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org © 2020 IJCRT | Volume 8, Issue 7 July 2020 | ISSN: 2320-2882

AN ANALYTICAL STUDY OF E-COMMERCE IN

INDIA

Basheer K.T,Department of Economics, Sullamussalam Science

College, Areekode, Malappuram, Kerala

Abstract

E -Commerce or E-Business is the largest application of computers and information technology in keeping and
managing business and financial records. It helps in transaction of any amount of money from any part of the
world to other. We can purchase anything online with the help of debit and credit cards. Application of e
commerce are billing to customers, tracing payments received and payments to be made and tracing supplies
needed and items produced, stored, shipped, and sold, etc..
Keywords: E-commerce, B2C, Flipkart, sales penetration
1. Introduction
E‐ Commerce is the process of doing business online. Or we can say that E‐commerce is to conduct business by
using the IT Information technology, i.e., computer technology and electronic communication. It is the buying
and selling of items or goods or services on the
Web using electronic communication and digital information processing technology.EDI or
Electronic Data Interchange is an early form of e‐commerce. Its high cost, use of proprietary standards
etc.E‐commerce is the process of doing business electronic. It changes the entire business scenario due to the
powerful innovation of Internet, which is spreading fast through the world. The power of Internet as a global
access was felt with the introduction of the World Wide Web (WWW) in 1994. This global network makes global
relations with the companies made easier. It is predicted that, in the near future the digital economy will
overtake the traditional economy of all developed countries. E‐commerce is a composite of technologies process
and business strategies that foster the instant exchange of information within and between organization.
E‐commerce strengthens relationship with buyers & make it easier to attract new customer, improves customer
responsiveness and open new markets on a global scale. E‐commerce is the application of various communication
technologies to provide the automated exchange of business information with internal and external customer,
suppliers and financial institution
E-commerce business in India has seen exponential growth over the last decade. This growth is due to
many contributory factors, including rapid adoption of technology by Indian consumers, large increases in the
number of internet users, new enabling technologies, innovative business models and alternative payment options
offered by E-commerce companies. Moreover, the high growth in E-commerce continues unabated, with the sector
expecting to witness a steep increase in revenues in the coming years. The E-commerce industry was worth 12.9
billion US $ in 2015 grew at a CAGR of 42%, and is estimated to become 38.09 billion US Dollar by 2020

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1.1. Importance of E‐commerce

Through, E‐commerce, operating efficiency of the business firm will definitely improve and which in turn strengthen
the value and service given to customers and provide a competitive edge over competitors. These improvements may
result in more effective performance. The direct benefit accrue to an organization on practicing e‐commerce are
better quality, greater customer satisfaction, better decision making, low cost, high speed and real time interaction.
More specifically e‐commerce enables executing of information relating to the transaction between two or more
using interconnected networks. From the business perspective with less time spent during each transaction, more
transaction can be achieved on the same day. As for the consumer, they will save up more time during their
transaction. Because of this, E‐commerce steps in and replaced the traditional commerce method where a single
transaction can cost both parties a lot of valuable time. E‐commerce is the most cost effective compared to traditional
commerce method. This is due to the fact where through e‐commerce, the cost for the middleperson to sell their
products can be saved and diverted top another aspect of their business. For e‐commerce, the total overheads
needed to run the business is significantly much less compared to the traditional commerce method. The reason due
to that is where most of the cost can be reduced in Ecommerce. To both the consumers and business, connectivity
plays an important part as it is the key factor determining the whole business. From the business point of view,
E‐commerce provides better connectivity for its potential customer as their respective website can be accessed
virtually from anywhere through the Internet. This way, more potential customers can get in touch with the
company’s business and thus, eliminating the limits of geographical location. From the customer’s standpoint,
E‐commerce is much more convenient as they can browse through a whole directories of catalogues without any
hassle, compare prices between products, buying from another country and on top of that, they can do it while at
home or at work, without any necessity to move a single inch from their chair. Besides that for both consumers and
business, commerce proves to be more convenient as online trading has less red tape compared to traditional
commerce method. Ecommerce itself gives a boost to the global market. In short, if without any major obstacles,
E‐commerce will certainly continue to mature in the global; market and eventually, it will become an essential
business plan for a company in order to survive and stay competitive in the ever changing market. E‐commerce
business have numerous advantages over off line retail locations and catalog operators consumers browsing online
stores can easily search to find exactly what they are looking for while shopping and can easily comparison of shop
with just a few clicks of the mouse. Even the smallest online retail sites can sell products and turn a profit with a very
simple online presence. Web tracking technology allows e‐commerce sites to closely track customer preferences and
deliver highly individualized marketing to their entire customer base.
1.2. Recent trends in E-commerce
Industry studies by IAMAI show that online travel dominates the e-commerce industry in India with 70% of the
market share.
Online retailer major categories include smartphones, laptops, cameras, books, computers, clothes, home and
kitchen appliances, toys, and gifts.
Promotion of products, recruitment through social media, the pattern of advertisement by corporate sector etc
are made online.
Changes the lifestyle of Indian consumers by seeking convenience, comfort and variety.
1.3. Impacts of E‐commerce in Society
The introduction of e‐commerce has impacted on the traditional means of online exchanges. It is creating a new
market place and opportunities for the reorganization of economic processes, in a more efficient way. The open
structure of the Internet and the low cost of using it permit the interconnection of new and existing information and
communication technologies. It offers businesses and consumers an innovative and powerful information system and
another form of communication. This changes the way they search and consumer products, with these products
increasingly customized, distributed and exchanged differently. The advent of ecommerce has seen a dramatic impact
on the traditional ways of doing business. It has brought producers and consumers closer together and eradicated
many of the costs previously encountered. It is evident that the supply industry will benefit from e‐commerce which
includes those producing computers, networking equipment and the software necessary
It has affected the following fields of economic activity.
Pricing of the product.
Product availability
The transportation patterns
Transaction costs.
Cost and profit structure of all companies.
Consumer behaviour in developed economies & worldwide competitiveness.
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1.4. Economic, behavioural changes

