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REPORT ON
ONLINE COMMERCE
March 2011
CONTENTS
Executive Summary .................................................................................................................... 3
Methodology .............................................................................................................................. 5
Glossary of Terms Used ............................................................................................................. 6
Introduction ................................................................................................................................ 7
Market Size of Product Categories ........................................................................................... 11
Online Travel ......................................................................................................................... 11
E-tailing ................................................................................................................................. 12
Financial Services .................................................................................................................. 13
Digital / Mobile downloads .................................................................................................... 14
Other Online Services ............................................................................................................ 15
Indian Online Shoppers ............................................................................................................ 16
Mode of payment .................................................................................................................. 18
Reasons for not shopping online ............................................................................................... 19
Promising Future ...................................................................................................................... 21
EXECUTIVE SUMMARY
Net commerce on India has evolved over the past decade in terms of magnitude. Total net
commerce market of India is estimated to be INR 19,688 crores in year 2009 and is expected to
grow to INR 31,598 crores by year 2010. It has come a long way since 2007 when the market
size was just INR 8,146 Crores. The detailed usage pattern, however, has remained quite
uniform and skewed over the years. Certain services continue to dominate the overall market
while other still lag behind.
Net Commerce Market Size from 2007 to 2011 (Figures in Crores. Percentages indicate share of the overall market size)
Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+ Total Market Size 8,146 14,030 19,688 31,598 46,520 Online Travel Industry 6,250 (77%) 10,500 (75%) 14,953 (76%) 25,258 (80%) 37,890 (81%) Online Non-Travel Industry 1,896 (23%) 3,530 (25%) 4,735 (24%) 6,340 (20%) 8,630 (19%) - eTailing 978 1,120 1,550 2,050 2,700
- Digital Downloads or Paid Content Subscription 238 290 435 680 1100
- Financial Services * 1,200 1,540 2,000 2,680
- Other Online Services (incl. Online Classifieds) 680 920 1,210 1,610 2,150
*: Financial Services were not calculated in the years prior to 2008. +: Estimated Figures
As of 2009, among Internet users, online travel leads the pack with 76% share in Net
Commerce (INR 14,953 crores) while eTailing takes second position with 7.82% share (INR
1,550 crores). In eTailing, computers and computer peripherals account for INR 560.52 crores
while cameras, mobiles and MP3 players contribute INR 389 crores. Other major contributors
to net commerce include online classifieds (jobs, online matrimonial, cars, real estate and
others), buying movie tickets, food delivery and gaming subscription is estimated to be INR
1,210 crores. Financial service transactions over the Internet comprise nearly 7.8% of the
market size (i.e. 1,540 crores).
Online users in India have exhibited willingness to make purchases over the Internet; this is
quite evident from the growing net commerce industry. In the last few years, the interactions
have been skewed towards specific categories such as travel or certain products in eTailing.
This behavior has evolved recently and is expected to blanket different kinds of products and
services purchased over the Internet and mobile networks. Given the increasing awareness and
acknowledgement, the overall industry is slated to experience a high growth in the next couple
of years. While online travel will continue to comprise a major proportion of the overall market,
e-Tailing and digital downloads could experience a high growth. Mobile/Digital downloads are
expected to grow given the high proliferation of mobile devices in the country among different
users as well as introduction of interactive content over the Internet. E-Tailing which has
experienced growth in few select products till now; is another area for growth. Recently, a lot
of ecommerce initiatives have started to garner decent attraction from Internet users (albeit in
limited categories such as books and digital products). There has also been an increase in
funding for such initiatives. Further, famous retail chains are also opening up to embrace the
medium to ensure there are sales over the Internet. If this momentum continues, ecommerce
is expected to be an important activity among regular Internet users.
METHODOLOGY
The results of the report have been arrived at by conducting primary research among Internet
users in 15 cities as well as secondary research for triangulating the findings from external
sources.
Primary Research: Primary information about net commerce was collected by 800 individuals
through face-to-face interviews during I Cube 2009, a syndicated product of eTech, IMRB
International. These individuals were interviewed in 15 cities across India.
Secondary research was done to understand the structure and dynamics of the net commerce
market in India. Information from various published resources was used to perform a data
validation check.
Information collected from secondary as well as primary research was thoroughly analyzed in
preparing the report.
GLOSSARY OF TERMS USED
Active User: An individual who has used the Internet at least once in the last 1 month.
Claimed Internet User: An individual who has used the Internet at any point in time in the past. This gives us a clear indication as to how many Indians have experienced Internet at least once in their lifetime.
