Transition to Transaction: the big leap Indian e-commerce must take

The Indian e-commerce story is intact, and there is definitely more to it as India is still in its nascent stages of online commerce. However, the industry faces several challenges such as a huge number of non-transactors and low Internet spends.

Aug 22, 2018 05:08 IST India Infoline News Service

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The Indian e-commerce story is intact and there is definitely more to it as India is still in its nascent stages of online commerce.

What seems to be working for the industry is the aggressive pricing, improving delivery services, and encouraging Internet growth trends, propelling the industry at a whopping 70% rate over the last five years.

India e-tailing inches closer to other markets, still has a long way to go

Among its emerging market peers China and Brazil, India holds the top spot as the fastest-growing country in terms of Internet user base. The country witnessed a sharp growth in Internet users with an average of over 40mn new users annually since 2013.

However, India is still a laggard when it comes to Internet penetration and spends compared to China and Brazil. A point to note is that data usage on mobile devices in India is on par with that of developed nations, mainly due to the entry of Jio and reduced data pricing, albeit two-third of users still remain on 2G networks. 

As Internet penetration and data usage increase, e-commerce is also witnessing better reception. However, a few trends pose barriers for the industry. According to a recent study by Google, Bain & Co, and Omidyar Network, Internet usage in India is highly skewed with women and rural areas having less access compared to men and urban areas, respectively. Further, the report points out that of the 390mn (1 out of 3) people who buy online, only 40% make online transactions. Thus, three out of five customers are “non-transactors”— people who consume online content, but do not perform an online transaction.

Offline to online transactions – the longest distance

These 230mn (60% of 390mn) online consumers do not transact online, but use e-commerce platforms only to research products and then buy them offline. The report attributes this behavior to the absence of trust in obtaining the desired product quality online, lack of tangibility, greater convenience in buying offline, and concerns regarding grievance redressal.

The report adds that 20% of the respondents of the survey stopped transacting online after their first purchase due to negative experiences such as substandard product quality.

The initial strategy of industry players of aggressively discounting their products has also worked against them in this context, as they begin to reduce the discounts. Delivery hassles and delays also rank high among the reasons why consumers don’t transact online.

What can companies do to regain the lost customers?

Companies are taking a sizeable hit in terms of ad and marketing spends owing to the loss of customers at the final stage of buying. They are now recognizing the massive opportunity at hand — if they manage to make these customers’ transition to transaction possible.

To begin with, firms can enhance their grievance redressal mechanism by assuring customers of friendly returns and refund policies. For example, last year, apparel website Myntra released two TV commercials to highlight its “easy returns and instant refunds” policy.

Further, to address the tangibility aspect, companies can come up with innovative models for certain products; for example, eyewear e-store Lenskart.com provides frame trials at home to customers.

In addition, reliability on online channels can be increased by making quicker delivery options available at a premium, such as Amazon Prime Delivery and Flipkart First, and by further streamlining logistics and supply chains.

Better access to customer care and quick redressal of complaints will also help the migration of non-transactors to the other side to a considerable extent. For instance, Amazon India has a scope for improvement with respect to customer care access. With no phone numbers available on the app or the website, only email and chat options are available as contact points. The company does connect via calls when you choose the call option, but this is only visible after the customer goes through several web pages.

Companies need to specifically target customers who were lost following a first-purchase-gone-wrong episode using better retention strategies. Targeted ads, better engagement, and initiatives on spreading awareness about hassle-free shopping will also help firms go a long way in convincing non-transactors to begin purchasing online. After all, e-commerce in India is a $50bn opportunity that waits to be unlocked.

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