The changes that B2C e-commerce has sparked arguably have had a more significant impact on the economy and on
buyers' behaviour than has B2B ecommerce. In the past, when consumers wanted to make purchases they had to set
aside time to shop during certain hours of the day, or they had to read through catalogs sent to them by mail-order
houses. Today, many consumers can simply use their computers— and now smart phones or other portable
electronic devices—to shop online. Buyers and sellers that engage in e-commerce retail trade are no longer restricted
by store hours, geographic marketing areas, or catalog mailing lists. With a few simple clicks they can gain access to a
variety of goods 24 hours a day, seven days a week. The characteristics of retail e-commerce merchandise also have
changed significantly over the past decade. Back in 2000, computer hardware was the most common type of
merchandise sold over the Internet. Today, the variety of merchandise is extremely diverse, and shoppers can buy
almost anything online.
Online shoppers have benefited in other ways. The growth of e-commerce retail sales has reduced consumers' search
cost, placed downward pressure on many consumer prices, and reduced price dispersion for many consumer goods.
But this has led to a substantial decrease in the number of small companies operating in certain industries, as they
tend to be less involved with e-commerce. Larger businesses, most notably retail book outlets, new automobile
dealerships, and travel agents, are better able to compete in this new market environment.
The extremely rapid growth of e-commerce retail sales has provided a major boost to residential parcel delivery
services. That's because online merchandise purchases involve some form of residential delivery by a third-party
vendor such as FedEx, UPS, or the U.S. Postal Service. In addition, there appear to be considerable synergies related to
B2C parcel and heavier freight volumes—parcel industry insiders have observed that businesses with strong e-
commerce related B2C parcel shipment volumes often have stronger B2B shipment volumes than those that do not
engage in B2C e-commerce.
1.5. E-commerce influences demand patterns
As technology, e-commerce, and globalization become more intertwined, buyers and sellers are increasing their
connectivity and the speed with which they conduct sales transactions. As we saw during the recent turmoil in the
financial markets and some supply chain networks, speeding up sales transactions can be a very positive attribute
when small market corrections are taking place. However, during a major economic correction like the one we
witnessed during the Great Recession, a quicker response to sales transactions can have cascading impacts on supply
chains, resulting in large contractions or expansions in orders, production, shipments, and inventory. That's because
years ago, it might have taken two years for events in one country to affect another's economy. Now, thanks to
technology and instant communication, the impact can be almost immediate. Thus, there are some potentially
negative consequences to the rapid growth of e-commerce. In this volatile business environment, supply chain
managers should consider developing strategies for dealing with the rapid swings that can result from increasing use
of e-commerce in a globalized market.
II. Objectives of the study
1. To study the present status of e-commerce on Indian economy.
2. To study the importance and contribution of e-commerce.
3. To understand the challenges of ecommerce in India

