SCOPE OF STUDY

This study being “desk analysis" contains views of various writers and researchers of E-
commerce. This study includes the global trends including India as a major source of E-
commerce , increasing use of e- commerce in developing nations , reasons behind success of e-
commerce as an industry , the use of e-commerce in global sourcing , advantages of E-commerce
and several more topics being covered under the project analysis. The use of e-commerce in
various countries and their influence over the people or citizens of that country is remarkable.

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 RESEARCH OBJECTIVES

The study is focused on achievement of following objectives:

 To assess the latest trend in e-commerce globally.
 The impact of growth of e-commerce.
 To analyse the latest global scenario of e-commerce.
 The impact of growth on overall economy

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RESEARCH METHODOLOGY

Sources of Data

For having the detailed study about this topic, it is necessary to have some of the secondary
information, which is collected from the following:-Books, Websites and Newspapers. So in this
basically secondary data is used in collecting the information. The sources of data are:
Websites:
 Wikipedia
 Wikinvest
 India-commerce

Newspapers:
 Hindustan Times

Type of Study
The research design or type of study specifies the methods and procedures for conducting a
particular study. The type of research design applied here are “Descriptive” and “Desk Analysis”
as the objective is to have knowledge about the ecommerce in global Scenario. Descriptive study
means situation, but not the causal linkages among its different elements.
Descriptive studies (such as a cross-sectional study) help in generating hypothesis on which
further research may be based. Desk analysis is to Gather and analyze information, already
available in print or published on the internet.

CHAPTER-I

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 INTRODUCTION

The Internet and the Web

The Internet was conceived in 1969, when the Advanced Research Projects Agency (a
Department of Defence organization) funded research of computer networking. The Internet
could end up like EDI without the emergence of the World Wide Web in 1990s. The Web became
a popular mainstream medium (perceived as the fourth mainstream medium in addition to print,
radio and TV) in a speed which had never been seen before. The Web users and content were
almost doubled every a couple of months in 1995 and 1996. The web and telecommunication
technology had fuelled the stock bubble in the roaring 90s and eventually pushed NASDAQ over
5,000 in 2000 before it crashed down to 1,200 in 2002. XML and Web Services Besides the
availability of technical infrastructures, the popularity of the Web is largely attributed to the low
cost of access and simplicity of HTML authoring, which are the obstacles of EDI development.
The Internet and the Web have overcome the technical difficulty of EDI, but it has not solved the
problem of slow development of
e commerce standards.

XML, as a meta mark-up language, provides a development tool for defining format of data
interchange in a wide variety of business communities. Web Services offers a flexible and
effective architecture for the implementation. There is no doubt that XML and the Web Services
will shape the course of e commerce in years to come

Concepts of Electronic Commerce

E-commerce (electronic commerce or EC) is the buying and selling of goods and services on the
Internet, especially the World Wide Web. In practice, this term and a newer term, e-business, are
often used interchangably. For online retail selling, the term e-tailing is sometimes used

Electronic commerce is generally considered to be the sales aspect of e-business. It also consists
of the exchange of data to facilitate the financing and payment aspects of business transactions.

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 E-commerce can be divided into

 E-tailing or "virtual storefronts" on Web sites with online catalogs, sometimes gathered
into a "virtual mall"
 The gathering and use of demographic data through Web contacts
 Electronic Data Interchange (EDI), the business-to-business exchange of data
 E-mail and fax and their use as media for reaching prospects and established customers
(for example, with newsletters)
 Business-to-business buying and selling
 The security of business transactions

Today Ecommerce is an integral part of business because of various reasons like:

 Ease of use & Accessibility all across the globe

 Great variety & easy compassion of products from different vendors

 Trusted payment channels

 Shopping can be done sitting in the convenience of home shopping, hence it is

less time consuming.

It is therefore very important for any new entrepreneur to understand the significance of E-
Commerce and should know how to utilize this tool for the growth and development of business.

So, whether you have an existing business or launching a brand new business, whether the
volume of your business is large or small, you can always generate profit by demonstrating your
products or services online, thereby acquiring a large amount of viewer exposure. In concise,
buying and selling will result in profits and returns.

There are so many factors which makes e-commerce to come to the fore front in today's world.
Saving precious time involved in business transactions is really a prominent factor. Like for
instance, net banking makes it easy to carry out money and baking transactions in a break neck
speed as compared to the real banking scenario. This asserts the fact that Ecommerce is beneficial
to both business and consumer wise as payment and documentations can be completed with
greater efficiency and reliability. Another important factor determining the flow of whole

5
business is connectivity. Connectivity is very important for both consumers and business.
Ecommerce provides better connectivity for all the potential candidates all over the globe, thus
helping in enhancing the business without any geographical barriers. From the view point of the
customer, Ecommerce is a good platform for hassle free shopping by sitting in your home. The
customer can browse through all the products and services available and can review and compare
the prices of the similar products available in the online space.

In global market scenario, the emergence of Ecommerce as a forerunner has opened up various
windows of opportunities for a variety of online companies and investors. More and more
resources are being directed into electronic securities, internet facilities, business plans and new
technologies due to the boom in the space of E-commerce. As a result various new markets have
emerged from Ecommerce itself giving a boost to the global market.

Definition of E-Commerce from Different Perspective

1. Communications Perspective
EC is the delivery of information, products/services, or payments over the telephone lines,
computer networks or any other electronic means.

2. Business Process Perspective

EC is the application of technology toward the automation of business transactions and work
flow.

3. Service Perspective
EC is a tool that addresses the desire of firms, consumers, and management to cut service costs
while improving the quality of goods and increasing the speed of service delivery.

4. Online Perspective
EC provides the capability of buying and selling products and information on the internet and
other online services.

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Benefit of e-Commerce
 Access new markets and extend service offerings to customers
 Broaden current geographical parameters to operate globally
 Reduce the cost of marketing and promotion
 Improve customer service
 Strengthen relationships with customers and suppliers
 Streamline business processes and administrative functions

Scope of E-Commerce
 Marketing, sales and sales promotion
 Pre-sales, subcontracts, supply
 Financing and insurance
 Commercial transactions: ordering, delivery, payment
 Product service and maintenance
 Co-operative product development
 Distributed co-operative working
 Use of public and private services
 Business-to-administrations (e.g. customs, etc)
 Transport and logistics
 Public procurement
 Automatic trading of digital goods
 Accounting
 Dispute resolution

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E- Commerce in Action

How e-Commerce Works

The consumer first moves through the internet to the merchant’s web site. At the web site, the
consumer is briefly given an introduction to the product or services the merchant offers. It
is at this point that the consumer makes the decision to visit the web store by clicking on a
link or button located on the web page. After choosing to visit the web store, the
consumer is typically connected to an online transaction server located somewhere else on
the internet which runs software commonly referred to as a shopping cart application.

The shopping cart application has been setup by the merchant to display all products and
services offered, as well as calculate pricing, taxes, shipping charges, etc. From there, the
consumer decides that he wants to purchase something, so he enters all pertinent credit
card information and a sales order is produced. Depending on the ecommerce
implementation, the sales order can now take two totally different paths for confirming to
the consumer that the order is officially placed.

Scenario 1

The consumer’s credit card information goes directly through a private gateway to a processing
network, where the issuing and acquiring banks complete or deny the transaction. This
generally takes place in no more than 5-7 seconds and the consumer is then informed that
the order was received, the credit card was authorized, and that the product will ultimately
be shipped.

Scenario 2

The consumer’s entire order and credit card information is electronically submitted back to the
merchant’s server (usually via email, FTP, or SSL connection) where the order can be
reviewed first and then approved for credit card authorization through a processing
network. The consumer then receives an email shortly afterwards, confirming the order
being received, the credit card being authorized, and status on when the product will
exactly be shipped.

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In both scenarios, the process is transparent to the consumer and appears virtually the same.
However, the first scenario is a more simplistic method of setting up a shopping cart
application and does not take into consideration any back office issues that may delay
shipment (i.e., items out of stock, back orders, orders submitted after office hours or
during holidays, etc.). Most of the e-Commerce Manager relies on the second scenario to
handle all of its ecommerce orders. This second scenario keeps the consumer accurately
informed throughout the entire ordering process. There are several basic steps you will
need to accomplish before becoming e-Commerce Enabled.

 Getting a Merchant Bank Account

 Web Hosting

 Web Design Considerations

 Registering a Domain Name

 Obtaining a Digital Certificate

FORCES FUELING E-COMMERCE

There are three major forces fuelling e-Commerce.

They include:

1. Economic forces

2. Marketing and customer interaction forces

3. Technology, particularly multimedia convergence

1. Economic Forces

One of the most evident benefits of e-Commerce is economic efficiency resulting from the
reduction in communications costs, low-cost technological infrastructure, speedier and
more economic electronic transactions with suppliers, lower global information sharing
and advertising costs, and cheaper customer service alternatives.
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Economic integration is either external or internal. External integration refers to the electronic
networking of corporations, suppliers, customers/clients, and independent contractors into
one community communicating in a virtual environment (with the Internet as medium).

Internal integration, on the other hand, is the networking of the various departments within a
corporation, and of business operations and processes. This allows critical business
information to be stored in a digital form that can be retrieved instantly and transmitted
electronically.

Internal integration is best exemplified by corporate intranets. Among the companies with
efficient corporate intranets are Procter and Gamble, IBM, Nestle and Intel.

Eg. sesami.net: Linking Asian Markets through B2B Hubs

sesami.net is Asia’s largest B2B e-hub, a virtual exchange integrating and connecting businesses
(small, medium or large) to trading partners, e-marketplaces and internal enterprise
systems for the purpose of sourcing out supplies, buying and selling goods and services
online in real time. The e-hub serves as the centre for management of content and the
processing of business transactions with support services such as financial clearance and
information services.

It is strategically and dynamically linked to the Global Trading Web (GTW), the world’s largest
network of trading communities on the Internet. Because of this very important link,
sesami.net reaches an extensive network of regional, vertical and industry-specific
interoperable B2B e-markets across the globe.

2. Market Forces

Corporations are encouraged to use e-Commerce in marketing and promotion to capture

international markets, both big and small. The Internet is likewise used as a medium for
enhanced customer service and support. It is a lot easier for companies to provide their
target consumers with more detailed product and service information using the Internet.

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3. Technology Forces

The development of ICT is a key factor in the growth of ecommerce. For instance, technological
advances in digitizing content, compression and the promotion of open systems
technology have paved the way for the convergence of communication services into one
single platform. This in turn has made communication more efficient, faster, easier, and
more economical as the need to set up separate networks for telephone services, television
broadcast, cable television, and Internet access is eliminated. From the standpoint of
firms/businesses and consumers, having only one information provider means lower
communications costs.

Moreover, the principle of universal access can be made more achievable with convergence. At
present the high costs of installing landlines in sparsely populated rural areas is a
disincentive to telecommunications companies to install telephones in these areas.
Installing landlines in rural areas can become more attractive to the private sector if
revenues from these landlines are not limited to local and long distance telephone charges,
but also include cable TV and Internet charges.

This development will ensure affordable access to information even by those in rural areas and
will spare the government the trouble and cost of installing expensive landlines.

E-COMMERCE AND E-BUSINESS

While some use e-Commerce and e-business interchangeably, they are distinct concepts. In e-
Commerce, information and communications technology (ICT) is used in inter-business
or inter-organizational transactions (transactions between and among firms/organizations)
and in business-to-consumer transactions (transactions between firms/organizations and
individuals).

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In e-business, on the other hand, ICT is used to enhance one’s business. It includes any process
that a business organization (either a for-profit, governmental or non-profit entity)
conducts over a computer-mediated network. A more comprehensive definition of e-
business is: “The transformation of an organization’s processes to deliver additional
customer value through the application of technologies, philosophies and computing
paradigm of the new economy.”

Three primary processes are enhanced in e-business:

1. Production processes, which include procurement, ordering and replenishment of stocks;

processing of payments; electronic links with suppliers; and production control processes,
among others;

2. Customer-focused processes, which include promotional and marketing efforts, selling over the
Internet, processing of customers’ purchase orders and payments, and customer support,
among others;

3. Internal management processes, which include employee services, training, internal

information-sharing, videoconferencing, and recruiting. Electronic applications enhance
information flow between production and sales forces to improve sales force productivity.
Workgroup communications and electronic publishing of internal business information
are likewise made more efficient.

The Internet Economy

The Internet economy is a broader concept than e-Commerce and e-business. It includes e-
Commerce and e-business. The Internet economy pertains to all economic activities using
electronic networks

as a medium for commerce or those activities involved in both building the networks linked to
the Internet and the purchase of application services such as the provision of enabling
hardware and software and network equipment for Web-based/online retail and shopping
malls (or “e-malls”). It is made up of three major segments:
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physical (ICT) infrastructure, business infrastructure, and commerce. The CREC (Center for
Research and Electronic Commerce) at the University of Texas has developed a
conceptual framework for how the Internet economy works. The framework shows four
layers of the Internet economy-the three mentioned above and a fourth called
intermediaries.

E-Commerce in Indian Scenario

The past two years have seen a rise in the number of companies' embracing e-commerce
technologies and the Internet in India. Most e-commerce sites have been targeted towards NRI's
with gift delivery services, books, audio and videocassettes etc. Major Indian portal sites have
also shifted towards e-commerce instead of depending on advertising revenue. The web
communities built around these portal sites with content have been effectively targeted to sell
everything from event and movie tickets to groceries and computers. The leader in these services
being Rediff on the net, (www.rediff.com) and India plaza which started a shopping section, after
their highly successful content site generated WEB visitors. In spite of RBI regulation, low
Internet usage e-commerce sites have popped up everywhere hawking things like groceries,
bakery items, gifts, books, audio & videocassettes, computer etc. None of the major players have
been deterred by the low PC penetration, credit card usage in India have also tried to close the
success worldwide of online commerce. BPB publication went online selling its complete range
of computer books about 2 years ago, it might not have the success of an Amazon.com of Barnes
and Noble, but they definitely have promised the cause of e-commerce in India with at least 1 to
5 web sites like India bookshop coming online.
This is not to say that the e-commerce scenario has been bad in India, as highly
successful e-businesses like Baba Bazaar and India mart have proved themselves. Indian Banks
too have been very successful in adapting EC and EDI Technologies to provide customers with
real time account status, transfer of funds between current and checking accounts, stop payment
facilities etc. ICICI Bank, Global Trust Bank and UTI-Bank also have put e banking over the
internet facilities in place for the upcoming e-commerce market speed post also plain to clone the
FedEx story with online package status at any moment in time . The future does look very bright

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for e-commerce in India with even the stock exchanges coming online providing an online stock
portfolio and status with a fifteen minute delay in prices. The day cannot be far when with RBI
regulations we will able to see stock transfer and sale over the Net with specialized services like
Schwab and e-trade.
Though with security and encryption being proven, technology for the transfer of
funds over the Internet, the Indian Government still has problems with 'Digital signatures' and
verification processes over the Internet. This combined with RBI norms and regulations has
proved a major huddle for e-commerce even though VSNL India's monopolistic ISP does want to
jump on to the electronic transaction bandwagon with the advent of private ISP's and India’s new
and positive attitude towards IT and the prime ministers new 'IT policy "the future is very
positive in India for doing commerce.”

