e-commerce in india: evolution, growth and challenges

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E-COMMERCE IN INDIA:Evolution, Growth and Challenges

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01 | Executive summary 04

02 | E-commerce Categories 06• B2B

• B2C • C2C

• C2B

03 | Growth of e-commerce in India 08

04 | Sectors 12 • Travel

• Automobiles• Financial services

• Stock trading• Real estate

• Gifts • Matrimony • Job search • Online retailing • Online ads

05 | Opportunities 16 • Global trade • Virtual businesses

• Lower search costs • The rise of facilitators

06 | Challenges 18 • Payments

• Logistics • Cyber crime

07 | 10 years from now: 20E-commerce is dead, long live e-commerce

08 | The e-commerce evolution 22

09 | India and the internet 23

contentsTable of

Executive Summary

In the second half of 2011, as India’s 100 millionth internet user logged on and the number of mobile phone users crossed 600 million, it became clear that the foundation for an e-commerce revolution had been laid.

The internet is already changing the way connected Indians shop. Not only has it opened up a new world of lower prices and choices, it has also emerged as a wealth-creating tool for entrepreneurs.

Given the size of the Indian market and growing consumerism, industry sources aren’t surprised that e-commerce companies are reporting double-digit growth. “Most e-commerce ventures, particularly online retail, are experiencing phenomenal growth with online transactions growing by leaps and bounds every month,” said Mukesh Bansal, CEO and founder of Myntra.com, a Bangalore-based

04 05

Composition of internet audience

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%15-24years

25-34years

35-44years

45-54years

55+years

INDIAASIA-PACIFICWORLDWIDE

Growth of online population

INDIACHINARUSSIAN FEDERATIONBRAZIL

13%

20%18%

19%

MARCH2010-2011

Source: Comscore State of the Internet With a Focus on India (2011)


online shopping retailer, to the ‘China Daily’ (April 20, 2012), an English language newspaper.

He claimed that Myntra.com was doubling its revenue every four to five months, which was the trend across the industry.

Ravi Srinivasan, veteran business journalist, said: “E-commerce is a force multiplier for retail. Whatever retail does for the economy, e-commerce improves and enhances. The primary advantages are reducing the cost of intermediation, enhancing consumer information and choice and ‘democratising’ retail. All of these would go towards increasing choice and lowering cost for consumer.”

Online ticketing and banking services are already popular, but Indians are only just dipping their feet in the e-commerce pool. Slowly, the comfort level is extending to other products and services.

A study by Avendus Capital - a financial services firm - said that Indian e-commerce revenues grew to $6.3 billion in 2011, from $4.3 billion in 2010 and $3.3 billion in 2009. The study estimated that online retailing would catch up with online travel by 2015, each contributing $12 billion in revenues.

K Vaitheeswaran, founder of Indiaplaza.com, India’s oldest online retailer, told ‘China Daily’: “In 1999-2000, only 3 million people used the internet and out of that, only about 15,000 to 20,000 users were shopping online. Today that 3 million has grown to over 100 million. More importantly, those 20,000 online buyers have grown to over 14 million.”

The benefits are clear to consumers – convenience, lower prices and price comparisons. As Pankaj Jain, consultant at Tlabs and lead organiser at Startup Weekend said: “Customer service is the key. If you can build a customer-centric e-commerce company in India that provides a Zappos-like experience, you will have a major edge over other e-commerce businesses.”

The rise of smartphones, secure transaction gateways, banks going online with a vengeance and the easy issue of credit and debit cards have aided e-commerce.

All this has attracted investors in a big way; in 2011, the sector received investments of more than $1 billion.

In January 2011, Snapdeal.com, an online deal shop, raised $12 million and another $40 million at a valuation of $100 million six months later. Meanwhile, online retailers Fashionandyou.com and Myntra.com raised $40 million each.

Flipkart, the books retailer which has now diversified into various

products, raised $150 million from Accel Partners and Tiger Global Management, putting its valuation at $850 million.

While the opportunities are myriad, so are the challenges. Foremost among them is finding a way to grow the customer base. What is needed, said industry sources, is a quantum leap - getting at least 25% of internet users to start transacting online from the present 6%-8%(E-commerce, excluding travel).