Internet Non-Owner: An individual who belong to a household which does not own Internet connection.
Internet Non-User: An individual who has not accessed Internet at any point in time.
PC Literate: An individual who knows how to use a PC. While this term does not signify the extent of PC usage, it means that a computer literate is able to work on a PC without assistance.
LFI: Internet users who “Look for Information” (LFI) for a product or a service they want to buy.
Online Shoppers: Internet users who look for information and eventually buy a product or a service over the Internet.
INTRODUCTION
In India, Internet has primarily been used for enabling communications between individuals
through various modes such as emailing, messaging or even social networking. However, a
digital interactive media is only so much successful if it fails to pervade every single activity an
individual indulges into in their daily life. In India, initiatives over the Internet have still not
been able to make users buy products and transact monies.
The I-Cube 2009 study clearly reflects on the limited penetration of eCommerce among
Internet users. In the survey conducted in top 15 cities in the country among 17.5 Active
Internet Users, who access Internet at least once in a month, there are 13.6 Mn users who look
for information regarding products. Of these, there are merely 7.4 Mn (40%) have bought any
product over the Internet.
eCommerce Penetration among Active Internet Users
The figure, below, illustrates the growth in the market size since 2007.
Net Commerce Market Size from 2007 to 2011 (Figures in Crores. Percentages indicate share of the overall market size)
Year Dec 2007 Dec 2008 Dec 2009 Dec 2010+ Dec 2011+ Total Market Size 8,146 14,030 19,688 31,598 46,520 Online Travel Industry 6,250 (77%) 10,500 (75%) 14,953 (76%) 25,258 (80%) 37,890 (81%) Online Non-Travel Industry 1,896 (23%) 3,530 (25%) 4,735 (24%) 6,340 (20%) 8,630 (19%) - eTailing 978 1,120 1,550 2,050 2,700
- Digital Downloads or Paid Content Subscription 238 290 435 680 1100
- Financial Services * 1,200 1,540 2,000 2,680
- Other Online Services (incl. Online Classifieds) 680 920 1,210 1,610 2,150
*: Financial Services were not calculated in the years prior to 2008. +: Estimated Figures
Net commerce industry has grown from INR 8,146 crores in the year 2007 to INR 19,688 crores
in 2009. This growth is primarily driven by online travel industry which contributes 76% to total
net commerce industry in India today. Next year the market is expected to grow and reach INR
31,598 crores. This strong growth is expected to continue due to the support of service
providers and regulators it has started to garner and is expected to reach INR 46,520 crores by
the year 2011.
Growth of Net Commerce over the Years (Figures in INR Crores)
Of the market size of
INR 19,688 crores;
online travel, which
includes booking rail
and air tickets, hotel
accommodations and
tour packages
comprised 76% of the
whole pie. E-Tailing
which includes
purchases of durable
products such as
electronic items,
home and kitchen appliances as well as personal items – apparels and jewellery constituted 8%
of the overall share. Conducting transactions to different types of financial services such as
insurance payments and renewals, as well as transactions through trading accounts amounted
to 8% of the overall share. Downloading mobile and digital content comprised 2% of the
overall share. Whereas other online services such as classifieds (jobs, matrimonial, cars real
8,146
14,030
19,688
31,598
46,520
Dec 2007 Dec 2008 Dec 2009 Dec 2010* Dec 2011*
40%
72%
60%
47%
E-Tailing8%
Online Travel76%
Digital Downloads
2%
Financial Services
8%
Other Online Services
6%
Components of Net Commerce Market- 2009 (INR 19,688 Crores)
estate and others), online food delivery as well as buying movie tickets and DVD rentals
comprise 6% of the overall market.
MARKET SIZE OF PRODUCT CATEGORIES
ONLINE TRAVEL
Online travel industry has grown from INR 6,250 crores in year 2007 to INR 14,953 in the year
2009. The restrained growth in 2009 was due to the overall slowdown in the industry. Due to
conveniences of paying online as well as the facilitation from the regulators the growth is
expected to grow at a much higher rate in the next few years.
At present, out of total INR 14,953 Crores Online Travel market, domestic air travel contributes
63% i.e. INR 9,482 crores followed by Railway tickets contributing 28% (INR 4,184 crores)
others such as international air travel (INR 548 crores), Hotel bookings (INR 308 crores), Bus
tickets (INR 294 crores), Tour packages (INR 86 crores) & travel insurance (INR 52 crores)
contribute balance 9% to the total online travel market.