1.1 Evolution of Commerce

Commerce has evolved over the centuries. Prior to the evolution of money it was the simple
“barter process” where things could be exchanged, say milk for grains. The evolution of money
brought with it, the concept of a “marketplace”. In a marketplace, Commerce is function of 4
P’s – Product, Price, Place and Promotions. All these four components play a vital role in a
transaction to take place. Different combinations of 4Ps determine different t forms of
Commerce. Once the marketplace came into existence, a few pioneers realized that people would
be ready to pay extra if they could deliver products at the customer’s doorstep. A slight
modification on Price and Place led to the convenience of getting products at their homes. This
concept delighted the customers and thus, the concept of “Street Vendors” was born.

When the Postal System came into being the sellers decided to cash in on the new opportunity
and started using mailers giving description of their products. It led to the concept of “Mail
Order Cataloguing”. From here, the evolution of the “Tele shopping” networks was thus
inevitable with the development of media vehicles.

The latest generation of commerce is one that can be done over the internet. Internet provides a

14
virtual platform where sellers and buyers can come in contact for sale and purchase of goods and
services. They can be thousands of miles apart, may belong to different parts of the world, might
speak different languages, “E-Commerce” emerged as the boundary-less trade medium in the era
of globalization.

15
Fig 1.1 Evolution of Commerce

16
Since, Internet has the ability to reach the customer’s home; the Distribution Channel has started to
assume new meaning to the B2C and C2C e-Marketer. The Physical delivery got converted to
electronic delivery; physical products were now electronic products, displayed on a website. With
options of paying online through debit and credit cards, even the Transaction was purely electronic.

Fig 1.2: The Dimensions of E-Commerce

Another important P for the e marketer, Promotion, assumed importance, especially because there is
no face to face interaction between the buyer and seller. The focus of online promotions is the ‘great
deals’, ‘discounts’, ‘convenience’ offered by the Marketers

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 CHAPTER II
LITERATURE REVIEW

Electronic commerce or e-commerce consists primarily of the distributing, buying, selling,

marketing, and servicing of products or services over electronic systems such as the Internet and
other computer networks. The information technology industry might see it as an electronic
business application aimed at commercial transactions. It can involve
Electronic funds transfer, supply chain management, e-marketing, online marketing, online
transaction processing, electronic data interchange (EDI), automated inventory management
systems, and automated data collection systems. It typically uses electronic communications
technology such as the Internet, extranets, e-mail, e-books, databases, and mobile phones.

Fig 2.1: Meaning of E-Commerce

2.1 Functions of Electronic Commerce
The four functions of e-commerce are:
Communication
Process management
Service management
Transaction capabilities

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Fig 2.2: Functions of Electronic Commerce

2.2 Distinct Categories of E-Commerce

Four distinct categories of electronic commerce can be identified as follows:

Business-to-business (B2B): Business-to-Business refers to the full spectrum of e-commerce that

can occur between two organizations. Among other activities, B2B e-commerce includes
purchasing and procurement, supplier management, inventory management, channel management,
sales activities, payment management, and service and support. While we may be familiar with a
few B2B pioneers- e.g. Chemdex (www.chemdex.com), Fast parts (www.fastparts.com), and Free

19
Markets (www.freemarkets.com) - some other exciting new consortia are emerging.
Business-to-Consumer (B2C): Business-to-Consumer e-commerce refers to exchanges between
businesses and consumers, e.g., Amazon.com, Yahoo.com and Schwab.com. Similar transactions
that occur in business-to business e-commerce also take place in the business-to-consumer context.
For instance, as with smaller business-to-business, transactions that relate to the back office of the
customer (i.e., inventory management at the home) are often not tracked electronically. However,
all customer-facing, or front office activities are typically tracked. These include sales activities,
consumer search, frequently asked questions and service and support.

Consumer-to-Consumer (C2C): Consumer-to-Consumer exchanges involve transactions between

and among consumers. These exchanges may or may not include third-[arty involvement as in the
case of the auction-exchange eBay. Other activities include classified ads (e.g.,
www.numberoneclassifieds.com), games (www.heat.net) jobs (www.monster.com), Web-based
communication (www.icq.com), and personal services (e.g., Yahoo! Personals, webpersonals.com).

Consumer-to-Business (C2B): Consumers can band together to form and present themselves as a
buyer group to businesses in a consumer-to-business relationship. These groups may be
economically motivated as with the demand aggregator, Mercata.com, or socially oriented as with

20
cause-related advocacy at voxcap.com.

In 2012, B2C ecommerce sales grew 21.1% to top $1 trillion for the first time, according to new
global estimates by e Marketer.

This year, sales will grow 18.3% to $1.298 trillion worldwide, e Marketer estimates, as
Asia-Pacific surpasses North America to become the world's No. 1 market for B2C ecommerce
sales.

Sales in North America grew 13.9% to a world-leading $364.66 billion in 2012—a figure expected
to increase 12.2% to $409.05 billion this year—as more consumers shifted spending from physical
stores to retail and travel websites thanks to lower prices, greater convenience, broader selection

21
and richer product information. But despite strong growth, North America’s share of global sales
will drop from 33.5% last year to 31.5% in 2013 as Asia-Pacific surges ahead.

B2C ecommerce sales in Asia-Pacific grew more than 33% to $332.46 billion in 2012. This year,
the region will see sales increase by more than 30% to over $433 billion—or more than one-third of
all global B2C ecommerce sales.

The rapid growth in Asia-Pacific sales is a result of several factors. Three Asia-Pacific markets
China, India and Indonesia—will see faster B2C ecommerce sales growth than all other markets
worldwide this year, while Japan will continue to take a large share of global sales.

China, unsurprisingly, is the primary driver of growth in the region. The country will surpass Japan
as the world’s second-largest B2C ecommerce market this year, taking an estimated 14% share of
global sales, as its total reaches $181.62 billion, up 65% from $110.04 billion in 2012.

22
The US will remain the single country with the largest share of worldwide B2C ecommerce
spending, at 29.6% in 2013—down from 31.5% in 2012 despite relatively strong growth. This will
continue throughout the forecast period, though China is closing the gap fast. In 2016, China will
have 22.6% of the worldwide market, vs. 26.5% in the US.

China also boasts the highest number of people who buy goods online in the world—nearly 220
million in 2012, according to e Marketer—a result of increasing internet penetration; a burgeoning
middle class with growing trust in online shopping; government-driven campaigns to promote
consumerism; as well as improved infrastructure, product selection and services offered by online
sellers and retailers.

23
According to e Marketer, B2C ecommerce sales in the US will grow 12% to $384.80 billion in 2013
—after growing 13.8% to $343.43 billion last year—as average B2C ecommerce sales per user
reach $2,466 this year among those who buy goods online in the US.

Average spending per user is lower in China—set to reach just $670 this year, e Marketer estimates
but the sheer growth in China’s digital buyers is staggering. The country will nearly double the
number of people who buy goods online between 2012 and 2016, e Marketer estimates, resulting in
considerable upside for B2C ecommerce sales in China through the forecast period.

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A Bottom-Up Approach to Evaluating the Global Ecommerce Market

E Marketer is relatively distinct in its methodology for global B2C ecommerce sales. The company
forms its figures through an analysis of various elements related to ecommerce sales—including
macro-level economic conditions, population figures, internet and broadband adoption, consumer
attitudes, historical trends in online sales, survey data from third parties, and estimates from other
research firms, investment banks and other forecasters at a country and regional level before
building its worldwide model.

25
For example, when evaluating overall B2C ecommerce sales in China, e Marketer considered data
points from dozens of sources on top-line sales, growth, online buyers, online buyer penetration,
internet usage, and other trends—including, but not limited to, those included on the charts above
and below—before forming its own forecast.

26
In all, e Marketer analyzed more than 1,100 data sets from over 130 research sources whose
ecommerce figures are each tracked and evaluated by e Marketer based on their respective
methodologies, definitions and historical accuracy looking at more than 22 markets and six major
regions, before forming its worldwide figures.

E Marketer tracks and re-evaluates many of its estimates more than once per year. When an
estimate is re-evaluated and found to be unchanged from the previous estimate, it is marked as
"confirmed and republished" as of the later date.

Definitions: e Marketer’s figures for B2C commerce sales include retail sales, travel sales; digital
downloads purchased via any digital channel (including online, mobile and tablet) and sales from
businesses that occur over primarily C2C platforms such as eBay. These figures exclude gambling
and event tickets. Digital buyers are internet users ages 14 and older who have made at least one
purchase via any digital channel within the past year, including purchases made on desktop, laptop,
mobile and tablet devices. E Marketer converts currency based on the average 2012 exchange rate
as reported by the Economist Intelligence Unit.

Note: e Marketer benchmarks its Argentina B2C ecommerce sales projections against Cámara
Argentina de Comercio Electrónico (CACE) data, for which the last full year measured was 2011. E
Marketer benchmarks its Germany B2C ecommerce sales numbers against the Bundesverband des

27
Deutschen Versandhandels data, for which the last full year measured was 2011. e Marketer
benchmarks its India B2C ecommerce sales projections against the Internet & Mobile Association
of India (IAMAI) data, for which the last full year measured was 2011. e Marketer benchmarks its
Japan B2C ecommerce sales projections against the Ministry of Economy, Trade and Industry
(METI) data, for which the last full year measured was 2010. US B2C ecommerce is comprised of
retail ecommerce and digital travel sales. US retail ecommerce is benchmarked against the
Department of Commerce data, for which the last full year measured was 2011; US digital travel
sales, which includes online leisure and unmanaged business travel, is benchmarked against
PhoCusWright data, for which the last full year measured was 2010. Asia-Pacific includes
American Samoa, Armenia, Australia, Azerbaijan, Bangladesh, Bhutan, Brunei, Burma, Cambodia,
China, Cook Islands, Fiji, French Polynesia, Guam, Hong Kong, India, Indonesia, Japan, Kiribati,
Kyrgyzstan, Laos, Macau, Malaysia, Maldives, Marshall Islands, Micronesia, Mongolia, Nauru,
Nepal, New Caledonia, New Zealand, Northern Mariana Islands, North Korea, Pakistan, Palau,
Papua New Guinea, Philippines, Samoa, Singapore, Solomon Islands, South Korea, Sri Lanka,
Taiwan, Thailand, Tajikistan, Timor-Leste, Tonga, Turkmenistan, Tuvalu, Uzbekistan, Vanuatu,
Vietnam, Wallis and Futuna. Eastern Europe includes Albania, Belarus, Bosnia and Herzegovina,
Bulgaria, Croatia, Cyprus, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kosovo,
Latvia, Lithuania, Moldova, Montenegro, Republic of Macedonia, Romania, Russia, Serbia,
Slovakia, Slovenia, Turkey, Ukraine, Poland. Latin America includes Anguilla, Antigua and
Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bolivia, Brazil, Cayman Islands, Chile,
Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, El Salvador, Grenada,
Guatemala, Guyana, Haiti, Honduras, Jamaica, Mexico, Montserrat, Netherlands Antilles,
Nicaragua, Panama, Paraguay, Peru, Saint Barthelemy, Saint Kitts and Nevis, Saint Lucia, Saint
Martin, Saint Vincent and the Grenadines, Suriname, Trinidad and Tobago, Turks and Caicos
Islands, Uruguay, Venezuela, Virgin Islands (British), Virgin Islands (US). Middle East & Africa
includes Afghanistan, Algeria, Angola, Bahrain, Benin, Botswana, Burkina Faso, Burundi,
Cameroon, Cape Verde, Central African Republic, Chad, Comoros, Congo (Brazzaville), Congo
(Kinshasa), Cote d'Ivoire, Djibouti, Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia,
Gaza Strip, Ghana, Guinea, Guinea-Bissau, Iran, Iraq, Israel, Jordan, Kenya, Kuwait, Lebanon,
Lesotho, Liberia, Libya, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte, Morocco,

28
Mozambique, Namibia, Niger, Nigeria, Oman, Qatar, Rwanda, Saint Helena, Sao Tome and
Principe, Saudi Arabia, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, Sudan,
Swaziland, Syria, Tanzania, Togo, Tunisia, Uganda, United Arab Emirates, West Bank/Palestine,
Western Sahara, Yemen, Zambia, Zimbabwe. North America includes Canada, US. Western Europe
includes Andorra, Austria, Belgium, Denmark, Faroe Islands, Finland, France, Germany, Gibraltar,
Greece, Greenland, Guernsey, Iceland, Ireland, Isle of Man, Italy, Jersey, Liechtenstein,
Luxembourg, Malta, Monaco, Netherlands, Norway, Portugal, San Marino, Spain, Sweden,
Switzerland, and UK.

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2.3 Significance of E-Commerce

The electronic market place participants are not limited only to digital product companies’ e.g.
publishing, software and information industries. The digital age and the digital revolution affect all
by virtue of their process innovations:
Web-TV and digital television are going to affect TV news and entertainment programs.
Changes in telecommunication will affect the way the information is received, product
announcements, orders etc. Phones, Fax machines, Copiers, PCs and Printers have become essential
ingredients in doing business, so are E-mail, websites and integrated digital communication Today’s
office business machines are not integrated (e.g. Faxed orders have to be typed in on computers),
the much talked about convergence will drive all these equipment into one digital platform, whether
it be a computer connected to the Internet and intranet, a new kind of device capable of interacting
with other devices, because that device will prove to be more efficient and productive.

