E-com’s uphill journey

ALTHOUGH the number of e-commerce providers is growing, it has yet to be matched by the consumer growth as several hurdles are blocking its popularity in the country, says a report.

Low rate of personal computer and the Internet base, telecom infrastructure, lack of security and high access costs are the major hurdles for the e-commerce sector in the country. India had only five personal computers per 1,000 persons in the beginning of 2001 and around 1.12 million Internet subscribers in March 2001.

Nasscom projects the growth of PC subscribers to 10 million and the Internet users to 30 million by 2003. Poor security is another obstacle to e-commerce. Regular theft of user names and passwords erode confidence in the security standards of sites, keeping the percentage of those who use the Internet to conduct business transactions very low. Among the products, Indian consumers are willing to buy online are cinema tickets, greeting cards, clothes, cassettes, books, magazines, fast food, medicines and educational material. According to the Preliminary e-Assessment Report, India, there are enormous challenges facing e-commerce sites in the country. The relatively small credit card population and lack of uniform agencies create a variety of payment challenges unknown in the USA and other developed countries.

"India’s complex postal system and an uncertain regulatory environment could complicate increased distribution of online purchases," the report added.

Nonetheless, everyone from Yahoo!, Microsoft and IBM to local carpet vendors, hotels and some Indian ISPs are trying to claim a slice of the rapidly emerging Indian e-commerce market. In India, the lion’s share of current e-commerce revenues are generated from an ever-expanding ‘business to consumer’ (B2C) rather than ‘business to business’ (B2B) market.

As in the USA, B2C transactions have taken the form of online purchases of music, books, discounted airline tickets and educational resources.

The B2B market is expected to increase following greater investment in the Indian telecom infrastructure and once companies’ concerns with intellectual property rights and legal protections for commerce over the Internet are addressed. Credit cards are the common currency for buying on the Internet in many countries, but there are only an estimated five million credit card users in India out of a population of one billion. The anticipated spread of the Internet access through cable television, already introduced selectively, could expand use and reduce costs. The report pointed out that given the poor state of India’s telecom infrastructure, it is not clear if such targets will be met. According to a Nasscom survey, the total volume of e-commerce transactions in India rose from Rs 4.5 billion in 1999-2000 to an estimated Rs 23-25 billion in 2000-01 and is projected to rise to Rs 400 billion by 2003-04.

The study estimated that during 2000-01, the electronic-retail segment earned only Rs 500-600 million, whereas online share trading transactions were worth Rs 12 billion.

A study by the Confederation of Indian Industry (CII) and the International Trade Centre predicts that e-commerce activity in India will rise from Rs 4.5 million in 2000 to Rs 252 billion in 2005, of which the business to business segment will account for Rs 232.8 billion.

Both studies expect that B2B transactions will dominate and will be the primary growth engines over the next three to five years. E-commerce revenues in India are expected to increase dramatically over the next three years. According to a report by International Data Corporation (IDC), e-commerce will account for 575 million by financial year 2002-03 while the Internet users will reach more than 5 million mark, making India the fourth largest Internet market in Asia.