Component Share of Online Travel (Total: INR 14,953 Crores – 2009)
Component Percentage (%) Market Size (INR in Crores)
Domestic Air Tickets 63 9,482
Railway Tickets 28 4,184
International Air Tickets 4 548
Hotel Bookings 2 308
Bus Tickets 2 294
Tour Packages/Travel Insurance 1 138
6,250
10,500
14,953
25,258
37,890
Dec 2007 Dec 2008 Dec 2009 Dec 2010* Dec 2011*
Online Travel Industry (In Crores)
42%
68%
69%
50%
E-TAILING
E-Tailing comprises of buying consumer items such as cameras, computers, home & kitchen
appliances, flowers and toys, gifts online. This category has grown from INR 978 crores in year
2007 to INR 1,550 in year 2009.
At present, PCs, laptops, computer peripherals, accessories and storage, contribute the most
36% (INR 560 crores) to e-tailing followed by cameras & mobiles contributing 25% (INR 389
crores). Personal items such as jewellery, apparels, cosmetics, apparels, shoes and watches
contribute 19% (INR 296 crores) whereas Electronic items like TV, Audio systems & other
accessories account for 13% (INR 203 crores) Balance 7% is contributed by Home & kitchen
appliances (4%) and other online buying (toys, gifts, flowers etc.)
Component Share of eTailing (Total: INR 1,550 Crores – 2009)
Component Percentage (%) Market Size (INR in Crores)
Computers, accessories, storage & peripherals 36 560
Cameras & Mobiles 25 389
Personal Items (Apparels, Jewellery and others) 19 296
Electronic Durables 13 203
Home & Kitchen Appliances 4 62
Other Products (Toys, Gifts, Flowers) 3 40
9781,120
1,550
2,050
2,700
Dec 2007 Dec 2008 Dec 2009 Dec 2010* Dec 2011*
E-Tailing (In Crores)
38%
15%
32%
32%
FINANCIAL SERVICES
Financial services market is estimated to be INR 1,540 crores and is expected to grow to INR
2,000 crores in the year 2010. Prior to 2008, there were no accurate estimates of the online
financial services. The online financial services include Insurance and related services (INR 585
crores), online transactions for financial services (INR 527 crores) and other fund-based
transactions (INR 426 crores) such as paying utility bills.
Component Share of Online Financial Services (Total: INR 1,540 Crores – 2009)
Component Percentage (%) Market Size (INR in Crores)
Insurance and related services 38 586
Fund-based Transactions (such as paying utility bills)
34 527
Online transactions for financial Services 28 426
1,200
1,540
2,000
2,680
Dec 2008 Dec 2009 Dec 2010* Dec 2011*
Financial Services (In Crores)
30%
28%
34%
DIGITAL / MOBILE DOWNLOADS
Digital downloads as a category has increased from INR 238 crores in 2007 to INR 435 crores in
year 2009. Given the proliferation of mobile devices and the services available over the
Internet, the growth rate is expected to be higher in the next years.
Majority of mobile downloads is attributed to ringtone, wallpapers or pictures download (INR
148 crores) and mobile recharges as well as bill payment (INR 148 crores) Software & utility
applications for mobile account for 18% of Digital downloads (INR 78 crores), paid music/video
downloads contribute 7% (INR 30 crores) while balance 6% is contributed by mobile games
downloads.
Component Share of Mobile / Digital Download Services (Total: INR 435 Crores – 2009)
Component Percentage (%) Market Size (INR in Crores)
Ringtone / Wallpapers / Pictures download 34 148
Mobile recharge for pre-paid connections or paying post-paid mobile bills
34 148
Softwares and utility applications for mobiles 18 78
Paid Music/MP3/Video downloads and Other Content
7 30
Mobile games download 6 26
238290
435
680
1100
Dec 2007 Dec 2008 Dec 2009 Dec 2010* Dec 2011*
Digital Downloads (In Crores)
50%
22%
56%
62%
OTHER ONLINE SERVICES
Online classifieds includes services such as online dating, matrimonial and jobs. It is estimated
that online classifieds together is INR 1,210 crores. In the classifieds, online jobs constitute
major share of INR 484 crores. Online matrimonial/dating services form a share of 15% i.e. 182
crores.
