks about Rs21,000 crore annually. Also, a shift away from cash

will make it more difficult for tax evaders to hide their income, a substantial benefit in a

country that is fiscally constrained.

To be sure, the government on its part is working at various levels to reduce the

dependence on cash. Opening bank accounts for the unbanked under the and adoption of

direct benefit transfer is part of the overall idea to reduce usage of cash and increase

transparency.

RBI has also issued licences to open new-age small finance banks and payments banks

which are expected to give a push to financial inclusion and bring innovative banking

solutions. Things are also falling in place in terms of technology for India. The recently

launched Unified Payments Interface by National Payments Corporation of India makes

digital transactions as simple as sending a text message.

So, will the exercise to exchange currency notes and the ongoing currency crunch be a

decisive factor in making India a truly cashless economy? Nandan Nilekani, in an

interview to this newspaper, termed this as “a defining point in India moving to cashless”.

Shortage of cash has significantly increased the use of digital modes of payment, but the

actual shift will only be visible after the cash crunch eases. It is possible that a section of

people which has used electronic mode of payment for the first time due to the cash

crunch will continue to transact through this medium, but there are still a number of

hurdles in making India a cashless economy.

First, a large part of the population is still outside the banking net and not in a position to

reduce its dependence on cash. According to a 2015 report by PricewaterhouseCoopers,

India’s unbanked population was at 233 million. Even for people with access to banking,

the ability to use their debit or credit card is limited because there are only about 1.46

million points of sale which accept payments through cards.

Second, about 90% of the workforce, which produces nearly half of the output in the

country, works in the unorganized sector. It will not be easy for the informal sector to

become cashless, and this part of the economy is likely to be affected the most because

of the ongoing currency swap. Third, there is a general preference for cash transactions

in India. Merchants prefer not to keep records in order to avoid paying taxes and buyers

find cash payments more convenient. Although cashless transactions have gone up in

recent times, a meaningful transition will depend on a number of things such as

awareness, technological developments and government intervention. For instance,

mobile wallets have seen notable traction, and it is possible that a large number of Indians

will move straight from cash to mobile wallets. A study by Boston Consulting Group and

Google in July noted that wallet users have already surpassed the number of mobile

banking users and are three times the number of credit card users.

However, as noted above, a material transition to a cashless economy will depend on a

number of factors. First, the availability and quality of telecom network will play an

important role. Presently, people face difficulties in making electronic payments even in

metro cities because of poor network. Second, as one of the biggest beneficiaries of this

transition, banks and related service providers will have to constantly invest in technology

in order to improve security and ease of transaction. People will only shift when it’s

easier, certain and safe to make cashless transactions. Third, the government will also
 need to play its part. It will have to find ways to incentivize cashless transactions and

discourage cash payments. Implementation of the goods and services tax, for example,

should encourage businesses to go cashless. Government should also use this opportunity

to revamp the tax administration, as more than taxes, small businesses fear tax inspectors.

The government will have to create conditions—not necessarily by creating cash

shortages—to push cashless transactions to a threshold level after which the network

effect will take over. India may not become a cashless economy in the foreseeable future,

but it needs to reduce its unusually high dependence on cash to bring in much needed

transparency and efficiency in the system.

In point, the people of India were left in limbo as the government cancelled the bulk of

their currency without providing them with the means to obtain the newly printed notes to

replace it. On the surface, this seems as if it was a matter of gross negligence, but there

may have been more to it than that. As the demonetization process continues, Modi’s

rhetoric is less about fighting corruption and more about transitioning India to a cashless

economy.

Up until this campaign, India was an incredibly cash-centric economy. Cash accounted for

upwards of 95% of all transactions, 90% of vendors didn’t have card readers or the means

of accepting electronic payments, 85% of workers were paid in cash, and almost half of the

population didn’t even have bank accounts. Even Uber in India accepted cash — the only

country in the world where this option is available — and “Cash on Delivery” was

the preferred choice of 70% of all online shoppers.

By temporarily turning off the engines which drove the cash economy, India hoped that

more people could be brought into the fold by using track-able — and taxable — digital

financing vehicles, like debit cards and e-wallets.

One of the internet’s early effects was to foster a much greater proliferation of specialty

retailers than ever before — retailers with a unique point of view but not necessarily a need

for a tremendous amount of floor space. The internet has allowed retailers to connect with

potential customers and express their brand in entirely new ways, and physical stores have

become a part of their communication and sales strategy instead of being their only or primary

way to reach consumers.

While logic would suggest that this downgrade in the importance of physical stores would

lead to less interesting designs, on the contrary the ability of retailers to communicate and

build brands online has actually led to more focused and impactful physical store identities as

well. If you look at a successful mall today versus twenty years ago, you will see a much

stronger and more varied collection of tenants now than ever before, and shoppers have the

internet and e-commerce to primarily thank for this more tailored collection.

Meanwhile, omni-channel retailing has converged the online and offline shopping

experiences. For retailers who practice this approach, prices are consistent in all formats, and

consumers can choose between numerous options: shopping online with home delivery,

shopping online and picking up at a store, shopping at a store and taking merchandise away,

or shopping at a store and having it delivered to their home.

Many retailers are also attempting to make elements of their online experiences similar to

their stores, and some retailers, most notably Burberry in the UK, are going the other way,

attempting to integrate elements of their online presence into their physical stores — through

software that allows virtual trying on of clothes, or live links to events in other stores or even

other countries.
The internet has also impacted retailers in ways that go far beyond their physical space or

their online presence. Fast-fashion retailers like Zara, Uniqlo, Top Shop, H&M and Forever

21, who are harnessing the power of internet-based technology in all aspects of their business

— design, manufacturing, and logistics — are growing very rapidly and in many cases taking

over larger spaces once inhabited by big box retailers like department stores and large home

electronics showrooms. Along with convenience, these stores offer the latest styles,

reasonably priced, updated quickly and continuously, in ways that simply weren’t possible

before.

. Ease of Internet access, Safe and secure payment modes coupled with aggressive marketing

by E-Commerce Giants has revolutionized this segment. Rapid development in mobile

technology has given way to Mobile Commerce with many E-Commerce companies shifting

to App only model.