User experience of e-commerce

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E-commerce gives customers the freedom to purchase items from anywhere.

According to a February 2001 Business 2.0 report, 55 percent of users enjoy online shopping because there
are no salespeople involved. In a December 2000 study, it is also indicated that "anyone with access to a credit

card would buy over the Net." Based on such phenomena, it is safe to say that interactivity, which is more secure

than ever and saves the need of a middleman during an online transaction, has played a major role in boosting the

growth of e-commerce.

Compared to traditional retailing, users also cited the following reasons as to why they prefer online shopping:

Convenience 84%
Saves time 72%
Avoids crowds 64%
Allows more time to research 61%
Lower prices 60%

Among these top five reasons, at least two of them cannot be provided by traditional retailing, and
they can only be enhanced by the interactivities offered by the Internet. Therefore, interactivity is a
significant revenue partner for sites that have adopted e-commerce.

The downside is that e-commerce sites are inundated with traffic during major holidays. In 1999,
AMR Research, a market analysis firm specializing in logistics, reported that the peak in online
orders during the holiday season came around Dec. 11, whereas the shipping activity peaked the
30
week of Dec.20, indicating there was a delay in preparing orders.

"Two years ago, it was acceptable, even impressive, to send an e-mail confirming the order had
been received,'' said Ashley Deaton, manager of logistics services for the European division of Kurt
Salmon Associates, a consulting firm. "Now, the customer wants to know where that order is in real
time.''

Customers also want more information about the status of their Internet orders than they expect
with catalog orders.

This sheds light on the fact that e-commerce requires a different outlook on building a logistics
network. Products ship from the company to the customer. The store no longer plays the
intermediary, according to a January 2000 article in the Journal of Commerce.

2.4 Studies on E-Commerce Industry in India

To understand the situation in India, Nasscom conducted a survey on India's potential for e
Commerce industry with the following points of reference:
(a) Understand and evaluate the present state of E-commerce industry and market in India.
(b) Anticipate future potential of E-commerce industry and market in India.
(c) Identify present and potential global trends that are expected to define new paradigms of E-
commerce scenario.
(d) Analyze current internet access and penetration in India and evaluate potential threats.
(e) Suggest suitable strategies to enable Indian IT companies to address and capture a significant
share of E-commerce market.

(f) Increased proliferation of Internet.

(g) Achieving a leadership position in E-commerce technologies and infrastructure market.
(h) Developing state-of-the-art E-commerce enabling and access infrastructure in India.

31
Going by even the preliminary findings, it can be easily summarized that E-Business can indeed
emerge as a major opportunity for India. This acquires twin connotations of E-commerce and E-
Business transactions from local businesses and the huge opportunity for software exports to other
countries by quickly joining the E-Business opportunities. This survey is the first of its kind which
has taken into consideration India's twin assets – software industry and rapidly restructuring
industry sector.
The scope of the study also included finding a level of awareness among corporate
executives about E-commerce and its benefits; perceived importance of E-commerce as being
integral to their corporate strategy framework; prospective volume of transactions expected to be
carried out through E-commerce; opportunity for exports of E-commerce solutions and services
.Penetration analysis of online services based on the NASSCOM (1999) study indicated that
penetration rates of internet and E-commerce transactions in India are expected as follows:
For Business-to-Business transactions, Indian industries are expected to reach online penetration of
2% by 2003 and 8% by 2008. This would be about one tenth of E-commerce penetration in
Japanese industries during similar periods. It further expects that India's active internet population
would spend close to 1.4% of its total regular household spending through internet purchases by
2003. Revenue streams would increasingly be aligned with emerging global model. Most of the
revenue would come from commercial transactions and a small amount would come from
advertisement revenues. It is expected that by 2003 Internet Business-to-Consumer transaction
would constitute 80 percent of the revenue. The advertisement revenues would amount to about 5%
of total advertisement money spent. It is predicted that 3-4 percent of E-commerce could be the
result of a growing group of affluent Indians living overseas who are likely to make some form of
purchase from Indian based Web sites either for their own personal consumption or as gifts for their
kin in India.

Some of the preliminary findings on E-commerce and E-Business software exports potential are as
follows: In the year 1999-2000, Internet and E-commerce related software and services exports
from India brought US $ 340 million out of an estimated US $ 3.9 billion software and services
exports. Supply Chain Management optimization is one of the strongest drivers of global E-

32
commerce solutions market, as it spurs Business-to-Business transactions. More than 68% of Indian
software houses have informed of strong expertise in Supply Chain and Distribution Management
solutions. Almost 32% of IT company respondents have identified web based consumer businesses
as a major opportunity area, with expected paybacks beginning in 3-4 years. Some of the promising
areas of E-commerce services are: legacy application integration; Internet application integration;
EDI, Migration to web based models; new IT frameworks, integration with business strategy and
strategic IT consulting (OECD, 1999). With corporate planning to revive IT spending after Y2K
problem, E-commerce solutions have emerged as a major technological and business opportunity
for Indian software houses. However, there is a concern over present state of affairs with regard to
facilitating and supporting E-commerce in India because of the poor infrastructure. However, the
software industries in India as well as user industries are putting together their resources for
adopting E-Business strategies.
In spite of passing of the I.T. bill, the framework and infrastructure in India still is not conducive
enough for proliferation of E-Business. More than 88% corporate executives expressed keen
awareness of increasing adoption of E-commerce and its potential benefits. More than 41% of
corporate executive said that E-commerce transactions are integral to their corporate plans. Among
the executives responding, nearly 85% were industries which did not have direct or frequent contact
with end-consumers, but they can see that in the future they may have to. About 18% of
corporations already have some form of E-commerce infrastructure in place. These have been
facilitated through upgrade of existing IT systems or fresh installations configured for E-commerce
transactions. The most commonly found business practice is to establish extranets or EDI
(Business-to-Business) infrastructure for initial or learning period. This is subsequently upgraded to
internet based access mechanisms for customers. More than90% of the executives cited perceived
efficiency in Supply Chain Management as motive for Business-to-Business E-commerce, and
enhanced Customer Services (Customer Relationship Management) for Business-to-Consumer
transactions. The other reported benefits included moving towards Justin-Time management.
Almost 78% of respondents concurred that for them technology is not a major concern, nor is the
required budgetary resources. However, the high cost of effecting such transactions and inadequate
services with regards to telecommunication in India along with bandwidth were cited as major
impediments. About48% of respondents said that given the right framework and cost-effective

33
infrastructure, they would like to move towards adopting E-commerce at the earliest. Some of the
key industries that have high potential for early adoption of E-commerce are: Financial (Stock
Exchanges and Banks), Automobiles, Retail, Travel, IT and Manufacturing. However, in India
presently there are only two hubs of EDI based transactions which are in Pune and Gurgaon.

2.5 E-Business Initiatives

There is a clear need of government action and international agreements on E-commerce issues. It
is generally recognized that there is a need for simple, transparent and predictable legal
environment for E-commerce on a national and international level and that Governments should
avoid undue restrictions on E-commerce in order to avoid competitive distortion. To develop such
global framework for E-commerce, a large number of international and regional bodies have been
working notably amongst them being OECD, WTO, WIPO, NCITRAL and ITU. A comprehensive
document reporting on international and regional Bodies and their activities and initiatives in E-
commerce was prepared (Jan.1999) by OECD Secretariat for OECD Ministerial Conference, which
was held in Ottawa in1998. "A Borderless World: Releasing the Potential of Global Electronic
Commerce"(OECD, 1999) indicated the potential for global business for many countries. Second
half of 1999 saw commitments of some of the big companies to move their multi-billion dollar
purchasing operations on to the Internet. With many Fortune 500 Companies moving their supply-
chain transactions involving purchase and sales of goods and services on to the Internet has created
a real necessity among those who do not have E-commerce presence to move in quickly or be left
behind. Now major multinationals such as Intel, IBM, Cisco,3 Com, Dell and many others have had
E-commerce models for 3-5 years. E-commerce between business and consumers (B2C) which
means direct purchase of products on the Internet, for example, books, automobiles, music,
entertainment, software, PCs and many other products has also picked-up significantly. E-
commerce is one area where market forecasts made in 1996-97 turned out to be much less than
actual performance. Projections have been revised subsequently by most of the consultancy firms
Forrester (IEEE, 1999) forecasts that worldwide Internet Commerce will reach between $ 1.4 and $
3.2 trillion in2003, up from a range of $ 55 billion to $ 80 billion in 1998. This growth will happens
as the world’s largest economies of India and China would completely come online by 2004

34
E-Commerce and Standards

With a view to ensure global seamless connectivity for E-commerce, as the demand picks up, the
need for such standards have been felt more in 2001 than in any other year. The general perception
is that it should be private sector, market led approach to open standards supported by Government.
In this regard, Ziff Davis Global Information Infrastructure (GII) Group have been working for a
standard for Internet based e-commerce involving a broad alliance of leading global corporations,
institutions and individuals. NIST, USA is providing effective support for industry led standards
(through alliance with Internet Engineering Task Force).These efforts include

(i) building standards road-maps with private sector stakeholders; (ii) providing technical assistance
to industry in the development and harmonization of open standards; (iii) establishing neutral test
beds and developing reference implementations with technical experts from the private sector; (iv)
developing test methods and infrastructures for measurement and demonstration and (v)
contributing to implementation guidelines set by ITU, ISO, IEC, UN, CEFACT who have been
working in this area. It is necessary to set up a dedicated team in the country which would follow
these international trends and actively participate in these international standards so that capabilities
and interest of India are taken care of. If India is to become a major stake holder in E-commerce,
Indian Industry needs full commitment from the government in this area. Real benefits of E-
commerce will come to India if Indian industry leap-frogs in using these tools to re-engineer its
operations aiming at gaining competitive advantage. USA and Europe through support of their
respective governments have taken such initiatives. Specifically under the Fifth Framework
Program of European Commission, one of the key actions is related to New Methods of Work and
Electronic Commerce. In USA, industry, government and Small Business Electronic Commerce
Working Group has been created to serve SME s. Collaborative programs are being developed to
help SMEs benefit from electronic commerce through increased training and education. To take
lead in E-commerce, it is necessary to develop such programs. Various organizations of MIT could
work with different leading industry associations to develop such awareness building and education
programs. A special group could be set-up to develop this. A proactive role by WTO, WIPO and

35
other multilateral organizations would put pressure on all countries to quickly gear-up for E-
commerce culture. However, a major concern is the proposed zero-duty issue on E-commerce, if it
is considered under GATT. Developing countries need to examine the consequences carefully and
evaluate possible option of its classification under GATT. For certain international E-commerce,
one needs to know if E-commerce transactions should be classified as cross-border trade or
Consumption abroad. Likewise, a considered view on domestic taxation issues needs to betaken.

CHAPTER-III

CONCEPTUAL FRAMEWORK

Global trends in E-commerce

36
  Government programs are a significant vehicle for c-commerce implementations
 Retail, grocery and logistics industries are the most active in encouraging trading partners to
implement EDI

 Small and medium sized companies demand flexible integration solutions

 European companies focus on core competencies and outsource technology to consulting

groups

 High percentage of first time implementers seek to achieve full integration

 Organizations are seeking a scalable, reliable system that is easy to deploy and manage

 Software needs to be capable of handing different business processes and must integrate
with existing IT investments

As social media, app stores and global availability become standard, many companies are looking
to enhance the online customer experience. And while retail and other transactions via Internet are
customary, more than ever companies are simplifying the ways in which customers interact with
their website and ultimately make online purchases. Here are eight trends happening right now in
global e-commerce that seek to enhance the user experience:

 Micro-payments – Among the most revolutionary changes in the coming months—not

years—is the use of micro-payment systems from a variety of financial firms, e.g., Paypal,
Visa, WesternUnion, among others, including banks. This trend is facilitated by the W3C
working group that approved these protocols and technical standards for the interworking.
These systems will change not only how we carry money but how we value money and
think about purchases. (Consider how a purchase of $4.99 feels in a mobile app store vs. at
Dunkin' Donuts.) Payment systems that make it easier to buy online, coupled with mobile
technologies will accelerate the usage of global e-commerce applications.

 Mobile technologies – More people access the Internet on their mobile devices than on any
other device. We are rapidly approaching the time (if we are not already there) where
designs must be created for the mobile Web first, and for the desktop second. Mobile

37
 technologies facilitate comparison shopping; with the advent of barcode reader apps and
price-comparison databases, a consumer could snap a bar code in Walmart and quickly
reference product reviews and prices on walmart.com (or compare prices with Walmart
competitors). Mobile technologies also facilitate impulse buys – especially with the advent
of micro-payments tied to the mobile device. Just recently, Starbucks customers can not
only place an order with their Smartphone, but also make a purchase.

 Social media – As Facebook has become the most visited site on the Web, the role of social
media, including Facebook and its local clones such as Twitter, is increasingly important.
Social media sites increasingly act as points of entry to e-commerce sites, and vice versa, as
e-commerce sites build rating, loyalty and referral systems tied to social media. Group
buying (e.g., Groupon) is also gaining mainstream ground, with many "deal of the day" sites
competing for an increasingly savvy consumer base, but improvements lie ahead as the
social aspects and user experience are refined.

 Fulfillment options – I believe that users will want to have multiple fulfillments and return
options when interacting with a vendor: ship to address, courier, pick-up in store, return to
store, etc. Having many fulfillment options is how customers view their overall customer
experience. Some companies have made a business proposition online by being exceptional
in service to the online channel (e.g., Zappos).

 Global availability – Increasingly, consumers want the availability to buy products from
foreign sites and have them delivered locally. Thus, currency and customs will be of
growing concern to many online retailers. Along with this, there will be concerns with local
privacy laws and restrictions on related data collection and storage.
 Localization – While the trend is to globalize, what’s often more important is to
localize. User Centric’s research clearly shows that sites that ‘feel’ local – with proper
imagery, language, time/date, weights/measures, currency, etc. – resonate far more than sites
that seem culturally distant or sterile.