Component Share of Other Online Services (Total: INR 1,210 Crores – 2009)
Component Percentage (%) Market Size (INR in Crores)
Online Jobs 40 484
Movie / Cinema Hall Tickets and CD/DVD Rentals
35 424
Online Matrimonial/Dating 15 182
Other B2C classifieds (Cars, Real Estate) 9 109
Online Food Delivery 0.5 7
Online Gaming Subscription 0.3 4
680
920
1,210
1,610
2,150
Dec 2007 Dec 2008 Dec 2009 Dec 2010* Dec 2011*
Other Online Services (In Crores)
32%
35%
33%
34%
INDIAN ONLINE SHOPPERS
Barring few services such as online ticketing, broadly speaking, Indian consumers aren't
shopping online. Large numbers of surfers use Internet to look for information about the
product or service they want to buy followed by physical visit to shop for buying.
According to I Cube 2009, 13.6 Mn Internet users looked for information (LFI) for purchasing
product or services online. Of these, 7.47 Mn purchased product or services online. This
indicates that almost each alternate Internet users who looks for information on products and
services on Internet, ends up buying them online.
Online Shopping Behaviours among Internet Users (Base: 17.5 Mn Active Internet Users in 15 Cities Surveyed in I-Cube 2009)
LFI indicates users who access internet to search for products or services. They may or may not
buy them online.
Online shopper indicates users who access internet to purchase product or services. These are
internet users who transacted online and purchased product or services over internet.
Only LFI indicates those users who access Internet to look for information on product or
services, however, didn’t purchase it over internet.
Among Only LFI, 61% access internet to look for information on Online Travel (such as tickets
and hotel bookings); of these 42% end up buying travel services through offline route.
Looked For Info.
(LFI)•13.6 Mn
Online Shopper • 7.4 Mn
Only LFI • 6.13 Mn
Cameras and mobile is the second most looked for information category. 60% of Only LFIs
accessed Internet to look for information on cameras and mobiles while 17% of them bought
the product through conventional shops.
Among Online Shoppers, 89% accessed internet to look for information on Online travel
services and 80% actually purchased product or services belonging to online travel using
internet.
Cameras and Mobiles was looked for information by 62% of online shoppers, however only
12% actually bought it over Internet. This indicates that even online shoppers access internet
to know more about products like Cameras and mobiles but only handful of them actually use
internet to purchase the same.
Mobile downloads and personal items were purchased by 22% and 20% of online shoppers
respectively.
61% 60%
49%45%
41%37%
32% 31%
22%16%
10%
42%
17%10%
18%11% 8% 5% 4% 3% 3%
Non Online Shoppers (Only LFI)(Base: 13.6 Mn Active Internet Users who Look For Information)
LFI Bought Offline
MODE OF PAYMENT
Online shoppers use Debit cards/Internet banking as mode of payment for shopping online.
Credit cards follow closely at second position. Paying against delivery comes at third position
whereas demand draft and mobile payment is almost negligible.
61%
50%
24%
10%4% 3%
37%35%
18%8%
1% 1%
Debit Card/Internet
Banking
Credit Card Place order online and pay offline
later
Prepaid cash cards
Demand Draft Mobile Payment
Mode of Payments(Base: 7.5 Mn Active Internet Users who have made online
purchases)Ever Used
Most Used
REASONS FOR NOT SHOPPING ONLINE
Lack of trust is the prime reason for not shopping online. According I-Cube 2009, various
reasons for not shopping online as mentioned by internet users include:
LACK OF TRUST
Most of Non-shoppers do not shop online due to lack of trust in Internet for doing transactions.
This includes reasons such as worried about personal security, distrust with Internet for
shopping online, distrust with quality. In other words, this lack of trust primarily leads to
security concerns one has while transacting over Internet.
SECURITY CONCERNS
Most Net commerce shopping happens through credit or debit cards. Indians, however are still
concerned about their personal security. They still prefer to transact in person than depend on
Internet.
UNCERTAINTY ABOUT PRODUCT AND SERVICE QUALITY
Unlike conventional shopping, buyers worry about online shopping. They aren’t sure if they will
get good quality products online.
FULFILLMENT ISSUES
99%
77%
69%
63%
47%
Lack of trust
Fulfillment Issues
Shopping Experience
Want to see product before buying
No need for shopping online
Reasons for Not Shopping Online(Base: 6.1 Mn Active Internet Users who do not purchase online)
When person is transacting over Internet, they are not sure who is sitting across the table. They
are worried about delivery of goods. It includes issues such as delay in or non delivery of
goods.