Logistics – timely deliveries, ensuring against damage during shipments, return of products and reversal of faulty transactions – are a problem too, as is the poor bandwidth and unreliable internet connections.

English is the dominant language of e-commerce, but only 35% (estimated) of the population speaks it. As the internet adapts and assimilates different languages, the industry will have to follow suit to ensure its customer base expands.

Besides, the problematic supply chains could be a deal-breaker.

The sizeable investments, however, are allowing Indian firms to build delivery channels and devise payment systems. Cash on delivery, for instance, is the preferred payment option in India and will remain so until consumers feel secure about parting with their credit card numbers online. All leading players have introduced this option.

The industry is now betting on India’s young consumers – more than half the population is under 25 years of age and more than 65% under 35 years – to push growth.

Understanding consumer behaviour and building online brands will be the key. How will Indian e-commerce firms adapt? The next decade will tell.

E-commerce categories

06 07

Business-to-Business (B2B)Originally coined to describe electronic communication between businesses or enterprises, Business-to-Business or B2B is now commonly used to describe all products and services used by enterprises. Business-to-Business covers the entire gamut of e-commerce that can occur between two organisations.

Transactions between industrial manufacturers, partners and retailers, or between companies, primarily fall into this category.

B2B activities include purchasing and procurement, supplier management, inventory management, channel management, sales activities, payment management, and service and support. Tradeindia.com, India’s largest B2B portal, maintained by Infocom Network Ltd, observed that e-commerce transactions in India show a growth rate of 30% to 40% and will soon reach the $100 billion mark.

International brands are keen to make the most of the growing Indian market and are relying on the web to exploit the customer base. Tradeindia.com, Matexnet.com, AuctionIndia.com, Indiamart.com, TeaAuction.com, MetalJunction.com, Chemdex, Fastparts and FreeMarkets are some of the leading B2B exchanges.

Over the years, the scope of B2B transactions has broadened. Moving on from sales, corporations are now using B2B communications to

promote investment, trade stocks and forge financial alliances.

Simply put, B2C transactions are direct dealings between businesses and consumers. A relatively new category, B2C started gaining momentum in the late 1990s when the internet became more accessible. This category includes everything, from information searches and electronic shopping to interactive games delivered online.

Some share of e-commerce revenues is generated from B2C transactions.

With a huge number of travel portals, railways and airlines have played a significant role in e-commerce transactions in India. Recently, Makemytrip.com registered a turnover of Rs 1,000 crore ($200 million). In 2007-08, travel alone constituted 50% of Rs 4,800 crore ($960 million) online market.

In the last few years online services like banking, bill payment, ticketing, hotel room booking, matrimonial sites and job sites are getting increasingly popular. With the stock exchange, too, coming online, there has been a tremendous boost in the online business.

However, B2C still has a long way to go to be on par with B2B in India. This is mainly because B2B transactions are of much greater value than B2C.

Business-to-Consumer (B2C)

Consumer-to-Consumer (C2C)

Consumer-to-Business (C2B)

C2C commerce is the oldest form of trade and has existed long before the web. However, global connectivity has given it a different dimension.

Such transactions are yet to make a significant impact on web-based commerce. Auction sites are one example of such business. When individuals have to sell goods, they list them on auction sites where others can bid. This transaction involves consumer-to-consumer interface. These may or may not involve a third-party like in the case of the auction-exchange eBay.

One of the biggest challenges that C2C faces is lack of trust. The lack of a reference point makes it difficult for buyers to feel confident about the people they are dealing with. Both buyer and seller are unsure of the quality of goods, credibility and payments.

In this business model, it is consumers who offer products and services to companies. In India, C2B is at an early stage. C2B connects a large audience to a bi-directional network through the internet. The accessibility of the web and technologies like digital printing, high-performance computers and powerful software are leading people to take this medium seriously.

Growth of e-commerce in India

08 09

E-commerce in India is still nascent, but it is important for developing countries like India. The opportunities for e-commerce players are many – rapid urbanisation and rising literacy rates, rapidly growing internet user population,

advances in technology, growing adoption of computers, introduction of 3G and falling net access costs.