 Customizability – Consumers want control, and want to be able to design the details of the
items they purchase.
38
  Time-based availability – Some of the hottest and most successful sites are those that have
a time-critical response component. Sites like Groupon, Gilt and others capitalize on the
perception of limited-time availability. Creating a sense of urgency drives traffic and
purchase behavior.

Business models across the world also continue to change drastically with the advent of
eCommerce and this change is not just restricted to USA. Other countries are also contributing to
the growth of eCommerce. For example, the United Kingdom has the biggest e-commerce market
in the world when measured by the amount spent per capita, even higher than the USA. The internet
economy in UK is likely to grow by 10% between 2010 to 2015. This has led to changing dynamics
for the advertising industry

Amongst emerging economies, China's eCommerce presence continues to expand. With 384 million
internet users, China's online shopping sales rose to $36.6 billion in 2009 and one of the reasons
behind the huge growth has been the improved trust level for shoppers. The Chinese retailers have
been able to help consumers feel more comfortable shopping online. eCommerce is also expanding
across the Middle East. Having recorded the world’s fastest growth in internet usage between 2000
and 2009, the region is now home to more than 60 million internet users. Retail, travel and gaming
are the region’s top eCommerce segments, in spite of difficulties such as the lack of region-wide
legal frameworks and logistical problems in cross-border transportation. E-Commerce has become
an important tool for businesses worldwide not only to sell to customers but also to engage them.

Asia Pacific

Chinese and Korean online consumers are the most prolific online shoppers m the Asia Pacific
region with 95 percent of Internet users intending to make a web purchase in the next six
months.Conversely, over one fourth of online consumers In Hong Kong (27%) and Thailand (26%)
and one fifth of residents in Japan. New Zealand, Indonesia and Australia do not plan an online
purchase m the upcoming months. Koreans who shop online are most likely to buy books,
cosmetics, clothing/accessories/shoes and groceries via the Internet in the next six months. While

39
connected Chinese also favor books and clothes. 40 percent plan to make an electronic purchase
online. Web-savvy Malaysians like online shopping for booking travel, with airline tickets and
hotel/tour reservations the top picks. More online Australians intend to purchase event tickets and
non-downloadable videos/DVDs/games than any other in the region. And one fifth of online Indian
shoppers plan to buy non-downloadable music.

Total online spending as a percentage of total monthly spending vanes by country with Chinese and
Korean online consumers allocating the most via the web than any other in the region. Online
consumers in New Zealand. Australia, Malaysia and Hong Kong allocate the least.

Europe
Intention to shop online in Europe is high—79 percent of online European consumers plan to
purchase products or services via the Internet in the next six months. Online consumers in Norway
and Great Britain show the greatest propensity with almost 90 percent planning a web purchase in
the near future. More online residents of Estonia & Croatia and Latvia indicate they would not be
making any online purchases in the next six months than in the rest of Europe (42%. 41%. and
41%. Respectively)

More than half of online Austrians who shop via the web plan to buy books, while online Germans
and Czechs intend to turn to the Internet for clothing and shoes more than any other online shoppers
in the region .Future online purchases for Norwegians are likely to include a vacation or a show as
indicated by their strong intent to purchase travel aid event tickets More than one third of online
Brits plan to purchase DVDs and games online. while connected Greeks indicate a preference for
electronic equipment and computer hardware. Web-savvy Israelis seek the Internet to purchase
electronic equipment more than any other item and are the least likely in the region to purchase
clothing or shoes online.

North America

Half of online Americans favor sites for stores that can only be shopped online and the majority of
Canadian web shoppers are split between a preference for online-only sites (31%) and those that
have traditional physical stores (19%) the list of products and services that are favored by American

40
and Canadian online shoppers is almost identical. Books, clothing and airline tickets are the items
most likely tagged for online purchase in the next six months. One-third of online Canadians say
they don’t plan on making an online purchase in the next six months, which is more than the one-
fifth of connected Americans who said the same. In fact, 28 percent of online Canadian consumers
indicate that they have never shopped online compared to 15 percent of Americans.

When selecting the top three sources to guide decisions, online product reviews are useful to 42
percent of American and 40 percent of canadian web shoppers. Online reviews are most important
when buying consumer electronics, cars and software and when researching cars. Electronics and
travel.

Latin America

Connected Brazilians are the most prolific online shoppers in the region with 84 percent planning to
make an online purchase in the next six months. The items that top the list are books, electronic
equipment. Computer hardware and DVD5/games. Conversely, online Colombians are the least
likely shop online in the near future—3 6 percent indicate they have no plans to shop virally in the
next six months and more than one-fifth indicate they have never shopped online.

Electronic equipment tops the list for planned online purchases for 34 percent of Venezuelan web
shoppers followed by airline tickets (27%) and computer hardware (21%). Surprisingly, books—
which typically tops the list for most online shoppers—was favored by only 18 percent of online
shoppers in this country.

Online purchase intent in Mexico is evenly divided among the top eight products and services:
books (3 0%), electronic equipment (25%). tours/hotel reservations (24%) event tickets and music
(22%), computer hardware (21%) clothing and video/dvd1s/games (18%). Also equally distributed
is the choice of sites that connected Mexicans prefer when shopping online.

Middle East / Africa / Pakistan

41
Shopping online Is the most underdeveloped In the Middle East, Africa and Pakistan region. Almost
half (47%) of online consumers indicate they have never made an online purchase—the highest
percent of any other region in the world. Of those connected consumers who have online access,
one-third say they do not plan on making a purchase in the next six months.

The most popular products and services for planned online purchase across the M EAP region are
books (29%), airline tickets/reservations (24%) and electronic equipment such as TV’S and cameras
(23%). Other popular planned online picks for South Africans are event tickets (33%) and non-
downloadable music (26%). Online residents of the United Arab Emirates intend to book travel
(27%) and buy clothing (25%). Web-savvy Pakistanis will look online to buy computer hardware
(25%) and clothing (18%), although they also lead the region saying they do not plan on making an
online purchase in the next six months (38%).

Social media is not yet playing much of a role in influencing consumers’ purchasing online,, but
Saudis are most likely to use such sites to help make buying decisions. While the majority on online
consumers in the region is not more Likely to share a negative rather than a positive experience
online, Egyptians and Saudis are more Likely than any other in the region. Online reviews and
opinions were most Important when buying and researching cars, software and consumer
electronics

E-commerce in India
New Gold Rush in E-commerce in India
Kunal Bahl, founder- CEO of e-commerce site Snapdeal.com bought out eSportsbuy.com for an
estimated of Rs.50 crores.
Bahl has 20–million (Rs. 100 crore) stash for acquisition-significant because Snapdeal is itself a
startup-but a rich on. It has raised Rs.52 million from ventures funds.
Bahl is not alone who is scouting for potential suitor. In February this year aggressively online
42
shopping site Flipkart.com acquired rival Letsbuy.com. Early last year, US-based social buying site
Groupon acquired India’s SoSasta.com and renamed it as Crazeal.com.
And so it seems that e-commerce is not about customers buying goods. It is about firms shopping
for others. Industry trackers say leading sites are gobbling up rivals to build size, or acquiring
customer niches either to add product segments or to get technologies that help efficient operations.
In the game in which future share issues are on the radar for bigger players, the smaller ones often
prefer to cash out than be crushed in lonely pursuits in an aggressively competitive game.
At stake is a huge market will growing potential because India has 900 million mobile phones, with
a big chunk of that growing up from voice talk to Internet, wile the current Web user base at more
than 100 million is in itself a significant number.
Industry estimates say India’s e-commerce market will zoom from the current Rs.51000 crore to
Rs.10,20,000 crore in revenues by 2020. The race lead to buyouts-often at the cost of profitability.
“At present sites are falling over each other to offer deep discounts, but you do not survive only
through discounts. This only creates a disloyal discount shopper who moves from one site to
another in search of the cheaper deal,” said Mahesh Murthy , managing partner of investment firm
Seefund Advisors. Murthy added that sites without a credible differentiation strategy and loyal
customers base would bleed-and will be up for grabs.
Experts say acquisition of other sites is also a good strategy to built brand and broaden a loyal
customer base. Snapdeal.com snapped up eSportsbuy.com to get access to its large catalogue of
sports and fitness products. Flipkart.com started out with books, added cameras and mobile
handsets and then got Letsbuy.com to acquire muscle in electronic goods, while Groupon’s buyout
was to enter India.

“There in no room for newer players in the general category but there is space for niche category
players,” he said. This has been observed by Prashanth Prakash, partner at Accel partners, which
has invested in Flipkart.com.
Private enquiry is doing a huge amount of work backstage. Venture capitalists say they more than
doubled the funding level in e-commerce over the past year, and the average size of investment has
ranged from Rs.20 to 40 million.
However, having a deep pocket is no guarantee to success. “Money can only delay your death. The

43
only key to survive is to have a credible differentiation strategy,” Murthy said.
Size is not everything, but could help if investors have a sense of timing. “As the e-commerce
companies grow and get brand loyalty the valuations are expected to increase even further. It will
be the time when we can offload our stake, for hefty profits,” a venture capitalist with significant
stake in leading e-commerce site.
Hundreds of Internet startups went bust in 2000 and 2001 in the “dotcom bubble” and comparing
the current e-commerce rush to that may not be farfetched said Shailen Amin, co-founder and CEO
of footwear sites Bestylish.com.
“There are a lot of guys in this business who don’t have a retail background. They are form either
consulting or technology. So one should ask if they are really qualified to run e-retail businesses.”
In the world where old-fashioned retail meets high-technology and innovative management, the
winners could well be those who understand dimensions.

What the consolidation?

 High operational costs affect profit margins.
 Most e-commerce sites compete on deep discounts, which hit their margins.
 Some firms feel the time is right to cash in on brand, customer base.
 Private equity (PE) and venture capitalists (VC) are eyeing safe exit while e-
commerce ventures are still profitable.

What makes a Long-Term Player?

 Loyal customer base, fundamentally strong business models, clear product/service
differentiation.
 Deep pockets to tide over initial gestation period.

Challenges for E-Commerce Sites

 Low customer loyalty
 High returns rates on cash-on-delivery
 High cost of customer retention

State of Play
 Acquiring site is a good way to built brand, broaden loyal customer base and add categories.
 The companies that are selling have real valuations, real transactions and real customers,
and are not based on eyeballs.

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E-commerce companies in India offers the most tangible and finest e-commerce solutions, provide
high end e-commerce solution taking utmost care of the privacy and security of the e-commerce
website. E-Commerce service includes shopping carts, database programmers, graphic design
services, graphics, e-business, Flash designs etc.

Top ten e-commerce companies in India

 20North.com:

This website offers variety of products like electronics ,books ,music ,movies ,car accessories. The
site also offers lucrative deals. Log onto the site to shop. Happy Shopping!!!

 99labels.com:

This site offers many fashion and luxury brands at good prices. Check this site for more brands .

 Dealsandyou.com:

This site offers various kinds of deals be it holidays, shirts etc. Also this site gives heavy discounts
on regular basis that cab be profitable for the shoppers. Browse this site for more.

 Fashionandyou.com:

This site also is a great place to shop and that too sitting at home. Also this site declares sale and
heavy discounts almost every day. Sign Up today to get more deals.

 Flipkart :

This site offers various kinds of products and that too at one place. Mobile, its accessories , books,
camera and laptop accessories. and many more things are available on this site. One can find deals
for home appliances also that are available at affordable prices. Check this site

 Indiangiftsportal:

This is known for providing gifts for various occasions like birthdays ,anniversary, wedding, bhai

45
dooj, diwali and many more .Also flowers, cakes ,chocolates and many more things are offered by
this site. Browse it today to send gifts to your loved ones.

 MagazineMall:

This company specifically deals in magazines and one can get magazines of different and
unique categories like Gardening/Housekeeping, lifestyle, fashion, luxury, current affairs
and many more.

 Bindaasbargain:

Here new deal comes everyday at 10 am and it is India's first One Deal A Day online shopping
site.Check out the site for new deal. Happy Shopping

 Buytheprice.com:

The site offers Mobiles, Computers, Cameras, Home Appliances ,Life style, Audio and Video and
much more. Variety of products are available under each category.

 Perfume2order:

It has categories like Perfumes for Men, Perfumes for Women, Deodorants & Deo Stick, Perfume
Gift Set, Designer Wallet & Belts, Flowers, Handbags & Clutches, Sunglasses and many more
things.

E-commerce in Global Sourcing Scenario

What Is E-commerce And How Does It Augments Global Sourcing?

E-commerce or electronic commerce, as it is popular, allows domestic as well as international trade
over the Internet. The advent of E-commerce is boon for global sourcing and import and export.
The boost to global sourcing and import/export through E-commerce is because of its to conduct
online marketing, monitoring supply chain and monetary & data transaction in a dependable
manner.

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Evolution of E-commerce with Global Sourcing?
It is hard to tell whether import/export volume has swelled because of E-commerce but sure it made
global sourcing easier to monitor with its evolutionary phases. Three decades ago, it facilitated fund
transfers- albeit electronically besides facilitating exchange of POs and invoices in international
trade. Electronic teller machines are the recent manifestations now overtaken by internet creditcard
processing and endorsement of unsigned invoices even in international trade.

Why is E-commerce Popular in International Trade and Import/Export?

Looked at from both import and export traders' perspective, international trade is easier conducted
electronically. Here are the points why present international trade depends much on E-commerce.

 Quick and ease of setting up E-commerce storefronts for both global sourcing as well as
import/export.
 Automatic running off of an import and export outfit without having to recruit many staff.
 Global sourcing agents/companies can evaluate/list import/export vendor Online.
 Software assisted documentation for each global sourcing and import export transaction
 Ability to handle multiple, quick and secure data and money transaction crucial to
international trade, simultaneously

In international trade, global sourcing happens to be one of the chief aspects of import and export
business. Global sourcing is an integral part of B2b scenario and has essentially transformed world
economies as well as boosted business in a great way. Nonetheless, it is also giving great
transformation to the work culture around the globe with China playing a lead role in global
sourcing. Nevertheless, it is also transforming work cultures around the world silently with China
business playing a major role.

Being an extension of open market dynamics, global sourcing facilitates the export and import of
goods to be in the reach of several small and medium enterprises in different countries. In this b2b
scenario, E-commerce plays an active role in the global sourcing where the business houses are
putting in deep efforts and reaping the benefits. In this rally of export and import, traders happen to
claim the share of the pie in global sourcing.