Challenges in front of online marketing:

E-Commerce, in-spite of the opportunities it presents also has poses certain challenges which

are sometimes too much to handle for start-ups:

• E-Infrastructural Issues: Internet is the backbone of e-commerce. Unfortunately, in

India internet penetration is so far dismally low at 0.5 per cent of the population,

penetration of personal computer (PC) as low as 3.5 per thousand of population and

penetration of telephone only 2.1 per cent of population, e-commerce remains far

away from the common man.

 • Branding & Marketing: To get people to come on an e-Commerce site and make a

purchase involves heavy cost due to branding and marketing. This cost is significant

and can be brought down to cost per customer, if the volumes permit to do so.

Experts say that the average figure for this metric in the current e-Commerce

ecosystem is between INR 500 – 1000 customer, which isn’t sustainable for even

medium sized companies, let alone early stage ones.

• Declining Margins: With the introduction of a large number of players in the already

competitive e-commerce market, the customer is pampered by offering huge

discounts, offers, taking returns etc. resulting in razor-thin margins.

• Logistics & Supply Chain: Logistics failure in any area can mean detrimental

damage to a startup’s future and can hurt the brand overall. Add to this the need for

a guaranteed return policy. Getting this right is a challenge.

• Tax related issues: Tax rate system of Indian market is another factor for lesser

growth rate of e-Commerce in India in comparison to other developed countries like

USA and UK. In those countries, tax rate is uniform for all sectors whereas tax

structure of India varies from sector to sector. This factor creates accounting

problems for the Indian online business companies.

• Touch and Feel: Indian customers are more comfortable in buying products

physically. Companies dealing with products like apparel, handicrafts, jewelry have

to face challenges to sell their products as the buyers want to see and touch before

they buy these stuffs.

Future of online marketing in India:

E-Commerce is here to stay:

• Social Media: Majority of online buying decisions are made on Social Media.

Social network like Facebook, LinkedIn, Twitter, Google+, Pinterest etc have become

a medium for easy log-in and purchase. Moreover, the clients can stay updated via the

posts published on this media. Further, the advertising & promotions on these social

sites has increased the chances of success of generating transactions to many folds.

• Drone Delivery: Companies have been working their way around to innovate the

delivery process to shorten human effort as well as time. The answer to these problems

is Delivery by Drones. DGCA is now fast tracking the process of issuing guidelines

for the use of drones for civil purposes in India. If everything goes as per the plan,

then India might become the first country in the world to allow the use of drones

for civil purposes.

• App only Approach: Statistics suggest the future of internet lies in mobiles. Experts

say more than 580 million people in India will use the Internet by 2018, and 70-80%

of them will access the Web on mobile phones. This will cause all major players to

switch to app only model. About two-thirds of its online traffic of Flipkart comes from

users in small cities and towns. Flipkart’s app-only approach assumes larger

significance in these places where most people don’t own desktop computers and have

limited access to broadband.

• Google's Buy Now Button: Google is reportedly working on its own ―Buy Now‖

style button that would allow e-shoppers search for products on Google and purchase
 them with a single click, right through Google’s own search results page. The button

will be displayed near sponsored search results beneath a ―Shop on Google‖ heading

at the top of the page. When users click on the Google’s ―Buy Now‖ button, they will

be re-directed to another Google page that will allow them to choose specific item

details, such as color and size, and then select a shipping route. Google would then

pass on order information, including the customer’s name and shipping address, to the

retailer.

• Artificial Intelligence: As the ecommerce space gets saturated, investors looking for

innovative use of technology are zeroing in on companies developing artificial

intelligence (AI) solutions. Jet Airways is experimenting with one such solution

devised by Vizury. It sifts through the individual’s public content on the internet, as

well as the customer’s previous searches and creates an instant profile. Based on this

information, the airline knows whether to package hotel deals, or simply stick with

airfare discounts. The system also allows them to predict how likely is it for the

customer to upgrade, and how flexible would the customer be to change travel location

or date.

Even though India has low Internet penetration –about 19% in comparison to other economies

where it is up to 90%; size and potential are epicenter for the attraction of the

Indian E-Commerce market. India has a third largest user base with 159 million mobile Internet

users –followed by America’s 250 million and China’s 550 million; has ample of opportunities.

The number of mobile Internet users in India is projected to be twice and cross the 300 million by

2017.
 E-commerce Size in India

The E-commerce business is expected to form the largest part of Indian economy with a

value of approximately USD 100 billion by 2020. E-commerce is facilitating MSMEs to

scale up their operations by providing a means of financing, technology and training.

Evolution of technology led innovations such as digital payments, hyper-local logistics,

mass customer engagements and digital advertisements have enabled the E-commerce

industry to grow speedily.

 Within the E-commerce industry, the Gross Merchandise Value (GMV) is an important

metric for valuations, especially during the early stages of growth. The majority of B2C

E-commerce companies report low profitability even in developed economies and the

situation in India is no different. While the GMV is rising, the companies have to suffer

an overall loss as the Ecommerce companies establish themselves. The GMV for B2C

segment in India was approximately USD 16 billion in 2015.

3.1.3 Growth of B2B E-commerce in India

The growth of the B2B E-commerce segment is relatively slower compared to the B2C

Ecommerce segment in India. This is because the entry barriers in the B2B E-commerce

are more than those in the B2C E-commerce industry. A B2B E-commerce company has

to have a strong business model, long term logistical arrangements with rail, road and

ports and also adhere to stringent regulatory and taxation laws. With an aim to tap the

huge potential in the B2B Ecommerce market in India, apart from the existing B2B

companies, leading B2C companies have also started to build their own platforms for

small business owners and traders. This is expected to be supported by rising expectations

among a growing number of companies buying and selling online and a shift to conduct

procurement transactions through the Internet.

Understanding this untapped potential of the B2B E-commerce industry, the Government has

allowed 100% FDI in B2B E-commerce, which has enabled globally successful B2B

Ecommerce companies such as Walmart and Alibaba to evince interest in the India B2B

Ecommerce industry.
3.1.4 Rise in Internet Users Giving Fillip to E-commerce

In 2014, the number of internet users in India stood at around 280 million and it was

estimated that the number would rise to around 640 million by 2019. An increase of

almost 70 million Internet users in a year is very significant. The rise of mobile internet

users is also expected to touch 457 million by 2019. Comparing this with the projected

growth, the E-commerce in India by the year 2020 is expected to touch USD 100 billion.

