e commerce in india: IRCTC still contributes 1/3rd – Something to worry about?

April 8, 2009

By sinha

IRCTC contributes 1/3rd to India’s ecommerce industry – sold 38.7 million tickets (as of Feb 09) and estimated gross sales stands at Rs 3,400 crore (while India’s ecommerce industry stands at ~9,000 crores)

While this does sound great for IRCTC (in a way, they own ~30% of ecommerce market share), it’s also a cause of worry.

Here is why!

Travel as an ecommerce category is big in India (rather the biggest – if you add up numbers from other travel players – ~50% contribute to ecommerce comes from travel!) and is the only segment that’s growing rapidly – it still means that Indian consumers aren’t buying ‘other’ things online (note that the rate of growth of ecommerce in India isn’t something great to talk about).

Essentially, Indian consumers’ online shopping behavior is still need-driven – and are buying standard items (even though they were exposed to online shopping 5-6 years back?).

That’s the real cause of worry. Growth of non-travel category just doesn’t seem to be happening at the rate expected – surely means lack of maturity in this space.

If an industry is dependent on 1 category, it surely means something needs to be corrected.

If Internet has to go mainstream in India (oh well! majority of Indian Internet users aren’t sure of Internet’s utility!), it does need to involve more real-life transactions and the same level of trust one gets in real world.

Internet needs to be more ‘realistic’ and ‘exploratory’ than what it is today – the business model needs to shift from transaction based (fight for the lowest price) to relationship based (how do I get repeat customers? how do I generate more demand?).

We need more niche category sites (look at what sells at eBay India?)– more community participation. There are fewer ecommerce brands in India compared to other emerging markets.

Barriers to ecommerce in India

Some of the major barriers at present are:

Not sure of product quality
Cannot bargain/negotiate
Not sure of security of transactions / Credit card misuse
Need to touch and feel the product
Significant discounts are not there
Have to wait for delivery
Goofups like these adds to one’s fear of trusting things online.

Do you see interesting new business models/opportunities rising out of these constraints?

What’s your opinion? What can drive the growth of ecommerce in India?

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Sidharth on April 8, 2009 at 7:14 pm

I think this has got something to do with price. I always find prices for consumer electronic items like mobiles. tv etc to be higher online than at your local stores. The online retailers have to probably be looking at dynamic pricing. Web is great for purchases like books and old movie DVD but for big ticket items they need to rework their prices.

Anshul on April 8, 2009 at 9:13 pm

@Ashish
I have reservations about the Barriers you have mentioned. I think following are the more critical:
1. High cost of Payment gateway integration.
2. Broken Logistics system.
3. Information flow between vendors is not efficient. Its still conventional phone based system.

Cannot negotiate doesn’t matter in online shopping IMHO. I remember seeing this in a survey report and frankly that was not upto the standards.

I can elaborate on each of the points but then this comment will again become like a post in itself

raghu on April 12, 2009 at 12:07 pm

people use the internet to find the lowest price, trust me if u go for relationship based model, its bound to fail

Ravi Rao on April 12, 2009 at 5:24 pm

So you mean sit down and do nothing?

Shailendra on September 10, 2009 at 11:08 pm

I think extremely poor service contributes to this general distrust of services online in India. In the past, I have tried to order from the biggest shopping portals in India. One of them shipped a defective product, another cancelled my order 8 days after I had placed it.

Even after several years of existence none of Indian online shopping portals have been able to ramp up or gather critical mass. I am afraid it is turning out be to be a chicken and egg situation. Because of lack of customers scales are low, they are unable to ramp up and provide cost effective services. Because service is not up to the mark, they are unable to attract more customers.

The end result is, we are still awaiting India’s Amazon!

Ninja on January 3, 2010 at 8:25 pm

Nice post. Interesting points you have raised regarding increasing ecommerce usage – first problem is how do you bring e-commerce to the mass? If you look around, every city (metro, town, etc) has numerous shops that advertise irctc online booking outside their shops. Nobody does that for other sites. A lot of net-ignorant people use these shops to do online booking thru irctc
99% of people like us (who are able to read this post and this comment) would have definitely used a portal/website other than irctc to do online transactions.

And there lies the main issue.