“E-commerce is probably the best thing that has happened to the Indian middle-class and emerging small businesses. As

a business model, it appeals to the ‘value-minded’ Indian mindset, which is about getting the best value for money spent,” said Nelson D’Souza, general manager, Fundsupermart.com, one of Asia’s largest distributor of mutual funds online. “Around the world, e-commerce has brought in ‘bargain hunting’, which is common to middle-classes around the world. The success of Flipkart and Snapdeal shows that e-commerce is here to stay.”

At present, travel leads the pack among e-commerce segments, flourishing on the back of growing disposable incomes and an internet-savvy urban population. However, other segments such as retail, classifieds, jobs, matrimonials and downloads are doing well too.

Mobile commerce, which is only just being introduced in India following the boom in telephony, could prove to be a stable complement e-commerce.

Mehul Patel, a serial entrepreneur who founded KIPL, a new media consultancy, and Mozomo, a mobile commerce consultancy, believes that the shift is already happening. His definition of ‘mobile commerce’ includes iPads and tablets, apart from cellphones. “There are more and more Android, iOS and Blackberry apps today in India than ever before. Most of our clients now have a dedicated smart apps budget,” he said. “I am highly optimistic that by 2015 we will have close to 400

Market share in 2010

E-commerce in india

TRANSACTIONS (IN $ MILLION)

31.38 103.841,750

3,0154,230

6,790

10,000

1998-99 1999-00 2007-08 2008-09 2009-10 2010-11 2011-12(projected)

Source: ‘Indian Ecommerce Report’ by Internet and Mobile Association of India and IMRB

Online travel80%

Downloads2.12%

Other services5.09%

Financial services6.31%

E-tailing6.48%


million people online using services through mobiles, tablets, handhelds or personal computers. It’s all merging, and it’s happening very fast.”

The Internet and Mobile Association of India (IMAI) estimated that India’s e-commerce market is growing 70% every year; 500% since 2007. In 2010, it was estimated at $6.79 billion, dwarfing its 2007 value of $1.75 billion. By the end of 2011, the e-commerce market is expected to have hit $10 billion.

While it is expected that travel will remain the dominant sector, e-tailing and digital downloads will probably grow at a faster rate.

Home Internet usage in India grew 19% between April 2006 and April 2007, when it reached 30.32 million users. By the end of 2011, there were an estimated 100 million Internet users. With a middle class of nearly 300 million, these numbers can only grow.

“The future is certainly going to show an upward trajectory – competition will heat up, more players will come in and then there will be a consolidation in the market,” said Amrit Ahuja, vice-president, 20:20 MSL. “A new breed of aggregators will arise for customers to visualise the multiple deals available; expect a new business model too.”

It’s clear that from the data that market share is moving towards India and especially China. China’s share of regional B2C e-commerce will grow from 4.1% in 2006 to 14.3% by 2011. Here, too, travel will be the largest category.

“The Chinese are way ahead on the e-commerce front. The massive success of local sites such as Alibaba reverberate the growth story for e-commerce in China. E-commerce businesses have managed over 10% of the GDP in some countries. India has a lot to catch up on. In 10 years, we will be probably where China and the world are today,” said Fundsupermart’s D’Souza.

Ahuja, however, disagreed. “In 10 years, the Indian market will be at par with the US and China as most of the pain points will be sorted out, consolidation will have happened and profitable models will have evolved,” she said.

While Indian consumers are less wary of buying train or airline tickets online, most agree that the market will mature only when consumers start buying more expensive categories such as apparel, home furnishings and jewellery.

Globally, the lifestyle category dominates e-commerce with a 64% share of transactions, said the eBay Census Guide of 2009.

The guide said that South India has the most active buyers (41% of all transactions), followed by West India (27%). However, West India has the most active sellers (46%), followed by North India (28%).

There has been a rise in the number of companies taking up e-commerce; major portals are shifting towards e-commerce instead of relying on advertising. The sites are selling

a range of products and services – from movie tickets and flowers to electronics and insurance. With stock exchanges coming online, e-commerce has arrived in India.

However, the business landscape is not without challenges. Credit cards are not ubiquitous and the payment challenges are myriad. Logistics, especially in the case of deliveries to consumers, are a problem.

These problems are being resolved. While the delivery system – via courier and post – has improved, modern technology like secured socket layer (SSL) has helped protect consumers against payment fraud. Banks, too, have successfully adapted technologies to provide customers with real-time account status, transfer of funds and stop-payment facilities.