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III. Research Methodology

This research is based on secondary data which are collected from several sources i.e. research papers,
www.statista, publications from Ministry Of Commerce, Govt. of India etc which is available on the internet
IV. Analysis of Data
Table 1: Present Market segments of E-commerce
Category Specification
Digital population as of 687.6 million
January 2020
E-commerce market size by 200 Billion USD
2027
Active E-commerce 74%
penetration
E-commerece share in retail 7%
by 2021
Share of online shoppers who 32%
prefer mobile wallets
Category of online retail with Electronics
the highest penetration rate
Flipkart revenue 436.15 Billion INR
Most popular e-payment Paytm
service
Statista 2020
Table 2: Share of E-commerce to GDP
Year GDP
2016 0.71
2017 0.76
2018 0.9
Statista2020, EPW March 2019
Figure 1: Share of E-commerce to GDP

GDP

2016
2017
2018

Ecommerce made up about 0.76 % of India’s GDP in 2017.This was estimated 0.9 percent in 2018. By being the
second largest online market in the world after china, the country’s rapid growth in the digital sphere

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V. Internet users in India

Table 3: Number of internet users in India from 2016 to 2018 with a forecast until 2023

Year No of internet Users

2023 660
2022 634
2021 601
2020 564.5
2019 525
2018 483
2017 437.4
2016 295.39
Statista 2020

Figure 2: Number of internet users in India

800

600

400

200

0
2022 2021 2020
2019
2018
2017

India had over 480 million internet users in the year 2018 across the country. This figure was projected to grow to
over 660 million users by 2023 indicating a big market potential in internet services for the South Asian. In fact
India was ranked as the second largest online market worldwide in India

Table 4: Digital buyers in India 2014-20 (In Millions)

Year No of Buyers
2014 54.1
2015 93.4
2016 130.4
2017 180.1
2018 224.1
2019 273.6
2020 330

Figure 3: Digital buyers in India 2014-20

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350

300

250

200

No of Buyers ( in Million)
150

100

50

0
2014 2015 2016 2017 2018 2019 2020

The e-commerce sector has seen a boom in the Asian region in the recent years. India, the south Asian country,
had the fastest growing online retail market in 2019. The number of digital buyers across the country was
estimated to be approximately 330 million in 2020. The figure suggests that almost 71 percent of internet users in
the region will have purchased products online for the mentioned time period. The sector is driven by personalized
advertisements, attractive discounts, quick delivery and return infrastructure and a high penetration rate of smart
phones. This retail ecosystem combined with the comfort of being at home and getting all your choices delivered
to your doorstep has turned the tables for the e-commerce sector quite significantly.
VI. Roots of the system
Major consumption in the sector came from the male population in the country in 2019, where Amazon was
the preferred destination for scouting of products. Customized apps and experiences had their influence as well.
Almost 60 percent of the citizens had used a mobile device for the purchase of goods or services in 2018.
VII. Room for further branches
Even though there has been tremendous expansion in the sector, the penetration rate in the country is relatively
low compared to markets such as China and the U.S. The progress has faced challenges in the form of trust
issues due to a large number of fake websites and products, which were the reason that over 20 percent of the
buyers refused to, buy goods or services online in 2016. Reliable websites and quality assurance from
manufacturers are tackling the issues headfirst, as they look to provide better products and services to customers
and seek growth and benefits for the industry in the long run
IIX. Growth of B2B E-commerce in India
The growth of the B2B E-commerce segment is relatively slower compared to the B2C Ecommerce segment in
India. This is because the entry barriers in the B2B E-commerce are more than those in the B2C E-commerce
industry. A B2B E-commerce company has to have a strong business model, long term logistical arrangements
with rail, road and ports and also adhere to stringent regulatory and taxation laws. With an aim to tap the huge
potential in the B2B Ecommerce market in India, apart from the existing B2B companies, leading B2C companies
have also started to build their own platforms for small business owners and traders. This is expected to be
supported by rising expectations among a growing number of companies buying and selling online and a shift to
conduct procurement transactions through the Internet. Understanding this untapped potential of the B2B E-
commerce industry, the Government has allowed 100% FDI in B2B E-commerce, which has enabled globally
successful B2B Ecommerce companies such as Walmart and Alibaba to evince interest in the India B2B
Ecommerce industry