3.1.5 Mergers and Acquisitions in E-commerce Industry

E-commerce companies in India have also witnessed consolidation in the past 2-3 years.

Larger E-commerce companies have been acquiring smaller companies to either diversify

their product range or to enhance business operations. Such mergers and acquisitions have

mainly centered on companies in the logistics, payment solutions and digital advertising

areas. It is estimated that a total of 930 M&A deals with a cumulative value of USD 26.3

billion took place in India in 2015, of which, 259 deals worth USD 2.43 billion pertained

to the E-commerce industry. Also, many strategic deals took place in the hyper-local,

food-tech and real estate listing segments.

3.1.6 Private Equity/Venture Funding of E-commerce Companies in India

Private equity and venture fund investments reached an all-time high in 2015 at USD 20

billion in India. The key sectors that saw investments were Information Technology with

666 deals worth USD 4.49 billion, followed by consumer goods with 280 deals worth

USD 4.69 billion. The majority of these investments have been concentrated in e-tailing

(70% of investment), followed by online classifieds (17%) and lastly online travel and

taxi (9%). This aggressive drive comes at a point when capital is becoming scarce for top

venture-backed online retail companies. There is also a reduction in the dependence on

discounts as a growth strategy. Investors are currently focusing on start-ups that may scale

slowly but have sound fundamentals and strong business models. In essence, these start-

ups should have the ability to survive any scenario. Therefore, investors today are

interested in start-ups in sectors like health care and education which, by the nature of

their offerings, will provide sustainable models and create legacy firms.

3.2 Contribution of MSMEs and E-commerce to the Development of the

Country

The E-commerce sector in India is projected to reach USD100 billion by 2020 and

USD300 billion by 2030 and is already changing the way MSMEs operate in India.

By adopting E-commerce, MSMEs shall achieve significant advantages such as increased

revenues and margins, improved market reach, access to new markets, cost savings in

marketing and communication, customer acquisition and improved customer experience.

Although MSMEs in India may or may not have an online presence, 43 per cent

participate in online sales in India. The Indian regulators, industry bodies and E-

commerce players recognize the challenges faced by MSMEs and are doing their bit to

enable thousands of MSME sellers to explore a new channel for marketing, sales and

customer service.

Major Contributory Factors to the Growth of E-commerce Industry in India

a. Faster Adoption of New Technology

Faster adoption of new technologies like the internet and smartphones has been one of the

biggest drivers of E-commerce in India. About 402 million people in India are presently

using the Internet. The number is further expected to reach 500 million users by 2017.
 It is estimated that by June 2016, the number of mobile internet users in India was 371

million.

b. India Fastest Growing Economy

India is amongst the fastest growing economies globally and higher income levels have

made India one of the fastest-growing consumer markets in the world. Rising disposable

income, changes in lifestyle and shopping patterns are some of the factors that have

proved instrumental in driving the E-commerce industry in India.

c. Innovating Easy-to-use Technologies

The E-commerce companies in India have been focusing on developing new applications

suitable for mobiles/smart phones, enabling users to make online transactions through

their devices with ease. Mobile applications have also assisted companies to enhance their

geographical outreach and increase their communication level with the end-users through

exchange of regular service updates and messages.

In addition, digital advertisements have also enabled E-commerce players to reach out to

a wider audience/customers. Similarly, adoption of Search Engine Optimization (SEO) as an

internet marketing strategy has also helped E-commerce companies improve their search engine

rankings.

d. Choice of Payment Options

While E-commerce companies in India offer various payment options, most of the players

have been offering ‘cash-on-delivery’ option to customers, despite incurring higher

administration costs on account of such transactions as this is the most preferred mode of
payment among consumers. Digital payment products and electronic wallets have also

been launched to ease the payment process in E-commerce transactions.

Government Initiatives in Driving E-commerce & MSMEs

Key Government Initiatives and Implementation Status

Government Flagship Initiatives for Development of E-commerce

Government has undertaken several initiatives to boost the E-commerce sector in India.

It has been leveraging E-commerce digital platforms to organize traditionally offline

markets, even for agricultural produce. Amongst others, it has launched an e-market

platform to connect farmers with mandis 1 of various states to sell agro-commodities

online. The government’s flagship initiatives such as Digital India, Start-up India, Make

in India and Skill India also contribute to the growth of E-commerce industry.

In March 2017, the government permitted 100% Foreign Direct Investment (FDI) in

online retail of goods and services under the ‘marketplace model’ to legitimize existing

businesses of the E-commerce companies in India and to attract more foreign investments

in the sector. A marketplace model is an information technology platform run by an E-

commerce entity on a digital and electronic network to act as a facilitator between buyers

and sellers. 100% FDI is also allowed in B2B E-commerce in India. However, FDI is not

permitted in the inventory based model of E-commerce, which is applicable to companies

that own inventories of goods and services and sell directly to consumers using online

platforms.
Government of India Policy on Foreign Investment in E-commerce in India

As per the Government of India’s FDI Policy, FDI up to 100% was permitted under

automatic route in Business to Business (B2B) E-commerce. FDI in B2C E-commerce is

permitted only in following circumstances:

i. A manufacturer is permitted to sell its products manufactured in India through

Ecommerce retail.

ii. A single brand retail trading entity operating through brick and mortar stores is

permitted to undertake retail trading through E-commerce.

iii. An Indian manufacturer is permitted to sell its own single brand products through

Ecommerce retail. The Indian manufacturer would be the investee company,

which is the owner of the Indian brand and which manufacturers in India, in terms

of value, at least 70% of its products in house, and sources, at most 30% from

Indian manufacturers.

In order to provide clarity to the extant policy guidelines for FDI in the eE-commerce

sector have been formulated by the government of India, which have been notified as

below:

Definitions:

i. E-commerce- E-commerce means buying and selling of goods and services

including digital products over digital and electronic networks.

ii. E-commerce Entity- E-commerce entity means a company incorporated under

the Companies Act 1956 or the Companies Act 2013 or a foreign company

covered under section 2 (42) of the Companies Act, 2013 or an office, branch or
 agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or

controlled by a person resident outside India and conducting the E-commerce

business.

iii. Inventory-based model of E-commerce- Inventory based model of E-commerce

means an E-commerce activity where the inventory of goods and services is

owned by E-commerce entity and is sold to the consumers directly.

iv. Marketplace-based model of E-commerce- In the marketplace based model, an

EEcommerce entity provides an information technology platform on a digital &

electronic network to act as a facilitator between buyer and seller.