There are regulatory challenges too. As investment rules in India liberalised and it became easier to move large amounts of money into and out of the country, 100% foreign direct investment (FDI) in e-commerce was ushered in. However, there were riders: FDI was allowed only in B2B e-commerce activities and not in retail, and 26% of FDI must be divested to the Indian public within five years if the companies are listed in another country.

Therefore, FDI in B2C e-commerce firms is not automatic; approvals must be sought from the Foreign Investment Promotion Board, which considers applications on a case-to-case basis.

As systems and regulations improve, the volume of transactions will rise.

Besides, India is on a growth path, accelerating consumerism. Growth will aid the rise of e-commerce, which in turn will spur more commerce.

E-commerce sales (in $ billion) inA-Pac (2006-11)

Source: e-Marketer, data includes projections for 2009, 2010, 2011

Country/Year 2006 2007 2008 2009 2010 2011

Australia

China

India

Japan

South Korea

Asia-Pacific

9.5

2.4

0.8

36.8

9.6

59.9

13.6

3.8

1.2

43.7

10.9

73.3

20.4

6.4

1.9

56.6

12.4

97.7

26.4

11.1

2.8

69.9

14

124.1

28.7

16.9

4.1

80

15.9

145.5

31.1

24.1

5.6

90

17.9

168.7

10 11

Sectors

12 13

Today, in India, several goods and services are bought online. The e-commerce landscape includes companies that provide a single product or service as well as multi-product or multi-service firms.

These include clothes and accessories, health and beauty products, books and magazines, computers and peripherals, cars, software, electronics, home appliances, entertainment, real estate and jobs, to name a few.

Automobiles

Financial services

On these sites, you can buy and sell cars and two-wheelers. These include new and used vehicles. Some of the services these firms provide are: Research, reviews, evaluation, technical specifications, insurance and finance.

While banking services have been available for a while online, financial products such as mutual funds can also be purchased off the internet now.

The ‘Business Standard’ newspaper recently reported that insurance policies may soon be issued in electronic

Stock tradingThis category is rapidly gaining prominence in India, based on its economic performance and the impact of growth on stock markets. The services include buying and selling of stocks, market analysis, research, company profiles and data, stock performance over time and buying of mutual funds. The advantage is that you no longer need a stock broker, and the commissions are a fraction of what broking houses charge.

Leading stock trading websites include Sharekhan.com, ICICIDirect.com, Indiabulls.com, Religare.com, Indiainfoline.com and 5Paisa.com. Many banks, such as Axis and HDFC, also offer the service.

TravelThis is the most popular category in India. The deals offered on tickets – rail and air – as well as on hotel stays and tours are major draws. Many sites categorise their offerings

form. E-policies, said the newspaper, will be available across the life, motor and health segments. The regulator is said to be in the midst of infrastructure checks and might start allotting licences by June 2012.

Quoting industry sources, the newspaper said ICICI Prudential Life Insurance and Birla SunLife Insurance would be among the first to launch. While customer uptake may be low initially – 2% to 5% of new business – it would rise to 10% to 15% within a year.

“Policy holders will understand the ease of owning an e-policy and gravitate towards it,” said KR Chandrasekaran, head

(insurance and banking), CAMs – an insurance repository. The leading players in this segment include Policybazaar.com, Indiainfoline.com and banks such as ICICI, Axis and HDFC.

Real estateThese sites provide information on properties users wish to buy, sell or rent. They allow you to search by location, cost, size, etc. Normally, the site provides you with the contact details of the buyer/seller/broker. There are several allied services, too, which make these portals one-stop shops for consumers and provide the portals with several revenue streams. These services include housing finance, loan instalment calculators, loan rate comparisons, loan eligibility calculators, insurance, interior design and packers and movers.

Some of the leading realty portals are Magicbricks.com, Makaan.com, Indiaproperty.com and 99acres.com.

Gifts

Matrimony

Before the advent of the internet, if you had to buy a gift, you’d most likely visit the nearest store and look through the shelves, sometimes for hours. Gift sites have enabled consumers to reduce the time spent on this activity. Now, you can browse through various categories - toys, perfumes, jewellery, accessories - and buy what you like in a matter of minutes.