E Commerce & Global Sourcing

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  Global sourcing is one of the widely known strategies of ensuring smooth business and
access to markets in a cost effective manner. In such a scenario, E-commerce has brought in
a new transformation. It has added to advantages like removing the barriers of time zones,
differences in costs, geographical locations etc. This has resulted in a major push in
development in infrastructure, technology and several other sectors across the globe. As we
see, E commerce is driving the export and import and propelling the economic growth of
numerous developing as well as developed nations. Business strategies are becoming easy to
execute and business houses are having a wide range of options from where they can make
their choices.
 E-commerce has made the path of business smoother and has facilitated not only in lower
cost, but also resulted in procuring material from places where there is specialization.
Moreover, business negotiations are easier and decisions are quicker due to this boon.
Driving the import and export business in this global sourcing scenario has opened new
frontiers for higher growth. The ease in supply chain is one of the best advantages that has
come from e-commerce in the global sourcing scenario.
 China, a major player in the global sourcing scenario has reaped several benefits in the e-
commerce enabled era. The use of internet has facilitated trade and boosted it at an immense
rate. Business from all over the world has been bagged by this country in spite of the
competitive market. Chinese traders have minted fast money and are still running in that
race.

Security concerns in Global Sourcing

E-commerce is not without security concerns, loss/misuse of encrypted data which are still being
seriously being viewed by import/export operators before engaging in international trade
electronically. The truth is E-commerce providers employ SSL (Secure Sockets Layer) to encrypt
data/money (remember banks) transfer from your desktop to your clients'. You can say, E-
commerce is secure for both import/export operators as well as global sourcing agents alike.

E-commerce has arrived on the global sourcing scene as both import and export and international
trade partners are accepting it. Despite its growing stature and popularity E-commerce is still
thriving in retail sector domestically and the international trade needs to cover a long distance

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before it catches up. Another reason for import/export operators' leaning towards E-commerce is the
growing costs of delays in processing POs and invoices through traditional methods which render
global sourcing useless.

E-commerce: A Boon for the Current Economic Downturn

E-commerce: A Boon for India

By the end of 2011, the e-commerce market in India had clocked close to Rs 50,000 cores. It is
interesting to consider whether the global economic downturn may have negatively impacted the
growth of e-commerce or possibly accelerated it as consumers look to new online channels which
can often deliver greater value than traditional stores.

Today, even though there are less than 10 million internet users who are actually engaging in e-
commerce activities, there are about 150 million internet users in India or around 75 million
households that are ready for e-commerce.

The growing reach in terms of internet connectivity to the interiors of India coupled with the
positive experiences of end consumers when buying online beyond the metros and big cities are
key drivers of the e-commerce boon in India. Businesses in even the smallest towns and villages
are becoming increasingly aware of e-commerce and are excited by the growth potential.

The growing penetration of e-commerce along with positive consumer experiences is reflected in a
trend towards higher value online purchases. Today, consumers across urban India are confident
enough to make purchases that exceed Rs 20,000-25,000. Earlier, the same shoppers stayed in the
Rs 2,000-5,000 ranges. According to one study almost 57% of business for e-commerce product
sites came from tier I, tier II and tier III cities while the eight metros accounted for the remainder
43%. The same pattern was visible in the service sites too, with tier I, tier II and tier III cities
contributing 54% of revenue versus 46 % by the eight metros.

According to a report by the IAMAI, the current e-commerce market in India is around US$ 10

49
billion. But with different levels of adoption, the market has the potential to grow anywhere
between US$ 70 billion – US$ 150 billion under one scenario and at another level it can grow
between US$ 125 billion – US$ 260 billion by 2024-25.

E-commerce: The world over

Globally, the scenario is much the same. Brazil, one of fastest growing economies in Latin America,
is seeing considerable growth. According to a recent report, it estimates business-to-consumer
(B2C) ecommerce, including both retail e-commerce and online travel sales, will total to $18.7
billion in 2012, a growth of
21.9% over the previous year. Brazil will account for more than half of the total B2C e-commerce
sales in Latin America through 2013, thanks in large to its huge populace and growing number of
online buyers.
Retail e-commerce itself in the U.S.is predicted to grow at 17% and it will likely account for $200
billion in sales in 2012 , according to a presentation at a popular forum. Retail e-commerce totalled
$48.2 billion during the third quarter of 2011; an increase of 13.7% compared with the third quarter
of 2010, according to estimates from the U.S. Census Bureau. 2011 also saw the European online
market boom despite the floundering euro. Germany’s online trade increased 17% in 2011 to
€21.48billion compared to 2010, crossing the €20 billion mark for the first time, outstripping
traditional mail order sales by 10%. A similar growth rate of 10% to 15% is expected in 2012.

In the global scenario, China is fast emerging as the biggest player in e-commerce. According to an
e-commerce report, by 2015, it may well surpass the U.S. In an astonishing illustration of its online
growth rate, China has added the equivalent of the entire population of France in internet users in
each of the last four years. It will add the equivalent of the entire population of Canada as e-
shoppers in each of the next four years. China is projected to rise from 145 million e-shoppers
today to 329 million by 2015.

Key reasons for the success of e-commerce

 Shopping 24x7: E-commerce facilitates shopping anytime, anywhere and for almost
anything desired. Busy consumers prefer this to the restrictions of when a mall/shop is open

50
 and the need to physically travel to a shop. Online business takes shopping a step further by
taking itself to the customer creating conveniences of shopping anywhere and at anytime.

 Reduced operational cost: Since the entire business can be moved online, the need for
physical stores has become obsolete. Less infrastructural investment and associated labour
costs drives up the profit margin. The seller can then transfer this benefit to the customer in
the form of discounted pricing which boosts the appeal of online shopping.

 Easy to compare: It is far easier and quicker to compare prices of goods online, equipping
the customer with the information to decide the right price or terms for themselves. The
comparison is not restricted to items from a single seller, or a single region. One can explore
products across global markets via e commerce.

 Safe & secure:Customers can trust the process of going online and purchasing only when
transactions are fast, convenient and secure. A high degree of integrity is possible only when
the online electronic payment provider is reputable and trustworthy. In India, all payment
transaction providers are required to comply with the security requirements laid out by the
Reserve Bank of India making the system more robust and reliable.

 Increased reach for the merchant: Just as the customer finds them able to venture across
geographic markets, the merchant too is able to display his product to customers in new
territories. Market penetration also becomes far more achievable with e-commerce; it is
possible for a merchant in Mumbai to extend his reach to north-eastern cities or even rural
villages that are now connected by the online network.

 Social media trend: In India, with the increasing propensity of social media, businesses
have now begun to engage their customers on social networking portals such as Facebook.
Promotions, sales and new products are increasingly showcased through such channels and
mobile apps are now available that suggest products to users based on their profiles. These
are likely to be rapidly developing marketing channels for the future.

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The e-commerce world is changing rapidly in the digitized world. These e-commerce developments
may have been accelerated by the global economic downturn which may be driving consumers to
find new ways of reducing their costs of living. The online channel offers a clear value proposition
for both merchants and consumers making it the most sought after and exciting business model
today

Factors affecting influence distribution and forms of global e-commerce

Stage Economic and Socio cultural Political legal Supranational

infra structure factors factors institutions
related factors
Internet adoption Per capita Literacy rate and The internet's UNDP-
GDP computer skill democratic introduction of
Nature the
incompatible internet in
with many countries
authoritarian
political
Availability of English language structures GATS-
telephone and skill competition
computer in telecom
sectors
Pricing structure Viewed as a Tariff and non ITA- reducing
tool of tariff barriers to the price of ICT
cultural ICT products.
imperialism in products
some
52
Buying/selling Availability of Intellectual Redress UNCITRAL
online credit property mechanisms in model law
protection case of
problems in
online
transactions
Advertising and Operating speed Influence of Ban on some Products can be
searching phase of language and website in advertised and
symbols used on authoritarian searched
computer and
site visited and regimes globally on
modern size
purchase GTPN of

decision UNCTAD
Payment phase Penetration rate Forms of Governments' UNCTAD smart
of credit cards payment: concern on card
check, wire the outflow of
transfer, cash foreign currency.
on delivery
etc,
Delivery phase Delivery means Products stolen Tariff and non- Electronic
and some tariff delivery free
infrastructure countries barriers of custom
duties in WTO
member

53
Brief Review
In present scenario E-Commerce is playing very essential role in the online business. Although it is
one of the best & cheapest intermediate for reaching out to new customers in the online market, if
e-commerce implemented effectively, it also offers a smart way of doing online business &
expanding it more.
An online business eCommerce podium is planned & implemented to make the most of its reach to
potential customers and provide them with a convenient, satisfying & protected shopping
experience.
Advantages of E-Commerce to the Online Business
 E-Commerce helps to Increase the sales revenue to the business
 Business people can spend less money and earn high profits with e-commerce
 It is very Easier to scale up online
 Easily we can track the segment of customers who are happy with purchasing goods through
online
 Avoid losing sales to competitors who are online
 Instantaneous global sales presence in quick time
 We can Operate the business in 24 *7 basis
 Easily we can increase our business customers
 We set up shop anywhere in the world, self-governing of geographical locations
 Inexpensive way to turn your Web site into a revenue center

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 Reduce Customer Support costs via e-mail marketing & customary newsletters
 We can create customized mailing list
 Easily we can drive free traffic to the website
 Instantly we can develop our business across the internet by using various e-commerce
strategies
 Customers can easily buy their products by using different payment gateways
 Develop more shopping carts by using e-commerce
 We can easily promote our business website by using various promotional activities such as
Search Engine Optimization, Pay Per Click Management, Email Marketing, Social Media
Optimization, Online Banner Advertisement, Online Branding and Affiliate Management etc

B2C - business to consumer

In the Australian context B2C (business to consumer) trading activity has been slow to take
off as at first consumers had doubts about the security of credit card transactions.

Initial B2C trading focused on music CDs, software and books - items which were compact
and easily shipped and where prices could be slashed once the retailer's cut was taken out of
the margin. The Amazon book store would be a good example of this. These products
pushed the perimeters of the market out for goods bought on-line.

Books and CDs are relatively generic products. A CD bought in the US will have the same
music and quality as one bought locally (the exception is the cover art) and so there is no
doubt in the consumers mind exactly what the product is. This is not the case with clothing,
where sizes can confuse the purchase decision... and where tactile senses figure strongly in
the purchasing decision.

Ebay has really transform purchasing behaviour on the web. Many people have made their
first ecommerce transaction on Ebay. Many people sell on Ebay too, given raise to the work-
from-home/drop shipping model of ecommerce.

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Interestingly though B2C transactions of previously localised or hard to find products can be
extremely strong. If you have a unique product that is highly relevant to a niche audience,
you are likely to do very well on the web.

Although sales are increasing rapidly on the Internet, the volume of turnover figures
continue to fail short of industry estimates. But as retail web sites become more navigable
and privacy policies are displayed, more people will be drawn to Net-based purchasing by
lower prices and convenience.

B2B - business to business

On the Internet, B2B (business to business) is the exchange of products or services between
businesses rather than between businesses and consumers.

Although early interest centered on the growth of retailing on the Internet, forecasts are that
B2B revenue will far exceed B2C revenue in the near future.

According to studies published in early 2000, the money volume of B2B exceeds that of
B2C by 10 to 1. Over the next five years, B2B is expected to have a compound annual
growth of 41%.

Payment Gateways

Both PayPal and Paymate offer credit card to bank account payments. Using one of these
services you can invoice a customer, they can pay on Paymate and the funds will be
deposited in your bank account ... less a transaction fee.

Unlike a credit card merchant facility you will not have ongoing, minimum monthly fees...
and the transaction fee is better than what most card companies offer small merchants.
Additional these service are being backed into other ecommerce sites and shopping
carts. Ebay for example uses Paypal to process some payments.

The Rise and Rise of Auction Sites

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Auction sites such as Ebay and TradeMe have done an enormous amount to get ordinary
people involved in online trading. Today many Ebay merchants are establishing their own
web sites to avoid Ebay and Pay Pal fees. They have learnt about how to present their
product in their Ebay store and what issues are important to their customers in purchasing
their product and now they are ready to start their own web site.

Security

On the Internet, security is handled by passing "keys" between Internet server and client
browser. When entering a secure site your browser is passed a public key by which
transactions between you and the web server are encrypted. The servers key is always kept
private.

On your web site security can be handled two ways - depending on your budget. You can
"piggyback" on someone else's "key" or you can register and pay for your own key or SSL
certificate at Thwate or Verisign.

Generally today businesses who host web sites offer access to a secure server and you can
use their server and secure certificate for less than if you registered and paid for your own
key.

However the person browsing your site will notice the URL change to one they do not
recognise - or trust. This may put your customers off (although there is no evidence of this).
Therefore one of the advantages of buying your own key would be to have a URL for your
secure pages that is consistent with the rest of your site.

Presently, in Australia, Verisign may sell you a key for over $800 while foreign ecommerce
providers like Instant SSL can sell it for $150. Although Verisign will argue that their key
comes with a range of value add benefits, the bottom line is the product, i.e. the key, is the
same.

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 Case Study on E- Commerce in Indian Scenario as an Example

3.1 Introduction

In the era of economic liberalization and increased competition, Indian industry is attempting to
harness technology to succeed in achieving its business objectives. In doing so, it has focused on
balancing the benefits provided by new technologies with the associated risks inhaling one’s
business depends on it. This has resulted in a race to be the first to be second in implementing new
technologies with most organizations waiting for their peers to explore new areas before venturing
into them.
The basic elements required for successful business engagement are changing rapidly. Pressures to
economies, speed up operations, and supply superior service are constant. One of the most visible,
challenging, exciting, and ill-understood means of responding to these pressures is the use of a
number of electronic channels, particularly the Internet and its offshoots.
3.2 Objective

This is study is a research into the use of e-commerce by companies. This study is conducted to
evaluate the perceptions, status, and triggers on the use of e-commerce in Indian companies. This
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survey has been conducted simultaneously in a number of countries in the Asia-Pacific region. The
results are expected to contribute significantly towards the current thinking regarding e-commerce
in this region. The results presented in this report pertain to the Indian survey.