Extent of Foreign Direct Investment in E-commerce:

i. 100% FDI under automatic route is permitted in marketplace model of E-

commerce.

ii. FDI is not permitted in inventory based model of E-commerce.

Other Conditions:

i. Digital and electronic networks will include networks of computers, television

channels and any other internet application used in automated manner such as

web pages, extranets, and mobiles.

ii. Marketplace E-commerce entity will be permitted to enter into transactions with

sellers registered on its platform on B2B basis.

iii. E-commerce marketplace may provide support services to sellers in respect to

warehousing, logistics, order fulfillment, call center, payment collection and

other services.

iv. E-commerce entity providing a marketplace will not exercise ownership over the

inventory, i.e. goods purported to be sold. Such an ownership over the inventory

will render the business into inventory based model.

v. An E-commerce entity will not permit more than 25% of the sales through its

marketplace from one vendor or their group companies.

vi. In marketplace model goods/services made available for sale electronically on

the website should clearly provide the name, address and other contact details of

the seller. Post sales and delivery of goods to the customers and customer

satisfaction will be the responsibility of the seller.

vii. In the marketplace model, payments of sale may be facilitated by the E-

commerce entity in conformity with the guidelines of the Reserve Bank of India.

viii. In marketplace model, any warrantee/guarantee of goods and services sold will

be responsibility of the seller.

ix. E-commerce entity providing marketplace will not directly or indirectly

influence the sale price of goods or services and shall maintain level playing

field.
 x. Guidelines on cash and carry wholesale trading as given earlier in the FDI Policy

will be applied on B2B E-commerce.

Subject to the conditions of FDI policy on services sector and applicable laws/regulations,

security and other conditions, sale of services through E-commerce will be under

automatic route.

4.1.3 GST for Growth of E-commerce

The Government of India is going to undertake a big taxation reform by way of

introducing a Goods and Services Tax (GST) which is expected to enhance the growth of

E-commerce. GST will enforce a single comprehensive indirect tax regime that will be

applicable across all states on the supply of goods and services. The implementation of

GST is expected to subsume all taxes like the central excise duty, service tax and

additional customs duty at the central level and VAT, CST, entry tax etc. at the state level.

GST will enhance operational efficiency of the Ecommerce industry in many ways like:

• Transparency and simplification of taxes across the borders in India

• Elimination of the incidence of double-taxation and improvement in the efficiency

of supply chain.

Logistics service providers can leverage seamless hub-and-spoke models for delivery

resulting in lower costs and fewer bottlenecks. Warehouses can be set-up keeping in mind

business objectives rather than for reduction in incidence of tax.

4.2. Recommendations for Improvement of E-commerce Status of MSMEs

As a result of the initiatives taken by the government, the country can soon become the

fastest growing E-commerce market in the world as both the number of Internet users as

well as the number of online shoppers/users is expected to grow in coming years. While

in India only about 25% of the Internet users buy or sell goods and services online, it is

nearly 55% in China. This indicates the huge growth potential of the Indian E-commerce

sector. Moreover, with growth of the Indian economy and subsequent improvement in the

per capita income in future, aspirations of Indian consumers will increase which will have

a positive impact on E-commerce sales.

Counterfeit Products

The E-commerce platforms are proved to be used for distribution of banned and

counterfeit goods. This can happen when certain suppliers/distributors introduce

counterfeit products in the supply chain alongside genuine products, making it difficult
 for E-commerce companies to detect counterfeits. Further, since the onus of ensuring

product quality, authenticity and packaging rests on the sellers, the E-commerce

companies, which act primarily as aggregators, are often unable to proactively detect

counterfeits or inferior/faulty products that may be sold to customers via their networks.

Due Diligence Checks Issues

While some of the leading E-commerce marketplaces have already established protocols

to know their customers to help identify unscrupulous sellers, at times, the information

obtained from sellers as part of these procedures can be misleading. For instance, while

PAN numbers may be sought from sellers, there is no process to ensure that duplicate

PAN numbers are not in use. Also, information pertaining to credentials of the seller such

as market reputation, physical verification of the seller’s premises, track record in

ensuring product quality, litigation history, relationship check indicating conflict of

interest and political interests is not available fully, which can jeopardize the business

process.

Regulatory Issues

FDI in retail trading and particularly in E-commerce companies has been a matter of great

debate across the country. Different organizations and trade bodies/governments have differing

views on the subject. The retail sector has largely been protected for small companies which may

not receive funding through FDI. However, there are views that FDI in E-commerce for retail will

also benefit MSMEs, which can receive funding from abroad. The E-commerce companies have

largely been pressing for 100% FDI in retail trade (whether single brand or multi-brand), with no

special restriction on transacting through E-commerce. Through the recently released press note,

the government has taken a step in this direction by allowing FDI in E-commerce for the single
brand retail trading in certain circumstances. Further, some organizations are of the view that retail

trade should be categorized by the item sold and not based on single/multi brand for the purpose

of regulating FDI. As the FDI policy did not explicitly refer to the marketplace model, there were

concerns whether the same is recognized and FDI permitted for entities engaged in such models.

This issue has recently been resolved by the government which clarified the terms ‘eE-commerce’

and ‘marketplace-based model of eEcommerce’.

There have also been concerns that the E-commerce organizations functioning as online

marketplaces are actively involved in predatory pricing. However, the recent press note

has clarified that the online marketplace companies with FDI can only engage in support

activities such as warehousing and logistics, and they cannot influence the pricing of

products.

Broad Overview of Challenges Faced in the E-commerce Ecosystem

Broad Overview of Challenges Faced in the E-commerce Ecosystem

Scaling up operations and • B2C E-commerce companies have raised and infused

profitability capital from investors to scale up their operations. However,

from profitability perspective, the losses have grown faster

than sales. Majority of the companies indulge in giving

heavy discounts for customer acquisition leading to the

absence of long-term sustainable business models

Tax framework • Due to the absence of a uniform tax structure, States have

adopted different tax frameworks and Inter-State goods

movement is a challenge. It not only increases operational

and compliance cost but also delays timely delivery of

goods. This issue will get rested with the introduction of

Goods & Services Tax.