These portals provide seekers with information on potential matches and can include information such as the city of residence, religion and caste. Allied services include astrological matching, legal help, beauty, clothing, etc. India’s leading matrimony portals are Shaadi.com, Jeevansathi.com, Bharatmartimony.com and Indiamatrimony.com.

INTERNET USER PENETRATION (MARCH 2010)


INDIA ASIA - PACIFIC WORLDWIDE

47% 49%41% 39%

47% 46%

Business/finance sites growth

Source: Comscore State of the Internet With a Focus on India (2011).Internet audience 15+ accessing Internet from Home or Work

Travel sites growth





35%40%

23% 22%

31% 31%

as per themes – trekking, adventure, wildlife, history, culture, etc. In 2010, industry estimates put the online travel business at $6 billion. India’s leading travel portals are Makemytrip, Yatra, Cleartip and Travelguru.

14 15

Job searchThe internet has simplified the search for the right job and presented an e-commerce opportunity. In India, a number of portals match a prospective employer’s requirements with

that of candidates. The major job portals are Naukri.com, Monsterindia.com, and Timesjobs.com. The allied services include resume building and employment counselling.

Online retailingAs web connections improve and credit cards become more common, online retailing or e-

tailing will grow. Internet retailers, because they don’t have to invest in brick and mortar stores or a large staff and because of the saving

technology brings, can provide a range of goods and services at discounted prices. India is expected to have the third largest internet user base by 2013, which is a major opportunity for online retail stores.

‘Campaign India’ (February 24, 2012) said that the ecosystem required for online retailing to flourish in India is at an inflection point. “Rising standards of living and a burgeoning, upwardly mobile middle-class with high disposable incomes, availability of a much wider range of products... and lower prices compared to brick and mortar retail driven by disintermediation and reduced inventory and real estate costs have helped e-commerce get a larger share of the consumers’ wallet,” reported ‘Campaign India’.

The eBay India Census 2011, which studied e-commerce consumer patterns, noted some key trends: Online shopping is mainstream and a pan-India phenomenon, rural buyers and sellers are increasingly making their presence felt, and the number of women shoppers is growing.

Kashyap Vadapalli, director (category and business development), eBay India, told ‘Campaign India’: “We see aspiring consumers from smaller cities latching on to online shopping like never before.” These consumers, he pointed out, have the aspiration for brands and lifestyle products, but no access. Online shopping destinations resolve this problem.

Added Fundsupermart’s D’Souza: “[Online retailing] will give strength to the Indian growth story by broad-basing the consumption story across India’s many towns, cities and all genders.”

Some of India’s leading retail stores include Pantaloon’s FutureBazaar.com, Flipkart.com and Indiatimes.com.

Online adsIndians access the internet from home, office and on their phones. There is a large population that now uses the internet as its primary source of information and bases its purchase decisions on what it views online. No wonder, then, that advertisers have identified the internet as the primary medium for marketing their businesses. Online advertising is expected to grow exponentially – in 2008-09, industry estimates pegged growth at 38%; in 2009-10 it was estimated at 32%.

Personals sites growth Retail sites growth




47%54% 55% 56%

63% 63%


37%40%

22%19%

25% 23%

Career services and developmentsites growth






13%14%

5% 5%

9% 8%




Opportunities

16 17

The opportunities for e-commerce — in fact, businesses in general — are well documented: rising incomes, 8% GDP growth, a young population with high aspirations. Call it a clichéd

argument, but it’s also a truism that the above factors will collectively be the growth engine for e-commerce.

“The opportunities are plenty. Almost half the Indian

population is under 25 years of age, and they are growing richer as they join the workforce. Per capita is on the rise. The internet offers better deals and a wider variety compared to supermarkets (which are non-

existent in tiers 2 and 3 cities),” pointed out 20:20 MSL’s Ahuja. “Data shows that most goods shipped are reached to cities with a population of 3 million or less. Also, the internet user base is expected to grow to 120 million soon, so there will be new users to target.”

KIPL’s Patel believes that the opportunity is “infinite”. “Commerce is more than 10,000 years old. E-Commerce is only 15 years old. As of now, India has very few websites people know, remember or trust. We need many more,” he said. He pointed out that e-commerce also provided an opportunity to empower smaller entrepreneurs in remote areas. E-commerce could also be the catalyst for ‘social product development’ and ‘crowd funding’, said Patel.