The survey sample consisted of more than 110 Indian companies, 69 of which had a minimum
turnover of INR l billion, and 17 with an annual turnover above INR 10 billion. We chose the
largest companies in the country because they were most likely to have the greatest resources to
commit to e-commerce and potentially the largest benefits to reap. They are also the ones with,
arguably, the greatest cultural and organizational obstacles to overcome in order to do so.
The research carried out by KPMG India and that took place during late-1998 was referred to while
carrying out this study. Respondents included CEOs, CFOs, CIO’s, and Heads of Marketing at the
companies surveyed.

3.3 Survey Methodology

The research study was conducted both Primary as well extensive Desk Research for this report.
Secondary data sources were used to gain a comprehensive and in-depth understanding of the E-
Commerce market in India. Inputs related to the internet users in India, and segment-wise users of
Internet in India etc. have been taken from I Cube 2006, syndicated research product of the e
technology group at IMRB International. These annual syndicated set of reports on the Internet
market in India are based on a large scale primary survey covering 65,000 individuals across 26
cities in India.
Information from various published resources and other research bodies were also used to perform a
data validation check and also to reach at the final numbers. Primary Research was conducted using
in-depth interviews with large and medium-sized B2C and C2C E-Commerce players. A detailed
questionnaire was administered to the players from various verticals of the E-Commerce Industry

Respondents were required to classify their organizations as belonging to:

* Manufacturing (MFG),

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* Financial Services (FS),

* Computers & Communications (C&C), and

* Other Industries.

Data Analysis

4.1 Usage of E-Commerce in India – a Demand Side perspective

Since the introduction of E-Commerce, there have been debates on future of its prospects in India.
Would it be as successful as it is in US or is it a mirage that attracts many but offers nothing
worthwhile? True enough; the players in the online marketplace are still struggling to settle with a
successful business model. Most of them are settling for Advertising Model, hoping it would help
them breakeven. However, to grow beyond, the majority of the revenue needs to be generated from
customers. Customers on the other hand, have become choice-spoilt. There is no dearth of offerings
for them. They skip from one seller to other in search of best deals in the standardized products
market.
In this section, we would,

• Focus on the usage of E-Commerce in India, and

• Understand the triggers and barriers for the online marketplace

4.2 Usage of E-Commerce

According to the survey conducted among the Industry players, the E-Commerce Industry in India

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was worth INR 7080 crores at the end of 2006-07. Is it big enough? How much is it expected to
grow?
 Indian e-commerce market hosted US$3 billion of transactions in 2011 (Source: IAMAI)
 It is forecast that more than US$20 billion worth of transactions will be carried out online
over next five to seven years in India and 12-15% of the country’s shopping activities will
move online. (Source: IAMAI)
 A total of 9 million Indian internet users carried out online transactions in 2011. This
number is predicted to reach 38 million by 2015. (Source: Avendus)
 India’s B2C market is expected to grow at a CAGR of 34.2% between now and
2015(Source: E marketer)
 Online retail sales will reach US$2.4 billion (excluding online travel) in 2012, with the
number of online buyers in the country expanding to 21.5 million (Source: E marketer)
 In November 2011, approximately 60% on Indian online users visited retail sites, with 7.6
million and 7.1 million users visiting coupon and consumer electronics sites
respectively(Source: Comscore)

The adoption and usage of E-Commerce in the country is a function of the overall environment for
Internet usage in a country. To correctly understand the likely growth path for E-Commerce in India
it is imperative to understand the internet ecosystem in the country. Some of the key variables that
need to be understood are the proportion of computer literates, internet penetration, frequency of
access to the internet, purpose of internet access etc. A correct mapping of these would help in
understanding the overall framework of E-Commerce in the country.

Source: I-Cube 2006 Syndicated Research of e-Technology Group @IMRB, March 2006
Figure 4.1: Frame-work of E-Commerce in the Country

The PC literate population is on a fast growth curve having grown 100% in 2006 over 2004.Though
in India overall penetration is still low the important factor is that a critical mass of users is shaping
up which will fuel rapid growth over the next 3-4 years. A Claimed or Ever Internet User is defined
as one who has ever accessed Internet. A subset of Claimed Internet users, Active Internet Users are

61
defined as those who have accessed Internet at least once in the last one month. They are the regular
users of Internet and are aware of the recent trends and applications emerging on the Internet. The
population of Active Internet Users was 21 million in March 2006.As these Internet Users mature
with respect to exposure and awareness of internet, they tend to spend more time online; access
internet more frequently and surf non-communication based applications and advanced online
Applications like gaming, E-Commerce, etc However, as it is evident from the charts below, E-
Commerce is still not the key driver of the internet. Internet usage in the country is still driven by
email and information search

E-Mail Chat Information Entertainment E-Commerce

Internet Users: Key Activities

However, the interesting part is that out of the 13.2 million internet users across 26 cities covered in
I-Cube 2006, (Syndicated Research of e technology group @IMRB International),14.2% use the
internet to buy travel tickets; 5.5% people do online shopping especially products like Books,
Flowers, Gifts etc. and 5% people deal in stocks and shares through the internet. Though the
percentage contribution of E-Commerce is almost same over the years, however, the number of
Internet users using E-Commerce is growing rapidly.

Thus, E-Commerce is surely being adopted by the Internet users as a way to shop. They are buying
a variety of products online and visiting various websites to buy products from. Given the rate of
growth in E-Commerce users, size of the E-commerce industry is expected to reach INR 9210
crores at the end of 2007-08, a big jump of 30% over the current industry size.

4.2 Triggers and Barriers for the E-Commerce market in India

In addition to the industry size, it is imperative to understand the reasons behind the growth and
reasons hampering the growth E-Commerce industry in the country. This section elaborates the
triggers and barriers that impact the adoption of E-Commerce by the Internet users we would start
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by enlisting the triggers which motivate the online shoppers to buy Products online.

Table 4.1: Triggers in buying through internet

As evident from the table above, time saving is the major reason that drives Internet users to shop
online. It is followed by convenience of anyplace, anytime shopping online. Online stores do not
have space constraints, thus, a wide variety of products can be put for display. Companies can
display whole range of products being offered by them. This further enables the buyers to choose
from a variety of models after comparing the looks, features, prices of the products on display.

To attract customers to shop online, e Marketers are offering great deals and discounts to the
customers. This is facilitated by elimination of maintenance, real-estate cost of the seller, selling its
products online. An insight into some of the problems stated by customers while buying through
Internet will help us to have a closer look at the issues which need to be addressed by the online
community.

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 Table 4.2: Barriers in buying through Internet

Absence of touch-feel-try creates concerns over the quality of the product on offer. Another
roadblock in the way of E-Commerce is lack of interactivity so as to allow for negotiations between
the buyer and sellers. In addition to above, the security of online payments is a major issue
requiring immediate attention of the e Marketers. Increasing rate of cyber crimes has made
customer apprehensive of revealing their credit card details and bank details online.
Moreover, the duration of selecting, buying and paying for an online product may not take more
than 15 minutes; however, delivery of the product to customer’s doorstep may take about 1-3
weeks. Further more our past observation has been that in India shopping is an experience itself.
Consumers look forward to it as an opportunity to get out of their homes and interact with other
people. The recent growth in the malls and the hypermarkets only corroborate this fact. Thus,
Ecommerce has to bank on the convenience and discount platform as there is no way that they can
compete with the offline platforms on the experience that they provide.

There is no doubt that Internet shopping has a number of benefits to offer. With changing lifestyles,
E-Commerce is surely the most appealing and convenient means of shopping. However, the grave
issues surrounding the market do not make it the “choice” of most of the Internet users. Addressing
the above specified issues, thus, has become critical to expand beyond the current user base.

4.3 Categorization of Internet Users

In I-Cube 2006, a survey done among Internet Users, details of products they looked information

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for and the products bought by them online in last 6 months were captured along with the details of
products they are likely to look information for and the products they are likely to purchase. On
analysis of the data, following trends were observed:

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 Table 4.3: Category of Internet Users

According to the data, of total 21 Million Active Internet Users in March 2006 (Source: I-Cube
2006), around 53% have had looked for information on travel while 27% are likely to look for
information on travel services online. Though, only 10% of the Internet Users have booked Air
tickets rail tickets or hotel rooms in last six months, only, 22% are likely to avail these services in
the near future. Except for Travel, percentage users looking for information and buying online is
pretty low. For instance, only 13% of the total Internet users have had looked for information on
online classifieds, however, only 2% of the total Internet Users have paid for availing any of the
services online. In future, only 3.4% of the total Internet Users interviewed is expected to avail paid
classifieds service online.
Based on their behavior towards buying online, Internet users can be classified into the following
four categories:

Table 4.4 Classification of Internet Users

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Though majority of Internet Users look for information on various product categories online, a
relatively smaller portion of them actually buy online.

Some of the reasons to explain this behavior are:

1) Apprehensions with paying online
2) Lack of touch-feel-try
3) Concern with authenticity of seller and products sold online
4) Time lag between placing order and delivery of the product
The sequence in which the above-mentioned category of Internet Users can be targeted by the
online players:

Fig 4.3: Segmentation of Internet Users based on probability of converting online

It has been observed that most of the Online Shoppers start their e-Shopping journey with buying
Air/ Railway Tickets. This might be because the service provided in case of Travel, especially
ticketing is undifferentiated with the place of buying the tickets. The buyer is ensured that he would
get the same service as his co-passenger who has bought his tickets from the physical counters.
However, the need for ‘touch-feel-try’ might be important for product categories like
Apparels, Jewelry. Product categories like Electronics, Mobile phones fall in the zone of’ high-risk’
products, for which there are many ‘LFIs’ and very few ‘Enthusiasts’. The above-mentioned

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factors make ‘Travel’ more attractive to the Enthusiasts than other product categories. As a result,
the Online Travel Industry is growing at a faster pace than other online categories, we are,
therefore, dividing the rest of the report into two segments:

1. Online Travel Industry, comprising Air, Rail, Hotel Reservations; Car Rentals, Tour Packages

2. Online Non-Travel Industry, comprising e Tailing, Digital Downloads, Classifieds and Paid
Content Subscription
Research Findings
5.1 E-COMMERCE IN INDIA
Statistics for Ecommerce in India
 Indian e-commerce market hosted US$3 billion of transactions in 2011 (Source: IAMAI)
 It is forecast that more than US$20 billion worth of transactions will be carried out online
over next five to seven years in India and 12-15% of the country’s shopping activities will
move online. (Source: IAMAI)
 A total of 9 million Indian internet users carried out online transactions in 2011. This
number is predicted to reach 38 million by 2015. (Source: Avendus)
 India’s B2C market is expected to grow at a CAGR of 34.2% between now and
2015(Source: E marketer)
 Online retail sales will reach US$2.4 billion (excluding online travel) in 2012, with the
number of online buyers in the country expanding to 21.5 million (Source: E marketer)
 In November 2011, approximately 60% on Indian online users visited retail sites, with 7.6
million and 7.1 million users visiting coupon and consumer electronics sites
respectively(Source: Comscore)

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Table 2: Top Retail Sites (Source Comscore Media Matrix, March 2012; Total Audience)

Table 3: Purchase (Source: Global WebIndex)

Some Trends in Mobile, Digital Advertising & Social Media

 Of the India’s general internet population, 9% of go online via mobile. (Source: IMRB)
 At the beginning of Q4 2011, the number of mobile internet users reached 43 million.
(Source: IMRB)

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 By 2015, India’s 4G service is projected to account for 28 million connections. (Source:
Avendus)
 India could become one of the top five countries for smart phones by 2016, representing
almost 10% of the entire world supply. In 2011 it represented 2.2% of it. (Source:
IDC/Campaign Asia Pacific)
 Online Advertising in India is currently generating $410 million a year and represents 7% of
total advertising spent. By 2015, it is expected to generate $1.6 billion and comprise 10-15%
of India’s overall Ad spent. (Source: Economic Times)
 Mobile Advertising spent came to US$56.5 million in 2011. It is forecast to reach $247
million by 2015. (Source: E marketer)

 India’s total social networking audience now totals 43.5 million according to one survey.
(Source: Comscore)
 There are more than 33 million users who on more than one social networking sites in India.
These sites are attracting more than 45,000 news users every day. (Source: Scribble/
Techonzo)
 Every so often there is a shift in the prosperity of a market based on region. Right now the
focus is on the ecommerce market of India, in particular focusing on the apparel industry.
According to statistics, the Indian apparel market is growing faster than any other industry
in the country, in regards to ecommerce.

 By the end of 2013, the country’s top ecommerce retailers are expecting for their sales to
double. A study conducted by HomeShop18.com further breathes truth into their claims, as
their study revealed that in India; a piece of clothing is purchased approximately every 40
seconds. There is just a high demand for clothing on the ecommerce market right now, and
many e-shops are springing up as a result.

 Part of the growth is due to the growing development of the country, where more citizens
have access to the internet each day; and not to mention the growth of population in India.
The mix has bred a whole new consumer base, whose preference is to purchase clothing
online, where they can find the brands they like from various retailers without having to
leave their homes.
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  As the growth in population and in ecommerce preference is so rapid, there is a high
demand for apparel online, which keeps the retailers stocking the shelves and offering new
styles on a more than regular basis, also prompting more sales.

 The Indian ecommerce market can also owe its growth to an expanded payment method
circle that allows customers to pay for their purchases when they get the items delivered.
This is called COD, or Cash on Delivery. Since the electronic card option is not taking off as
fast as the ecommerce market is here, this offers an alternative for customers who otherwise,
would not be able to purchase anything online.

 In India, women are progressively becoming more in charge of their own lives. This
freedom of empowerment has been part of the growth cycle, as they are now becoming
more active shopping online; whereas before, women did not really have that choice; so
while the consumer market was there, half of it could not partake in the industry.

 According to Deepa Thomas, an eBay specialist of India’s eBay commerce, 41% of sales are
taken by the lifestyle category, while clothing ranked above it. It is evident that this industry
is currently very lucrative, and that entrepreneurs would be smart to take advantage of the
growth in India. With retailers expecting their sales to double by the end of 2013, if all
processes remain the same, there is not telling how much the increase will be by the end of
2014.