Counterfeit goods • There is an increasing incidence of cyber thefts and

payment thefts in the industry today. Additionally, supply

of fake, counterfeit products by the merchants on the

platform are on a rise

Highly technical barriers • The B2B E-commerce ecosystem currently is highly

to market entry fragmented with fewer companies due to factors such as the

requirement of domain expertise, detailed knowledge of

product features and specifications.

Lack of robust technology • Users are likely to be using standalone systems prior to

integration adopting B2B E-commerce for handling inventory and

orders. Integrating existing systems with B2B E-commerce

is critical, but is usually not implemented efficiently for

sharing information and selling online

High costs associated with • The challenge in delivering orders quickly and efficiently

complex logistics often depends on the size, scale and location; it demands the

requirement use of specialist freight services increasing the cost of

delivery considerably.

Rigid procurement • Large corporates have stringent procurement and approval

processes in large processes for buying goods in bulk which restricts their

corporates procurement teams to buy on B2B E-commerce platforms

Cash on Delivery (CoD) as • Customer’s preference for CoD increases the chances of

a mode of payment returns, locking up working capital for both the marketplace

and sellers.

Network and • Access to E-commerce platforms through desktops,

bandwidth mobiles, and other devices are dependent on the network

dependency bandwidth

Merchant’s lack of online • Small merchants are uncomfortable and unfamiliar with

experience technology and need to be trained on the use of E-commerce

technology
Digital payment • Due to lack of high-speed bandwidth and inefficacies in

transaction failure payment gateway technology, the E-commerce industry is

facing high transaction failure rates leading to customers

dissatisfaction

Dependence on Telecom • E-commerce companies, that want to expand into tier 2 &

Operators for rural 3 cities are dependent on the Telecom Operators to roll out

penetration 3G/4G services into such areas for connectivity

Reverse logistics • Currently, reverse logistics is highly inefficient which

results in high inventory and increased costs

High cost of customer • Intense competition and heavy discounting has resulted in

acquisition customer acquisition and retention costly for E-commerce

companies.
Government’s Role and Recommendations

Introduction of Dedicated E-commerce Laws

India does not have a dedicated ‘Data Protection and Privacy Law’. These requirements are

partially being addressed from the application of provisions of other general laws in the country.

It is therefore necessary that dedicated laws for the growth of E-commerce are

promulgated including the laws for Cyber security, Data protection and Privacy laws to

give a boost to the growth of E-commerce in the country and to avoid unnecessary

litigations.

a. Increase Internet Penetration

At the heart of the E-commerce lies the ability to not just stay connected online but also

to do so at a fast speed. India ranks relatively lower when compared to its Asian

counterparts, the U.S. and China in respect of availability of Internet speed. Additionally,

many parts of rural India are yet to receive broadband connection. While efforts have

been made in this direction, the Government plans to facilitate Internet connectivity for

over two lac Gram Panchayats. Public Private Partnership (PPP) projects in this area

should be implemented for enhancing the reach of Internet to rural parts of India.

b. Seamless Integration Between Government Departments and Agencies

An integrated and coordinated approach is needed between different government agencies

such as policy-makers, Income Tax, Sales Tax, VAT, Excise, and Registrar of Companies

to ensure faster turnaround, efficiency and transparency for all stakeholders in the E-

commerce ecosystem. With instances where one state is levying a flat entry tax on all E-
 commerce consignments and the other state imposing restrictive trade practices on E-

commerce companies, it gives wrong messages. The government should ensure a uniform

regulatory and tax structure across the states to prevent such instances from dampening

the growth of Ecommerce in India.

c. Faster Implementation of Initiatives

The government has already launched several initiatives such as Digital India, Skill India,

Make in India and Start-up India. Faster implementation of these initiatives would have

a positive impact on the route of E-commerce industry.

d. Regular Consultations with Stakeholders

A consultative approach with periodic interactions with all stakeholders, trade bodies and

industry associations will help in building a uniform and favorable E-commerce

ecosystem.

There is a need to reach consensus on a domestic E-commerce policy like location of

serves to effectively respond to a proposal of multilateral discipline in E-commerce.

Under Information Technology Agreement (ITA-1), India has agreed to abolish tariffs on

hardware, which went against its domestic electronics manufacturing industry. “If large chunk of

future business is going to happen through E-commerce, giving up the right to impose tariffs

in future may go against India’s domestic players and eliminate a source of revenue. So,

the country should reconsider this stand while negotiating on E-commerce in the

international forums.

e. Accreditation and Rating of E-commerce Entities

There are a large number of heterogeneous E-commerce entities operating at various

levels with non-uniform systems hindering possibilities of sustainable cross-border trade.

Therefore, in the interest of bringing credibility to such E-commerce entities, a

mechanism to provide accreditation and/or rating should be developed or facilitated by

the government. This shall encourage confidence building among users by bringing in

standardization of procedures, quality in service delivery and overall homogeneity in

expectations across buyers and sellers in the country.

In order to achieve the desired standardization for the above said objectives, a designated

facilitating and hand holding agency needs to be created in the country which should

create online-systems with proper forward and backward linkages to enable the adherence

of a standard model code for E-commerce.

WTO’s Declaration on Global E-commerce and Recommendations

The Declaration on Global Electronic Commerce was first adopted by the WTO’s Second

Ministerial Conference in May 1998, urging WTO members to establish a comprehensive

work programme to examine all trade-related issues arising from global E-commerce.

Ministers also agreed to continue their practice of not imposing customs duties on

electronic transmissions until their next session - the temporary moratorium on eE-

commerce. The moratorium has been extended at subsequent ministerial conferences

including at the Nairobi Ministerial in 2015. The US now wants to convert the temporary

moratorium into a permanent one which needs to be fully deliberated upon by seeking

opinion of all affected countries.

Policy Recommendations for Private Sector

Cyber Security and Cyber Law Due Diligence

Banks and companies all over the world are vulnerable to sophisticated cyber-attacks and

they also lack adequate cyber security set up. It is necessary that all banks and companies

in the government as well as private sector strictly carry out cyber security due diligence

and cyber law due diligence. Cyber security issues of E-commerce business should be

effectively managed by the government and E-commerce companies.

Mobile cyber security is also very week in India. Therefore, the private sector must take

due care in dealing with mobile E-commerce.