His views were echoed by Tlabs’ Jain. “The opportunity lies in tapping into markets that haven’t been easily accessible - rural areas, for example - as broadband and mobile Internet technologies become more pervasive,” he said.

E-commerce has changed the way businesses approach globalisation. Businesses are leaning towards International Financial Reporting Standards (IFRS), and internet financial reporting. While the former is a global standard for accounting and financial reporting, the latter has been extremely helpful to e-commerce companies.

Globally, the annual growth rate of e-commerce is estimated as 28%. Some countries are way

Global trade

past that mark. In India, for instance the e-commerce growth rate has been projected as 51%.

E-commerce has enabled enterprises to become virtual businesses. A virtual enterprise is a modular structure of companies, customers, competitors, suppliers, linked by information technology. The web is used to share skills, costs, and access one another's markets.

The flexibility of a shared network allows companies to maximise the use of resources and compete in a complex market.

In terms of costs, e-commerce spells good news. The Internet encourages high transparency in prices. As competitors publish their prices on the web, there are search engines that monitor prices across websites. This is supplemented by the growth of protocols such as XML.

There are also fears that price transparency may prompt collusion. However, increased communication and frequent market interactions will deter this.

The internet today is flooded with facilitators that simplify electronic transactions.

Online banking is a powerful tool and has

Virtual businesses

Lower search costs

The rise of facilitators

• Net banking/phone banking:

changed the way banking was traditionally perceived. ‘Demat’ (electronic) accounts for sale/purchase of stocks and shares, foreign exchange services, direct/instant payment of bills on the account-holder’s behalf, financial planning and advice, electronic funds transfer are just a few of the services offered online.

Banks have empowered consumers with credit and debit cards, without which e-commerce would be impossible.

The web offers a host of information directories that list products and services with appropriate sub-headings for those looking for information. Message boards, chat rooms and forums add to the interactive experience.

• Credit/debit cards:

• Information directories:

Challenges

18 19

In India, the growth of e-commerce has been steady but slow. There is a clear lacuna in the required resources and infrastructure that has hampered progress.

Experts point to several hurdles. While Fundsupermart’s D’Souza pointed to low bandwidth, 20:20 MSL’s Ahuja said inventory based e-commerce is capital-inefficient, the revenue models are shaky and there is little consolidation. Tlabs’ Jain, on the other hand, listed supply chain automation, logistics, the lack of easy payment solutions and increased return in goods. Srinivasan said that consumers are “not adequately protected against fraud, misleading claims or poor service”.

Payment collection and taxesNet payment involves sharing some revenue (4% or more). With a thin profit margin, this means parting with half the profits. Businesses also have to factor fraudulent charges and charge backs in their business model.

“The biggest challenge is in the area of payments,” said D’Souza. “Most end consumers are sceptical while paying online, which has forced e-tailers to organise unconventional methods of payments.”

This is why cash on delivery is a preferred option in India. However, it’s not the easiest thing for businesses. “Cash on delivery sucks and needs to die,” said Jain.

Very often, the payments carry the baggage of octroi, entry tax, VAT and several state - specific forms that can be baffling.

Customers want their goods delivered in perfect condition and within a specific time frame. Regular post is not a viable option and couriers have their limitations in terms of reach. All this adds to the costs. Shipping high - value goods might need insurance, which is an additional cost.

Very often, vendors end up dealing with an inefficient system for inventory management that affects the delivery process. In most cases, there is no digital data for products, no appealing visual, and no mechanism to check daily prices. When sites are not updated regularly, they cease to attract buyers.

One of the biggest fears that consumers have in e-commerce is cyber crime. Cyber crime includes criminal acts such as viruses, phishing and denial of service attacks that cause e-commerce websites to lose revenues.

E-commerce companies suffer heavy losses due to stolen assets, breakdown of websites and so on. Apart from the financial loss, the company’s reputation is at stake. For the customer, it is a loss at the mere push of a button and it’s a

Logistics

Vendor management

Cyber crime ine-commerce

risk that people are not easily willing to take.

Cyber crime is a serious concern the world over. It is a law enforcement challenge for governments.

Furthermore, loopholes in the current legal and regulatory framework, lack of assurance in safeguarding the privacy of personal and business data, lack of payment gateways have hampered the growth of e-commerce.