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IX. Future of E-commerce in India

E-commerce sector in India is growing rapidly. The internet users base in India is 460 millions and it is expanding
day by day .The accelerating growth of Ecommerce in India is due to internet penetration and easily available
smartphones.furthermore the favourable demographics and government effort of digitalisation is also pushing the
growth of E=commerce sector in India

Table 5: E-Commerce sales in India (In Billion Dollars)

Year Sales
2015 12.9
2016 16.08
2017 20.01
2018 24.94
2019 31.19
2020 38.09
Statista 2020

Figure 4: E-Commerce sales in India (In Billion Dollars)

E-commerce sales in Billion Dollars

40

35

30

25

20 E-commerce sales in Billion

Dollars
15

10

0
2015 2016 2017 2018 2019 2020

X. Challenges of E‐commerce in India

E-commerce sectors have been facing multiple challenges in their business operations like taxation issues,
incidents of fraud, and issues with cyber security, intense competition and preference for payment in cash (COD)
by customers, inadequate infrastructure and low digital literacy. There is no uniform tax structure across various
states and there is ambiguity with respect to categorization of offerings into ‘goods’ or ‘services’. Guidelines on
taxation of certain transactions like e-wallets, cash on delivery, gift vouchers etc. are not clearly defined. Some of
these challenges are expected to be resolved after the implementation of the Goods and Services Tax (GST).
Incidents of distribution of counterfeit goods through E-commerce platform have also been increasing which has
added to the woes of both consumers as well as E-commerce companies. This is mainly because of the absence of
a trustworthy mechanism which can allow consumers to authenticate sellers or their products. Data/cyber security
is another major challenge faced by the players as they deal with huge volumes of customer information, a lot of
which is shared with third parties such as logistics providers raising concerns about exploitation by external
entities. Another challenge is payment by customers in cash. Receiving payment in cash (COD) makes the process
laborious, risky and more expensive for the companies as their working capital requirement increases. Higher
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return ratio for goods sold online is also proving expensive and presenting challenges for companies. Incidentally,
return percentage of orders in COD is much higher compared to online payments. The E-commerce industry in
India has seen intensified competition in the sector, which in turn has forced companies to adopt aggressive
pricing policies, offering heavy discounts to customers and high commissions to vendors and other parties. This
has exerted a lot of pressure on the profitability of the companies.

As far as e‐commerce is concerned it is still in an infancy stage in India. The environment exist today is not
much suitable for the fast growth of e‐commerce.We can list out the important challenges one by one as follows
1. One of the important challenges faced by this sector is the lack of adequate infrastructure for IT technology
and Internet. The penetration of personal computers in India is as low as
3.5 per thousand of population compared to over 6 per thousand in China and 500 per thousand in USA.
2. Another important reason for not developing e‐commerce is the high tariff rate charged by Internet Service
Providers [ISPs] Speed and connectivity is also poor.
3. Another problem faced is that e‐commerce sites are one of the favourite targets of
hackers.
4. the most serious drawback is the absence of effective cyber law at the moment.
5‐commerce is governed by the UNCITRAI model code, but this is not binding on any country. It is expected that
all WTO member countries will soon enact laws to govern
6. The reason low growth of e‐commerce is the privacy and security issues. Measures like digital signatures,
Digital certificates, and fire walls can be adopted to secure safety and protection over the message passed on
internet.
7. Payment related problems also continue to block the e‐commerce activities. Electronic cash, credit cards etc.
are some of the popular payment method used for e‐commerce transactions. But unfortunately penetration of
e‐cash and credit cards not only low, but
Indian consumers are suspicious about the threat of fraud played by unscrupulous hackers. In order to minimize
this problem, experts suggest the use of digital certificate along with credit card to secure their payment
activities.
8. Electronic commerce is also characterized by some technological and inherent limitations which have
restricted the number of people using this revolutionary system.
Conclusion
After taking a complete view of the industry trends, it is seen e-commerce is emerging as an important tool to
certify exploding growth of Indian economy. It has the scope to lead India into an Economic superpower. With a
rapidly growing internet penetration e-commerce offers an attractive option for the retailers to expand. To
achieve this, there should be more investments in supporting infrastructure and innovative and game changing
business models in India

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