Training and Skill Development

E-commerce has already become an attractive destination for budding entrepreneurs and MSMEs.

This has generated both blue-collar and white-collar employment opportunities in India. Further,

functions such as logistics, analytics, pricing, inventory management, transportation, and last-mile

delivery are unique and highly specialized. Lack of skilled manpower in these areas is one of the

bottlenecks faced by the E-commerce industry. To address this challenge, joint programmes by the

private and government sector would be instrumental to ensure a steady flow of trained talent that

has the ability to quickly adapt to the dynamic growth phases experienced by this industry.

Towards institutionalizing this recommendation, strategic alignment between the central and state

governments is imperative to strengthen this talent development initiative.

 Chapter-2
Research Methodology
 Research Methodology

Research

Research is a purposeful investigation. It is scientific & systematic searches for knowledge &

intimation on a specific topic research is useful & research objective can be achieved if it is done

in proposed process.

Methodology

The world methodology spells the meaning itself if the method used by the researches in obtaining

information. The data (information can be collected from primary sources & secondary sources.)

By primary data we mean data collected by researches him for the first time to collaborate the

data which has previously not been used is known as primary data by secondary data we mean

the data collected from various published matters, a Magazine newspapers status of previous

research report etc. In other word we can say that the data which has already been used your

different purpose by different people is known as secondary Primary data can be collected through

questionnaire and personal interview as far as concern my research is limited to Secondary data

andis collected from the various books journals, newspaper editions expert suggestions web sites

& internet & etc.

Research is a common language refers to a search of knowledge. Research is scientific &

systematic search for pertinent information on a specific topic, in-fact research is an art of

scientific investigation.

Research Methodology is a scientific way to solve research problem. It may be understood as a

science of studying how research is doing scientifically. In it we study various steps that are
 generally adopted by researchers in studying their research problem. It is necessary for researchers

to know not only know research method techniques but also technology.

The scope of Research Methodology is wider than that of research methods.

The research problem consists of series of closely related activities. At times, the first step

determines the native of the last step to be undertaken. Why a research has been defined, what

data has been collected and what the particular methods have been adopted and a host of similar

other questions are usually answered when we talk of research methodology concerning a

research problem or study. The project is a study where focus is on the following points:

CHARACTERSTICS OF RESEARCH:

 Research is more systematic activity directed towards discovery and the development and

organized body of knowledge

 Research is based upon observable experience and empirical evidences.

 Research demand accurate observation and description.

 Research requires expertise

 Research involves gathering new data from primary sources, Existing data for a new

purpose.

NEED FOR DESIGNING:

 Research design makes possible as maximum information with minimum expenditure of

effort, time and money.

 We need research design in advance collecting and analysis of data for research project.
 RESEARCH DESIGN:

The design for this research report is as follows -

DESCRIPTIVE RESEARCH:

Descriptive research in contrast to exploratory research is marked by the prior formulation of

specific research Questions. The investigator already knows a substantial amount about the

research problem, perhaps as a Result of an exploratory study before the project is initiated;

Descriptive research is also characterized by a pre-planned and structured design.

Methods of the data Collection-

1 - Secondary Data

Various books on the subject written by eminent authors were studied. Special write ups and

journals and manuals dealing with the topic were referred to. This was done with a view to gain

thorough know ledge about the topic and to analyse training process objectively.The fact and

information were backed up by the written data and records to safe guard against ambiguous and

vague information.

Sources of Secondary Data

Following are the main sources of secondary data:

1. Official Publications.
2. Publications Relating to Trade:

3. Journal/ Newspapers etc.:

4. Internet

Period of Study:

The period of this study is 8 weeks.

 Objective of the study

1. To study the current position of e -commerce in India.

2. To understand the advantages and disadvantage of e-commerce in India.

3. To suggest the future prospects of e-commerce in India.

4. To highlight the challenges before e-commerce in India.

5. To examine the benefits of e-commerce for the general public.

 Scope of the study

The study helps in determining the growth of e-commerce and to know about how the e-commerce

transactions are helpful in various field/area. It also helps in determining future prospects of e-

commerce payment. The scope of my study is mainly in India.

 Importance of the study

 No fear of being robbed.

 No need to carry bulky notes in a case. Just carry the required cards and mobiles.

 It becomes easier to determine how much was spent where.

 Taxation with lesser availability of hard cash and more in banks, there is a lesser scope of

hiding income and evading taxation and when there are more tax payers it ultimately leads

to a lesser rate of taxation for the whole country.

 Less availability of cash leads to decrease in illegal activities.

 More currency in bank will mean more circulation of money in the economy, leading to

greater liquidity and would eventually means lesser interest rates.

 Reduced red tapism and bureaucracy with e-commerce transactions through electronic

means through the wire transfers are tracked and people are accountable which in turns

reduces corruption and improves service time.

Chapter -3

Data Analysis

And

Interpretation
Scope of online Retail Marketing:

Electronic Commerce is more than just buying and selling products online. It also includes

the entire online process of developing, marketing, selling, delivering, servicing and paying

for products and services. India has shown tremendous growth in the E-commerce segment.

With an internet user base of over 300 million, India has third largest internet population

after US & China (see info-graphic below).

DATA INTERPRETATION-
The above data shows that India is growing rapidly in the terms of e-commerce and will achieve a
higher position in this field. The growth is rapid and feasible and shows the positive scenario in the
context of the growth and favourability of e-commerce in the country.
India has witnessed a major breakthrough E-commerce success stories particularly in e-retail in
Consumer Electronics & Fashion Apparel & Home Furnishing segments. E-
A

DATA INTERPRETATION-

E-Commerce gives improved user experience, flexibility and control to users to buy a
product or service when they are ready to purchase – irrespective of time and location – This
is the key for growth. Due to fast adoption of Internet enabled devices like smartphone and
tablets we have seen an unparalleled growth in E-Commerce. The avalanche of
telecommunication technology has completely changed the way of our living,
communication methods, shopping etc. It has a huge impact on how we communicate with
friends and relatives, how we travel, how we access the information and the way we buy or
sell products and services.
Major Challenges of E-Commerce in India:

DATA INTERPRETATION-

With around 1.25 billion populations out of which internet penetration is only 19% India has

enormous opportunities for commerce. Besides being such a big marketplace (attracting

global E-Commerce players and investors) it has own challenges.

