Selling Into India: A Country Poised for Rapid E-Commerce Growth

When it comes to e-commerce, India is positioned to become the next China. India has a huge population (1.3 billion) comprised mostly of people under 30 and a rapidly growing internet and mobile infrastructure. The government is reforming bureaucracy and making it easier for foreign companies to do business within India. Amazon, Alibaba, eBay, and many venture capital firms are actively pursuing Indian startups and developing infrastructure for online retail, food and consumer services such as taxi bookings.

Companies are readily investing now due to the rise of India's internet access, growing by 5 million users each month. Analysts expect half a billion Indians to be online by the end of 2018. Right now, India's e-commerce market is valued at approximately $20 billion; that number is projected to rise to $300 billion by the year 2030, when online commerce will comprise 2.5 percent of the country's economy.

What Indian shoppers want online
Indian consumers already buying online, especially those outside major cities who want the latest items now. A recent survey cited in the Times of India found that rural and small-town shoppers with mobile internet no longer wait for new products to debut in Mumbai stores and eventually reach their local shops; they actively seek out fashions and other goods as soon as they are available online.

Online shoppers in India are above the global average in several categories, according to AT Kearney's 2015 Global Retail E-Commerce Index. Among survey respondents who bought online within the past three months, 84 percent bought clothing, 79 percent purchased electronics, 79 percent bought tickets, and 82 percent purchased services. Other e-commerce categories in which Indians outperform the global average are home appliances, home furnishings, beauty, groceries, home goods, toys and children's items.

While India's in-country online marketplace grows, shoppers browse internationally as well. The Paypers' 2015 Cross-Border E-Commerce Report on India shows that 66 percent of Indian cross-border shoppers have made purchases from U.S. merchants. Roughly 24 percent have bought items from UK e-retailers, and 33 percent have purchased from China, including Hong Kong.

Rising spending limits, low levels of fraud
The National Reserve Bank of India recently opened the door to online sales of luxury and big-ticket items by raising the online transaction limit to $10,000, up from $3,000. Indian consumers with the means to spend that much online aren't much deterred by security worries. The Paypers report found that Indian consumers have the world's highest level of confidence in the fraud-prevention skill of their banks.

In fact, though online fraud is rising globally, India's numbers are notably low. A 2013 study of the 25 countries with the most e-commerce fraud incidents ranked India 22nd. Indian e-commerce and banking rules play a role in the country's relatively low fraud rates. All card-not-present (CNP) transactions require two-factor authentication; all CNP and card-present purchases above a certain threshold trigger instant notification to cardholders; and since mid-2013, all domestically issued credit and debit cards are keyed to work in-country only unless the cardholder requests international support. These practices offer a measure of security to offshore merchants selling into India as well by reducing the likelihood of chargebacks.

India's infrastructure challenges and opportunities
Some experts liken India's online marketplace today to China's a decade ago, when a boost in connectivity and smartphone adoption spurred rapid e-commerce growth. More than 70 percent of the population already has a mobile phone, and smartphone ownership, currently at 10 percent, is growing by 150 percent annually, Paypers found.

There are hurdles to mobile growth. India's mobile infrastructure is largely 2G and 3G, and a recent Ericsson study of urban mobile internet users found that 63 percent have service problems, including slow page loads and dropped connections. For merchants, this means storefronts should be designed for easy navigation and free from elements that load slowly.

Merchants should also be aware that while almost a third of online shoppers prefer to pay with a credit card (usually Visa, the dominant card brand in the country), almost a quarter prefer to pay with cash or check on delivery. Mobile payment options are limited but growing as the country's three largest wireless carriers as well as domestic and foreign-funded startups develop competing platforms.

Because India's payments landscape is changing so rapidly, offshore merchants must work with a payment services provider that can keep up with the growth and evolution of online and mobile payments. A good PSP will also have strong relationships with India's major acquiring banks, which include CitiBank India, American Express Banking, State Bank of India and ICICI Merchant Service, according to Paypers.

A market on the brink of massive expansion
The prospect of rapid growth, improved payment methods, and a tradition of strong fraud protection make India an attractive market for offshore e-commerce merchants. As more Indian consumers adopt the online shopping habit, merchants who have the most experience and the ability to adapt to changes in the market will have the best chance to build and keep relationships with them. Studying the market, offering the payment options shoppers want, and working with a skilled and adaptable PSP can help merchants anywhere earn a piece of India's growing e-commerce market.

Daria Rippingale is CEO of BillPro, a provider of reliable online credit card processing for high-risk merchants worldwide.
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