Non delivery of goods: Apart from shopping experience and convenience, one of the major
factors for net commerce not taking off in India as expected is due to the on-time dispatch of
goods. Delivery delays invariably have left people wondering if their money was ‘lost’ in the
transaction and are averse to conducting future online transactions. Merchants start order
processing and shipping only after the receipt of money through Credit Card or online banking
payment.
SHOPPING EXPERIENCE
Buying a product or service is many times associated with shopping experience. It includes
Shopping experience includes fun, entertainment and the satisfaction derived from shopping
of product or service. While transacting online, most users lack this experience and it has
resulted in people refraining from shopping online.
Lack of touch & feel: Touch & feel of product being purchased lacks while shopping online.
Online shopping is best suitable for products and services that do not require touch & feel
experience by buyer. Probably that’s one of the reasons for books & ticketing being more
successful than apparels while shopping online.
PROMISING FUTURE
The online users in India have evolved and are actively seeking to include their digital
interactions into their daily activities – making purchases and indulging in transactions being
one of them. Although the behaviour in online transactions has been a little skewed in the past
wherein travel comprised the majority of the market; this has changed since 2009. As per the
primary research, e-Tailing is one the primary growth driver and will remain so in the near
future. A major reason for such growth is the continuing niche and generalized websites that
are being introduced over the Internet. These websites serve certain segments that are willing
to transact monies for the products such as high-end Fashion and personalized products, due
to the convenience and range of products it offers. There have also been certain initiatives that
include mass market; for instance, certain aggregators and traders are offering their products
over the Internet to reach wider audience in the non-metro markets. As Internet seeps more
into the Tier-II and Tier-III cities there is bound to be increase in the number of online users that
would be willing to indulge in online purchases.
Financial services over the Internet is another area that holds promising growth. Although
there were no estimates prior to 2008, the online financial services amounts to a sizeable
proportion of the non-travel online interactions. Given the characteristic of the financial
services, it is very bound to experience a high growth. Instead of indulging in beaurocratic
methods of completing financial transactions, online modes of obtaining such services will
always be beneficial. There is no inherent need of transactors to be present in-person to get
financial services as there is no need for a “touch-and-feel” experience. Consequently, most of
the transactions involving financial services such as renewing insurance or paying utility bills
can be completed over the Internet.
An important aspect in ensuring continuous growth of the net commerce industry is the
increasing awareness of exchanging money over the Internet by all the stakeholders as well as
the acknowledgement of such possibility by the regulators. As the online and mobile medium
grows, the regulators are in the process of formulating guidelines to make options available to
the users as there are substantive benefits in transacting money over the Internet. Not only
providing convenience, online transactions also reduce personnel and resource overheads that
organizations and the government have to bear. As the issue of security minimizes due to
stringent methods adopted by banks and financial institutions; large numbers of retailers and
online aggregators are providing services to Internet users for their varied purchases they
make on a daily basis.
About IMRB International and IAMAI
e-Tech Group | IMRB International (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space.
Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present market environment and a roadmap for the future.
About Internet and Mobile Association of India (IAMAI) The Internet & Mobile Association of India (IAMAI) is a not-for-profit industry body registered under the Societies Act, 1896. Its mandate is to expand and enhance the online and mobile value added services sectors. It is dedicated to presenting a unified voice of the businesses it represents to the government, investors, consumers and other stakeholders. The association addresses the issues, concerns and challenges of the Internet and Mobile economy and takes a leading role in its development. The association’s activities include promoting the inherent strengths of the digital economy, evaluating and recommending standards and practices to the industry, conducting research, creating platforms for its members, communicating on behalf of the industry and creating a favorable business environment for the industry. Founded in January 2004 by leading portals in India, IAMAI in the only specialized industry body in India representing the interests of online and mobile value added services industry.
Contact Details
Dr. Subho Ray, President, IAMAI 406, Ready Money Terrace, 167, Dr Annie Besant Road, Mumbai - 400 018 Tel: +91-22-24954574 | Fax: +91-22-24935945 | http://www.iamai.in
Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Association of India
406 Ready Money Terrace, 167, Dr Annie Besant Road, Worli.Mumbai 400018.
Contact Details
eTech Group | IMRB
IMRB International
‘A’ Wing, Mhatre Pen Building
Senapati Bapat Marg, Mumbai
www.imrbint.com
Research Team for this Report
Balendu Shrivastava, Group Business Director
(balendu.shrivastava@imrbint.com)
Tarun Abhichandani, Insights Director
Ashwin Godbole, Insights Director
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