Purchase history: 62 per cent of shoppers having shopped for more than a year. 37 percent of
online shoppers have started shopping online in the last 12 months. 67 per cent of online shoppers
have shopped online as recently as three months showcasing the growing acceptance of ecommerce

Frequency of purchase: 67 per cent of online shoppers have shopped online as recently as three
months showcasing the growing acceptance of ecommerce. 53 per cent of online shoppers have
shopped online more than five times, 27 per cent of online shoppers have shopped online more than
10 times.

1. A top state/city representation: Maharashtra: 29 per cent (Mumbai: 24 per cent),Delhi

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 NCR: 19 per cent, Tamil Nadu: 11 per cent (Chennai: 7 per cent),Karnataka: 10 per cent
(Bangalore: 6 per cent), Uttar Pradesh: 7 per cent (Lucknow: 2 per cent), West Bengal: 6 per
cent (Kolkatta: 5 per cent), AndhraPradesh: 5 per cent (Hyderabad: 4 per cent), Rajasthan: 5
per cent, Gujarat: 4 percent (Ahmedabad: 2 per cent) and Kerala: 3 per cent.

2. Top City/Product Preference: Mumbai (24 per cent) holds the Top Slot for Every
Category, except jewelry. Delhi (19 per cent) fast competing with Mumbai in accessories,
apparel, gifts, home appliances categories and has piped Mumbai to rank first in jewelry.
Chennai (7 per cent) is at rank three for railway tickets, airline tickets, magazines, home
tools, toys, jewelry, beauty products and sporting goods categories. Bangalore (6 per cent) is
at rank three for books, electronic gadgets, accessories, apparel, gifts, computer peripherals,
movies, hotel booking, home appliances, movie tickets, health and fitness products and
apparel gift certificates. Kolkata (5 per cent) jumps to rank three in online music sales online
and is at rank four for the movies and the music categories.

3. 20 Products Bought Online: Books (41 per cent), Electronic Gadgets (40 percent), Railway
Tickets (39 per cent), Accessories Apparel (36 per cent), Apparel(36 per cent), Gifts (35 per
cent), Computer and Peripherals (33 per cent), Airline Tickets (29 per cent), Music (24 per
cent), Movies (21 per cent), Hotel Rooms (20per cent), Magazine (19 per cent), Home Tools
and Products (16 per cent), Home Appliances (16 per cent), Toys (16 per cent), Jewelry (15
per cent), Movie Tickets (15 per cent), Beauty Products (12 per cent), Health and Fitness
Products(12 per cent), Apparel Gift Certificates (10 per cent) and Sporting Goods (7
percent).

4. Satisfaction Index: 18 per cent of online shoppers are 'Highly Satisfied' with online
shopping and 62 per cent are 'Satisfied' with their online shopping experience making a case
for repeat purchases and peer to peer recommendations on this interactive medium. 17 per
cent are 'Neither Satisfied or Dissatisfied' - An opportunity to convert them towards this
increasingly high satisfying index. 3 percent of online shoppers are 'Dissatisfied' with online
shopping.

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 5. Top 5 Reasons to Shop Online: 70 per cent of online shoppers like 'Home delivery' about
online shopping, 62 per cent like 'Time saving', 60 per cent of online shoppers like the
'24x7', 45 per cent like the 'Ease of use' and 39 per cent of online shoppers like product
comparisons.

5.2 INTERNET GROWTH IN INDIA

E-commerce figures in advertisement are likely to record the maximum growth between the
years 2000 to 2003, because of the substantial addition to the user base expected in this
period. The emergence of broad band and the convergence of media are likely to provide
the thrust to the online ad-spend budgets of companies.

India to become second-largest internet market in 2014

The number of Internet users in India has reached 205 million in October this year, registering a
year-over-year growth of 40 percent according to a report by the Internet and Mobile Association of
India (IAMAI) and IMRB International. By December, the number is expected to reach 213
million.
The report also estimates that by June 2014, India will have 243 million internet users, at which
point of time, it is expected to overtake the US as the second largest Internet base in the world.
China currently leads with more than 300 million internet users while the US has an estimated 207
million internet users.
According to the report, the number of internet users in urban India was 137 million in October and
is estimated to touch 141 million by December. Rural India has witnessed year-over-year growth of
58 percent in active internet users since June 2012. In rural India, there were 68 million internet
users in October and this is estimated to reach 72 million by December.

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According to the report, the number of mobile internet users has also witnessed a steady rise, with
110 million mobile internet users in October. This is estimated to reach 130 million by the end of
December. In June, there were 91 million users accessing the internet on mobile devices, with 70.2
million users in urban India. This number rose to 85 million in October and is estimated grow by 47
percent and reach 103 million by December. Rural India is not that far behind in this regard with a
base of 21 million mobile internet users in June. It reached 25 million in October and will touch 27
million by December. Mobile usage and hence, mobile internet usage has seen a huge jump from
the 2012 penetration levels. Compared to the 0.4 percent mobile internet users in 2012, the
penetration has grown to 2.4 percent.
The report further finds that more than 50 percent of the urban internet users access internet daily.
However, this high frequency usage is not restricted to only the youth and working men; this habit
of accessing the internet daily is seen among other demographic segments as well, including older
men and non-working women. In rural India, 70 percent of the active internet users also access
internet using mobile phones, while 32 percent use internet only through mobile. The Community
Service Centers and Cyber Cafes are the main point of access for 40 percent of them. 

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5 to 10% of existing 50,000 dotcoms which are of Indian origin or are India oriented were likely to
survive in the next 5 years. Online advertising in India is poised for a stupendous leap.
A shake-out in the content providers segment following large-scale redundancy as e-commerce and
online advertising sink their roots deeper. Intense competition in the Internet Service Provider (ISP)
segment is likely to focus on generating alternative streams. In the case of Internet enablers and
software service providers, a significant increase in market size was expected in the long term. On
the structural front, a spate of mergers, acquisitions and alliances in the Indian Internet business in
the medium to long to long terms, paving the path for greater consolidation is expected.
Most large companies in the Internet business categories were expected to follow the merger and
acquisition (M&A) route to widen the portfolio of products and services, increase geographical
coverage and reduce the marketing costs and gestation period. Internet penetration was low in India.
India’s subscriber base reach 8.3 million users in 2005, with the highest growth rate being witnesses
by DSL (digital subscriber line) and cable connections. Dial-up connections, however would still
account for the largest share of internet connectivity options Net subscriber base of up to 45 lacs.

5.3 Research Highlights

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5.3.1 Respondents to the survey
Responses were received from 116 organizations. The organizations were asked to classify
themselves under one of the following sectors of industry:

* Manufacturing & distribution.

* Computers and communications.
* Financial services.
* Retail and wholesale trade.
* Other industries.
Some of the questions were analyzed by industry to highlight variations peculiar to those industries.
A significant majority of the responding organizations had global reach and marketed their
goods/services to both end-consumers and other businesses.

Use of e-commerce can be classified into 2 broad areas:

* Interfacing and selling to the end-consumer or B2C (Business-To-Consumer).

* Interfacing and trading with other businesses or B2B (Business-To-Business).

The following charts show that the main target market of the organizations that responded to the
survey included an even mix of both areas. The responding organizations were quite varied in terms
of size with the number of employees ranging from less than 100 to more than 10,000, and the
turnover ranging from less than Rs 10 million to more than Rs 10 billion. The annual InfoTech
spending of the organizations also varied over a wide range. While some organizations spent less
than Rs 100,000 on InfoTech per annum, there are others who spend more than Rs 100 million.

5.3.2 Strategic Importance of E-Commerce

Over half of all respondents said that e-commerce constituted either a substantial part of, or was
crucial to their, organization’s strategy. Only 4 per cent felt that it was of no importance to the
organization’s strategy. It is clear that e-commerce is increasingly being seen as a strategic tool to

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gain business advantage and competitive edge.

5.3.3 Potential Benefits

This section shows that companies are identifying the real benefits of e-commerce in terms of
opening up new markets, improving productivity, and automating their supply chains. Respondents
were asked to rate the potential benefits as relevant to their organizations. The respondents rated
Improved Customer Service and Improved Productivity as the Top Two potential benefits e-
commerce might provide to their organizations.

5.3.4 Realized Benefits

The chart shows the benefits realized by organizations using e-commerce. Improved Productivity
and Improved Product Quality have been rated as the Top Two realized benefits. Improved
Customer Service, rated as one of the Top Two potential benefits, is a close third.

5.3.5 Potential Barriers

The respondents rated Lack of Standard Payment Infrastructure and Trading Partners Technology as
the Top Two potential barriers to effective adoption of e-commerce in their organizations
.Infrastructure Cost and Security Issues figured as major concerns although they were not as

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important as the first two. We found that organizations are willing to make the necessary
investments in the technology as long as they could manage it efficiently and get satisfactory return
on investment. Our research in the European market indicated that security is an over hyped
concern. The tools for overcoming security risks are available but it remains subject to media hype.
Those companies that are most advanced in their use of e-commerce recognize this and, so, are
likely to regard it as a less significant barrier than those that have not.

5.3.6 Integration
Over half of all respondent companies had support at the board level and had allocated a budget for
e-commerce integration. Forty per cent of the organizations are taking measures to integrate e-
commerce technologies with their current operating processes and technologies. However, adapting
to e-commerce will not simply mean redesigning internal processes and customer interfaces.
Instead, companies will have to think of e-commerce as a new channel and not just a replacement
for existing channels which, in turn, means that they may have to start offering new services in
order to maintain their market image and position. Others will find that e-commerce provides them
with the opportunity to offer new services.

5.3.7 Implementation of E-Commerce Technologies

The charts show the status of implementation of e-commerce technologies in different industry
sectors. Internal and Internet e-mail, Websites, and Internet access are popular in all major industry
segments. Almost everyone uses internal e-mail and most organizations allow their employee’s
access to the Web. In 2 years, respondents from Manufacturing & Distribution companies favored
implementation of Extranet, Intranet, and EDI technologies while Financial Services companies
expected to have installed EDI, Extranet, and IVR systems, and Computers & Communications
were planning EDI implementations.
The following table summaries the most predominant e-commerce technologies that are
Currently being implemented and that will be implemented over a period of time in different
industrial segments.

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5.3.8 Functions Performed Electronically
The Internet was favored far more than all the other electronic channels with almost half the
respondents using it for news and information-based uses. The table ranks the functions on the basis
of percentage of respondents performing them electronically.

5.3.9 Transaction Volumes

Less than half of the respondents were able to provide details of the volume of transactions done
electronically. Of these, nearly half said that the volume of transactions in their organizations is
zero. Hence, most organizations surveyed are not able to determine the number of transactions
completed through electronic channels and many are yet to use these channels. Respondents were
asked for the approximate value of transactions currently completed through electronic channels.
Based on the table, the weighted average annual monetary value of e-commerce transactions is
approximately Rs 123 million for the respondents surveyed.

5.3.10 Governance
The sponsors within a company determine the scope and success of an e-commerce project. This
section reveals that InfoTech departments are taking the lead on e-commerce projects within their
organizations. Executive committee support in the for m of board approvals, and intervention to
ensure that the necessary business reengineering takes place to ensure that e-commerce is integrated
with business processes is critical to ensure that these projects deliver on promises. Respondents
were asked which part of the company was the principal sponsor of current or future e-commerce
projects. In nearly two-thirds of the companies, it was the Executive Committee. It was observed
that the InfoTech department champions, develops, and maintains these projects in a majority of the
organizations.

5.3.11 important features of maintaining Security of E-Commerce Transactions

The respondents were asked to rate the importance of features in establishing and maintaining the
level of trust required for employing e-commerce technologies effectively. It is interesting to note
that all the features have received very high ratings (a minimum of 67 per cent of respondents say

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that a particular feature is Important/Very Important/Critical). The highest ratings have been given
to Network Access Controls and Through-The-System Tests &Audits.

5.3.12 Trading partners

About 30 per cent of respondents had more than 5 per cent of their trading partners trading
electronically, and about half of these had more e than 50 per cent of their trading partners trading
electronically.

5.3.13 Characteristics of Trading Partners

The respondents were asked whether they agreed/disagreed with certain characteristics of their
trading partners. The charts show the cumulative responses of all the organizations. More than half
the respondents felt that trading partners were not a driving force behind their adoption of e-
commerce while, interestingly, trading partners+ technology was named as a significant barrier to
their adoption of e-commerce (Section 5.5). This implies that although the driving force behind e-
commerce was internal, its adoption was inhibited by lack of appropriate technology with the
trading partner(s).Trading partners were viewed favorably by more than half the organizations
surveyed in terms of considering concerns, having explicit role-based agreements, quality of
communications, long associations and levels of trust, while about a quarter of the respondents
viewed them as competitors in some areas. It is evident that most organizations work closely with
their business partners creating an environment with a large, unutilized potential for Business-To-
Business implementation of e-commerce.

5.3.14 Procedures Used By Organizations to Ensure Security and Proper Use of Compute
Resources
The chart details the procedures used by organizations to ensure confidentiality, security, and
appropriate use of computer resources.

5.4 Conclusion
From the survey, it is evident that the potential benefits offered by e-commerce are far from
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realized. The perception that trading on electronic channels cannot make money is challenged as
incorrect, at least in the Business-To-Business sector. There is also some expectation that, although
trading on electronic channels may take longer in the consumer sector due to the trading barriers on
the Internet, this, too, will soon follow. Electronic channels are forcing companies to re-think major
aspects of the way they are organized and do business. E-commerce raises major strategic issues
and is accelerating developments in areas such as globalization, branding, customer service, and
supply chain. Markets are being transformed as barriers to entry are torn down. This survey shows
that the application of e-commerce and the Internet in particular, extend beyond marketing to all
aspects of the supply chain. It also shows that the technical aspects are no longer as important as the
integration of business processes and the resulting need to re-engineer them across the organization.
But companies are approaching these developments piecemeal. If companies are to make profitable
use of e-commerce, then, its champions must make their cases heard at the highest levels.
This is an opportunity for the InfoTech and marketing departments to make their Board
aware of the effect of e-commerce not just from the technical point of view, but also in terms of its
impact on the bottom line. In our opinion, only those companies with an organization-wide
initiative, funded from the centre or, at least, on a joint venture basis between functions, with Board
approval, will emerge as leaders in what is a rapidly changing environment. Senior management
members who have earlier been responsible for the e-commerce initiative in their organizations
need to prepare a compelling business case, detailing the likely returns on investment, and submit it
to the Board. The rewards, both for the company and for the individual involved in shaping its
adaptation to the information age, promise to be well worth the effort.