High Return Rates: Though the trend is changing still E-Commerce players are

experiencing heavy product return rates, which are incurring losses for them, as

reverse logistics presents unique challenges..

Consumer prefer COD (Cash on delivery): Due to trust deficiency; still lots of people don’t

prefer to use a credit / debit card or internet banking methods for transaction, rather they opt

for ―Cash on Delivery‖ which is risky and leads less business margin.

Payment gateways Inefficiency: Consumers usually experience a high failure rate of

payment gateways. Usually once a customer does not reattempt after a transaction failure. It

leads to loss of businesses.

Quality Internet penetration: India has an internet penetration of about 19% in comparison

to countries like US & UK where it is up to 90%. However, that is not the concern for E-

Commerce players it is prospecting, the major challenge is about quality of connectivity. The

speed and frequent drops cause frustration and restrict user from using ECommerce for their

major source of buying.

Feature phones still rule the roost: Majority of the population resides in villages and rural

areas where the majority of residents use feature phones, not smartphones. However, this shift

is being changed and with a steady rate it is growing up.

Reliable Logistic and Supply Chain: India is a large country which has thousands of cities

and areas which are not easily accessible. Though the Metropolitan cities and other major

urban centers have not issue with supply chain, but the attraction lies in market size due to its

large population. Through E-Commerce consumer want to buy a product in not just efficient

manner but also expect to get it delivered at their place in least possible time.

Computer/Internet literacy and effective reach: India has poor reach of personal computer

(PC) which is very low as 3.5/1000 of the population, compared to Five Hundred/1000 US
cause of digital illiteracy. The internet is still accessible by half of the internet user population

through PCs with the help of telephone lines. Given the penetration of telephone only 2.1 per

cent of the population, e-commerce remains far away from the common man. It is difficult

for e-commerce to reach to 1,000 million populations spread over 37 million households in

6, 04,374 odd villages and 5,000 towns and cities. Besides, both cost of PCs and internet

access in India are quite high.

Tax norms and compliances: Yet a lot of initiatives have to be taken by government to

simplify complex tax norms which have different rates at different states.

Overfunded competitors are driving up cost of customer acquisition: The vibrancy in the

Indian startup ecosystem over the past couple of years has channeled a lot of investment into

the E-Commerce sector. The long-term prospects for E-Commerce Companies & players are

so exciting that some investors are willing to spend irrationally high amounts of money to

acquire market share today. Naturally the Indian consumer is spoiled for choice. However,

this trend has reversed as investors are getting worried about slipping further down a slippery

slope, and I expect more rational behavior in 2014.

Too many Players, startups have to struggle: Due to physical/infrastructure/technology

and customer acquisition has challenged a startup doesn’t just need to raise huge amounts of

capital rather they have to cultivate new ideas to gain popularity and win trust. Also, there are

big chances that some big players who are currently brick and mortar business and have huge

support of infrastructure, people, warehouses can use their money to evangelize the market.
E-commerce is changing the way of buying & selling of product & services in India.

Ecommerce is future of shopping. Due to E-commerce the gap has been reduced between

manufacturer & consumer. According to Indian population their vast scope for e-commerce

because currently in India only 19% people using internet for selling & buying goods &

services so remaining percentage we can considered that we having scope in Indian Market.

There is weak Cyber security Law in India that is why Indian People are facing challenges

toward e-commerce. The future of e-commerce e in India would be bright in the upcoming

years if all essential factors would be implemented, by establishing cyber & have their

benefits as per people wish. The role of government is to provide a legal framework for

ecommerce so that while domestic & international trade are allowed to expand their horizons,

basic right such as privacy, intellectual property, prevention of fraud, consumer protection

etc. are all taken care of. The expansion of e-commerce has been developed in rural as well

as urban area in reign able cost for consumption, because of that more people are getting

linked with e-commerce & the ratio of that is getting increase day by day.
E-commerce size ($ billions) in India

2013 $2.9
2014 $13.6

2015 $16.0
2018 $40.3
2020 $101.9

DATA INTERPRETATION-

As per another report, the value of E-commerce sector (GMV) in Indian rupees was

as under:-

The size of the E-commerce industry was estimated to be Rs. 2,110 billion by 2016 as per

Digital Commerce Report 2015 (IAMAI and IMRB). The industry was worth Rs.351

billion in 2011 and grew at a CAGR of 37% to touch Rs. 1,257 billion in 2015.
Size of E-commerce sector (2011-2016)

Rs. Bn 68% (%)

70%
53% 54%
2000
35% 50%
1500 34%

13% 2110 30%

1000
1257 10%
500 815
351 473 533
0 -10%
2011 2012 2013 2014 2015 2016 (e)
Size of e-commerce sector (Rs. Bn)

DATA INTERPRETATION-

The above analysis shows that there is a rapid increment in the percentage growth of the

e-commerce sector which has grown to double during the time period of 5 years.
Chapter - 4

Finding

And

Recommendation
 Findings

 India is growing rapidly in the terms of e-commerce and will achieve a higher

position in this field. The growth is rapid and feasible and shows the positive

scenario in the context of the growth and favourability of e-commerce in the

country.

 India has witnessed a major breakthrough E-commerce success stories particularly

in e-retail in Consumer Electronics & Fashion Apparel & Home Furnishing

segments E-Commerce gives improved user experience, flexibility and control to

users to buy a product or service when they are ready to purchase – irrespective of

time and location – This is the key for growth. Due to fast adoption of Internet

enabled devices like smartphone and tablets we have seen an unparalleled growth in

E-Commerce.

 The avalanche of telecommunication technology has completely changed the way of

our living, communication methods, shopping etc. It has a huge impact on how we

communicate with friends and relatives, how we travel, how we access the

information and the way we buy or sell products and services.

 Due to physical/infrastructure/technology and customer acquisition has challenged a

startup doesn’t just need to raise huge amounts of capital rather they have to

cultivate new ideas to gain popularity and win trust. Also, there are big chances that

some big players who are currently brick and mortar business and have huge

support of infrastructure, people, warehouses can use their money to evangelize the

market.
 E-commerce is changing the way of buying & selling of product & services in India.