Recommendations and Conclusion

6.1 Future Prospects on E-Commerce
The report of the United Nations Conference on Trade and Development (UNCTAD) on E-
commerce and Development makes the point that although world economic growth has slowed, and
in spite of the difficulties in which the information technology and telecommunications sectors are
mired, the rapid growth of internet use and electronic commerce continues. Estimates show that
internet use is increasing by around 30 per cent annually, and although the rate of growth of
transactions through the internet is much slower, e-commerce could represent up to 18 per cent of

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worldwide business-to-business (B2B) and retail transactions in 2006. Segments such as B2B have
shown rapid growth.
And in certain sectors, such as finance, travel services, software, information and other e-services,
online transactions have been growing at a much faster pace. For instance, in the developed
countries, online banking already represents between 5 and 10 per cent of total retail banking
transactions. Much of the growth has occurred in Asia.
The Report classifies India as a rising star in this regard, pointing out that India’s IT
services exports have almost doubled in two years and now account for more than 16 percent of
total exports and 8 per cent of all foreign exchange earnings. Given the extraordinary growth rates
of e-services exports, the latter figure is expected to reach 30
per cent by 2008. Policy measures to support exporters of e-services should focus on increasing
market access in eservices for exporters from the developing countries, as well as addressing
domestic obstacles related to technology, payments, infrastructure (telecommunications) and
standards
.But the overall message of the Report is a very positive one despite the current
slowdown, the internet and online services are poised to grow, and India will be one of the main
Beneficiaries. The e-commerce is one of the biggest things that has taken the business by a storm. It
is creating an entire new economy, which has a huge potential and is fundamentally changing the
way businesses are done. It has advantages for both buyers as well as sellers and this win-win
situation is at the core of its phenomenal rise. Though there are some weak links, with
improvements in technology, they will be ironed out, making the e-commerce easy, convenient and
secure. The e-commerce is certainly here to stay.

6.2 Recommendations
The most important factor that is necessary in growing eCommerce in India – Trust. If we look at
the Indian context, I feel that there is a general lack of trust between retailers and customers.
Consumers don’t trust the retailers because they feel that they are either being over charged or that
they wouldn’t be able to get appropriate level of customer service once the sale is complete.
Retailers don’t trust the customers because they feel that the customers will take every opportunity
to misuse the return or exchange policies. It is my opinion that this general lack of trust is the

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primary barrier that is impeding the growth of eCommerce within India. Here are some of the
practical techniques that online retailers can employ to improve this level of trust and build an
environment where customers feel safe in clicking that “Proceed to Checkout” button.

1. Customer Reviews
Today’s customers are putting less trust on website marketing messages and becoming more
influenced by recommendations from other people. Customer’s trust for an online retailer will
increase if the retailer offers an ability to let customers share their positive as well as negative
reviews about products or vendors. The key is to not “moderate” the negative reviews because by
allowing customers to post negative reviews, it will actually enhance the credibility of the retailer as
well as other reviews. Obviously, any foul language needs to be moderated but any genuine issues
with the products or vendors must be posted along with the positive reviews.

2. Clear shipping and delivery commitment

At the time of setting up products for sale, clear shipping and handling time must be associated with
the product. This information should be displayed consistently on all product pages so that
customer’s expectations around shipping timeline can be clearly set.

3. Analytics & Personalization

Although personalized product recommendations and content do not directly increase customer’s
trust, they do demonstrate to the customer that the online retailer is making a good effort in
understanding the customer’s individual needs and is acting upon them. This implicitly improves
the comfort level that the retailer is not just looking to sell products but is making an honest attempt
in building relationship with the customer.

4. Operational Reporting & Dashboards

Online retailers must invest in strong operational reports that provide alerts and metrics on orders
that have a risk of missing the service level that was promised to the customers. If you have
recently implemented an eCommerce platform, chances are that at times orders will get” stuck” in
various states. Therefore, it is important to establish thresholds around how long should orders stay

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in various states (such as “Processing for Payment”, “Preparing for Shipment” etc.) and then build
automated alerts when orders exceed these thresholds.

5. Vendor Penalties
In the Indian context, majority of the eCommerce sites work in a “drop-ship” model. This implies
that the online retailer doesn’t physically stock the goods, and instead relies on external vendors to
directly ship the merchandise to customer’s home. In this case, it is extremely critical to set clear
SLA’s on how long will it take the vendors to ship the orders. There should be financial penalties
built into the contracts if the vendors miss the service levels. Also, there should be penalties if the
vendors receive excessive negative reviews from customers.

6. Price Match Guarantee

A Price Match Guarantee (PMG) is a store policy which entitles a customer to a refund of the
difference between the store’s asking price and a competitor’s price. It can not only help build trust
with the customer, it can also help reduce price competition across online retailers. This may sound
counter intuitive but it is one of the most discussed examples in “Game Theory” and it has actually
helped retailers in US to avoid direct price wars. Take for example a firm like Circuit City that has a
price match guarantee, which looks good to a consumer. But that guarantee really allows Circuit
City to charge higher prices since competitors will be discouraged from setting a lower price that
Circuit City only will match when it must.

7. Well trained call centre

I recently called Airtel customer service to add Blackberry service to my cell phone. There was an
issue with their automated messaging system that was directing me to a wrong group within Airtel.
After calling 9 times, I gave up because every agent that I spoke to had the same scripted response
that I should call back again and press option 2. The point I am making is that although it is
important to train the call centre agents around specific customer service issues, what is even more
important is that the call centre agents be trained to have good problem solving skills, and they
should be empowered to own the problem resolution from end to end.

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8. Fraud Protection
Not only should an online retailer ensure that the appropriate security certificates are setup to
handle checkout related transactions, the sensitive customer and payment information should be
stored in an encrypted format. The messaging on the site should clearly indicate that the checkout
process is completely secure. In addition, there are third party Fraud detection services available
that help flag potentially fraudulent transaction based upon credit card usage velocity and other
parameters. These services would not only help reduce the credit card charge-backs for the retailers,
but will also improve the sense of security and trust with customers.
9. Proactive, timely communication
Are we there yet? If you have gone on a long drive with kids, chances are that you have been asked
this question. It is human nature to expect timely communication, especially when they are waiting
for something that they have already paid for. The retailers should ensure that every single status
update on the order generates an alert for the customer. Also, if the order waits in a specific state for
a timeframe longer than what was promised to the customer, an Email should be automatically sent
to the customers to make them aware of the delay. If the delay is longer than a few days, customer
should be contacted via phone and asked for approval for the delay or given an option to cancel the
order.

10. Charge only after order shipment

Customers feel much more comfortable if they know that they will only get charged once the order
ships. Currently, a lot of retailers charge the customer’s credit card immediately when customer
places the order. However, they should consider authorizing the amount at the time of order and
only charge the card once the order ships. This will also minimize any need to refund the amount
back to the customer in case the order needs to be cancelled for any reason.

11. Self Service Capabilities

The more online self service capabilities (e.g. order cancellation, modifications) retailers can
provide to the customers, it will not only help reduce the call centre expense, but will also build
more confidence with the customers. Customers will feel more in control because they wouldn’t
have to spend 10 minutes with a call centre agent to explain the issue – instead, they can directly

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resolve the issue online.

12. Real time inventory updates & safety stock

Retailers must invest in building automated capabilities that keep an up to date record of how much
inventory is available for all their products. Products must immediately become unavailable for
purchase from the site as soon as the inventory reaches below the safety stock. Canceling customer
orders due to lack of inventory is a situation that all retailers must avoid because this not only
frustrates the customers, it drops their confidence in the retailer’s ability to keep their promise. E-
Commerce will see a significant growth in India. However, the chasm between the early adopters of
eCommerce and the ones who are waiting can only be crossed by building a strong level of trust
with our customers – and winning them, one customer at a time.

6.3 Summarizing: Size of B2C and C2C E-Commerce Market in India

The total market size of B2C and C2C E-Commerce industry in India is around Rs. 7080crores at
the end of 2006-07. It is expected to rise to Rs. 9210 crores by the end of 2007-08.Following is the
break up for B2C and C2C ECommerce Industry in India for the year 2006-07 and 2007-08:

The Online Travel Industry has been driving the growth in the B2C E-Commerce industry, owing to
entry of low-cost airlines and increase in online bookings for railways and hotels. With an increase
in mobile subscribers across the country, the digital downloads segment is expected to be one of the
main contributors to the Online Non-Travel Industry in future.

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6.4 The Future of E-Commerce
E-Commerce is the future of shopping.
Thus, is would be apt to quote “The future is here. It’s just not widely distributed yet”-
William Gibson The Internet economy will continue to grow robustly; Internet users would buy
more product and buy more frequently online ; both new and established companies will reap
profits online; and…

• Safer Online Payment Systems: As the Internet becomes a safer place to transact, the amount
spent by the Internet Users online is bound to increase. Those apprehensive of divulging their credit
card and bank details would be active online shoppers. The Internet users are expected to buy high-
end products like automobile, property, home durables online.

• Customization of content and offerings: As the internet users mature, the demand for
customization will increase. The content would adopt the regional flavors. More niches will be
formed, seeking for offerings made for them and content that meets their requirements.

• More number of shoppers from Non-Metros: Currently, following the spread of users coming
from Metros and Non-Metros.
By the end of year 2007-08, the contribution from the Non-Metros is expected to increase. This
change would be bought by higher penetration of Internet in the small towns and limited reach of
physical distribution channels of the established sellers to these towns. These factors coupled with
higher disposable income would compel the Internet users in these towns to buy online.

• Expanding User Base: Going at the current rate of growth in the Internet users transacting online,
the user base for E-Commerce is expected to rise expand exponentially. A large portion of the
Internet population is under the age of 35 years and is increasingly moving northwards as far as the
purchasing power is concerned. The uncanny nature of this segment” to use now and pay later” is
going to play an important part in the future growth of Way of doing things will gain precedence.

• M Commerce: Currently E-Commerce is synonymous with PC and browser-based interaction.

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However, in the near future GPRS-enabled mobile phones will rule the online transactions. Today,
online downloads to mobile phones is limited to low value services like music downloads, picture
message downloads and ring tone downloads. However, as the mobile users get more familiar with
buying online, the purchase of high-involvement products is expected to rise. Certain verticals like
Banking and Finance, Travel, Entertainment, and Retail are likely to drive the growth of m-
Commerce in the country. In the recent past, E-Commerce and it variants like the m-Commerce
have yearned for the position of being the most important drivers of the Internet. They are
continuously evolving and upgrading to make a consumer’s e-Spending experience hassle free and
memorable. However, to attain that position, it needs to awaken its inner beauty – simplicity and
security of transaction.

6.5 E-commerce Solutions India

With the growth of e-commerce over the past few years, the number of e-business solution
providers in the industry has also grown drastically, especially in India. E-commerce can be
compared to a 24/7 open shop or a showroom catering to its clients and buyers. Therefore, a lot of
maintenance has to go into it. This is where the e-commerce solution providers step in, take things
in their hands, spend time and further enhance your business. Conducting business online may
sound very easy as you avoid a lot of unwanted hassles but a lot of skills and innovation is required
to keep it going. E-commerce involves doing market research, getting qualified traffic, converting
hits to business advantages and using information to generate new e-commerce from existing
clients. E-commerce solution providers in India with their in-depth research and skills will provide
you with tactics and strategies to make your business profitable. The first step for them would
ideally be to understand your business and requirements. A research will follow to find out the
predicted market potential, the best keywords and phrases, competition for keywords, search engine
relevancy etc.
The next step for an e-business service provider would be to find a way to get the visitor
on your website to take steps to benefit your business. This is done by understanding the psyche of
the visitor and creating an automated website, attractive and user-friendly for the visitor. Efficient e-
commerce solution providers will definitely opt for internet marketing to get more visitors to visit
your website. Launching a monthly newsletter for your customers is also a good idea. You can send

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them updates about the new and the latest that has been added to the portfolio of products on your
website. The launch of your website if required is also taken care of by the e-commerce service
providers. Site-management and promotion is also very important. The content, images and the
layout of a website has to be continuously improved and worked upon keeping up to date with the
market. Overall, your website should be designed to attract the first time visitors.
The usability and utility factor should also be kept in mind. This will bring them back to your
website whenever they plan to buy anything.
The web of e-commerce solution providers in India is vast. They offer a host of e-
commerce solution and consulting services to support guide and help you at each step. Outsourcing
e-commerce solutions will help you save time and resources while you can focus on other important
business objectives. Some e-commerce solution providers also offer BPO services which can be
used for telemarketing and cross-selling to maximize profits. E-commerce solutions are a big
support for businesses today. The demands and the expectations of the end-users are high and so is
the level of competition in the industry. E-commerce solution providers help you streamline your
process and cover all the gaps that might have gone unseen.

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 CHAPTER-IV
SUMMARY AND CONCLUSION

 There is a wide acceptance of e-commerce in world due to the internet facilities available.
 The countries such as India, Brazil, and China etc which are on the path of development are
using e-commerce for carry out various transactions.
 The e-commerce can surpass geographical limits and can prove to be worthy by reaching to
customers. It caters to the demands of both the national and the international market.
 The e-commerce can help in providing an edge to your rivals in the market as one can better
serve them globally.
 The Countries such as USA, Australia, Canada , UK etc are trying to come up with
something innovative which will change the current scenario.
 The countries are well aware of its benefits and are becoming more innovative in this field
as customers can easily select products from different providers without moving around
physically and it also help business to handle its resources well.

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 REFERENCES

Web
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(last accessed on 20th march , 2012)
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 http://www.nytimes.com/2003/11/24/business/e-commerce-report-sensing-economic-
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20th march, 2012)
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 http://www.bestindiansites.com/top-companies/e-commerce/ (last accessed on 20th march,
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 http://www.india-ecommerce.com/ecommerce-web-development.html (last accessed on 20th
march,2012)

Books
 Laudon Kenneth C., Traver Carol Guercio (2008) , E-commerce – Business , technology ,
society ,New Delhi ,Pearson Education

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