Ecommerce is future of shopping. Due to E-commerce the gap has been reduced

between manufacturer & consumer. According to Indian population their vast scope

for e-commerce because currently in India only 19% people using internet for

selling & buying goods & services so remaining percentage we can considered that

we having scope in Indian Market. There is weak Cyber security Law in India that

is why Indian People are facing challenges toward e-commerce. The future of e-

commerce e in India would be bright in the upcoming years if all essential factors

would be implemented, by establishing cyber & have their benefits as per people

wish.

 The role of government is to provide a legal framework for ecommerce so that

while domestic & international trade are allowed to expand their horizons, basic

right such as privacy, intellectual property, prevention of fraud, consumer protection

etc. are all taken care of. The expansion of e-commerce has been developed in rural

as well as urban area in reign able cost for consumption, because of that more

people are getting linked with e-commerce & the ratio of that is getting increase day

by day.

 MSMEs in India have been generally operating in a traditional manner and have been

dependent on domestic trading activities. But, with growing rate of internet penetration,

MSMEs are also gradually changing their operations to avail the opportunities to trade

through E-commerce. A large number of MSMEs is now involved in online transactions.

These MSMEs look towards an enhanced customer base and increased profits by using

E-commerce technology. MSMEs believe that use of E-commerce will boost their

business growth.
 Recommendation

 Create policy directives to bring category wise caps on digital payments for specific categories

 Tax rebates for consumers for certain types of digital payments. Government receipts, petrol, and

education are some leading examples which will lead to the better position of e-commerce in India.

 Tax rebates for merchants either in the form of sales tax relief as well as based on increase in sales

using digital means.

 Implement Reward/Incentive Scheme for both, Merchants and Consumers across all payment

options and e-commerce.

 Create more ubiquity for acceptance and adoption of prepaid instruments

 Deployment of mobile QR-code based card-acceptance solutions – i.e. Bharat QR to enable card

acceptance through feature phones and smart phones without any additional requirement of

infrastructure.
Chapter - 5

Conclusion

And

Limitation
 Conclusion

The government needs to take the necessary steps and make some policy considerations when they

are preparing for an e-commerce friendly economy. The payment systems have to be protected

from the cyber-attacks which are the major threat for cashless transactions. Also, the government

should be able to serve the under banked as well. Everyone from the society should have access to

an electronic system that they can use for such transactions. Government should take measures to

increase liquidity into the system so that people face less inconvenience. Government should also

try to improve overall infrastructure so that more and more people can come into banking net and

internet. Society has also to play its part. They have to understand the importance of cashless

economy and appreciate measures taken by the government. As a conclusion, it can be said that

going cashless provides a lot more benefits than just convenience to people, businesses and the

government in particular along with the base of e-commerce in the Indian market.

E-commerce is changing the way of buying & selling of product & services in India.

Ecommerce is future of shopping. Due to E-commerce the gap has been reduced between

manufacturer & consumer. According to Indian population their vast scope for e-commerce

because currently in India only 19% people using internet for selling & buying goods &

services so remaining percentage we can considered that we having scope in Indian Market.

There is weak Cyber security Law in India that is why Indian People are facing challenges

toward e-commerce. The future of e-commerce e in India would be bright in the upcoming

years if all essential factors would be implemented, by establishing cyber & have their

benefits as per people wish. The role of government is to provide a legal framework for

ecommerce so that while domestic & international trade are allowed to expand their horizons,
basic right such as privacy, intellectual property, prevention of fraud, consumer protection

etc. are all taken care of. The expansion of e-commerce has been developed in rural as well

as urban area in reign able cost for consumption, because of that more people are getting

linked with e-commerce & the ratio of that is getting increase day by day.

E-commerce is changing the way of buying & selling of product & services in India.

Ecommerce is future of shopping. Due to E-commerce the gap has been reduced

between manufacturer & consumer. According to Indian population their vast scope

for e-commerce because currently in India only 19% people using internet for

selling & buying goods & services so remaining percentage we can considered that

we having scope in Indian Market. There is weak Cyber security Law in India that

is why Indian People are facing challenges toward e-commerce. The future of e-

commerce e in India would be bright in the upcoming years if all essential factors

would be implemented, by establishing cyber & have their benefits as per people

wish.

The role of government is to provide a legal framework for ecommerce so that

while domestic & international trade are allowed to expand their horizons, basic

right such as privacy, intellectual property, prevention of fraud, consumer protection

etc. are all taken care of. The expansion of e-commerce has been developed in rural

as well as urban area in reign able cost for consumption, because of that more

people are getting linked with e-commerce & the ratio of that is getting increase day

by day.
 Limitation

As the research have done through the secondary data where research, data, realities, data have as

of now gave either on books, reports, newspapers, sites and so forth.

Raw numbers are not straightforwardly accumulated from the organization so that data or data

may change from the genuine realities.

What's more, time compel has disallowed from diving deep into the subject because of time

imperatives study is confined to constrained spots/urban communities as it were.

 Bibliography

REFERENCES:

Dr Meenu Jain , Globalization and Social Transformation: Indian Experience Research Process

–June 2014, pp. 120-131© Social Research Foundation. Dr Meenu Jain , Structural Change in

the Course of Economic Development ; India’s experience , Vol .5 issue 5 , pp 15-17 Indian

Journal of applied Research Journal May 2015.

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[2] Mithani and Gordon- Banking and Financial System - –Himalaya Publishing House – 2005.

[3] Dr.Shubra Gupta -Rural financing (Role of RRBs) –– Kurukshetra , June, 2011

[4] Dept. of Financial Services, Ministry of finance, GOI report on RRBs as on 31st March, 2011

[5] Das, U.R. (1998) “Performances and Prospects of RRBs”, Banking Finance November.

[6] Bose, S. (2005) Regional Rural Banks: The Past and the Present Debate

[7] Kannan, R. (2004), Regional Rural Banks

[8] Velayudham, T. K., and Sankaranarayanan, V. (1990) “Regional Rural Banks and Rural

Credit: Some Issues”, Economic and Political Weekly, September 22, pp.2157-2164.

[9] NABARD: Reports

[10] RBI, Monthly Bulletins, Various issues

WEBSITES:

 www.google.co.in

 https://en.wikipedia.org/wiki/Cashless_Transaction_(India)
 http://www.livemint.com/Opinion/XGbavEnoeP7dZITeh21MRM/Making-India-a-

cashlesseconomy.html

 http://www.thehindubusinessline.com/opinion/editorial/cashless-india-

editorial/article9386837.ece