The Information and Technology Act was passed to make e-commerce safe. It imposes heavy penalties on those who misuse the channel to defraud others.

Common cyber crimes

AREAS OF CONCERN

• Quality of goods and services is a concern. E-commerce firms need to focus on this.

• Security is promised, but not always delivered. Increased investment in security will bring more customers to this platform.

• Establishing trust and winning confidence isn’t easy. Brick and mortar stores tend to be more trusted, it’s no surprise. E-commerce firms will have to work hard to gain consumers’ trust.

• Delivery times tend to be a problem. Too many cases of late deliveries or damaged

goods have made buyers suspicious. Logistics must improve.

• Many sites lack detailed information about products and pricing. Transparency on this front is critical.

CRIME DESCRIPTION

Virus A program that attaches itself to applications or other software, damaging systems and files

Phishing Perpetrator sends out e-mails that link to fraudulent websites, causing victim to release personal information

Botnet Hacker transmits instructions to other computers for the purpose of controlling them

Spoofing Use of e-mail to trick an individual into providing personal information that is used for unauthorised purposes

E-bank theft Perpetrator hacks into banking system, diverts funds to his/her accounts

Netspionage Perpetrator hacks into systems or PCs to obtain confidential information

Online credit card fraud Illegal online acquisition of a credit card number and its unauthorised use

Denial of service E-mail barrage, computer viruses or other techniques to damage or shut down systems

Software piracy Theft of intellectual assets

Spam Unsolicited e-mail

10 years from now:E-commerce is dead, long live e-commerce

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E-commerce, both the word and the concept as we understand it today, will die within the next 10 years.

Narendra Nag, co-lead, MSLGROUP India Social | 2020Social

Before the luddites amongst you throw a party to celebrate a return to a simpler world where corner stores serve all your

needs, Monday to Saturday, between 11 in the morning and 7 in the evening, let me throw some water on the parade by

writing an article instead of a tweet.

E-commerce can broadly be broken down into three parts: you, the valuable customer who’s always right, browsing through a catalogue of products on a website; paying for the products using a credit/debit card or in cash when they are delivered; and a logistics and delivery system that goes to work as soon as you place an order so it reaches you as quickly as possible.

This model revolves around a web 1.0 worldview. It requires you, the customer who belongs to a Sec A audience and owns at least one car, to actually visit a website. The more modern online retail operations have expanded to social networks like Facebook, ensuring you can like a product before you buy it. Retailers like Levi’s show you which friends of yours like the pair of jeans you’re looking at. And in the next year or so, your timeline may well be flooded with other verbs as retailers go into overdrive, informing the social graph of every customer about their wonderfully decisive purchases.

The world, however, is changing very quickly. So, I’m going to go out on a limb to bet what little reputation I have as a rational thinker on three major changes that will completely transform the way we shop in 10 years’ time.

Websites are becoming increasingly less relevant. As more and more people buy smartphones, we have an app for whatever it is that we want to know or do. On a PC (really, you, the customer who travels abroad every year, still owns a PC?) access to the data and services on the

NUMBER ONE.

internet are controlled through the browser. On the mobile, we’re accessing online data and services primarily through apps. In 10 years’ time, it’s safe to assume that the smartphone will be a feature phone and Apple will be selling iMods — chips for our brains that allow us to be plugged into data streams all the time. In essence, some of us will be living in two worlds simultaneously and the store we visit in either will be very similar. Choosing a product from either will feel the same; after all, we’ll be adding things to a cart, not clicking on an ‘add to the cart’ button. And checking out will be similar as well. I’m not suggesting the online world will be more like the real world, a la bad virtual reality movies from the last century, but that the real world will be more like the dot-com world — physical retail outlets will offer a large variety of products without stocking them physically in their own stores.

Paper money is going to be a rarity, perhaps even a party trick or the highlight of a museum tour. Credit card companies won’t disappear, but cards well might. We may be paying using our mobile phones or the chips in our head. The point being, there will be no real difference in the manner in which we make and receive payments online or in the real world. This will remove another important distinction between physical commerce and electronic commerce.

Just-in-time logistics will have reached a whole new level. Why carry something you’ve liked at a store home when it can be delivered at an address of your choosing. This makes a lot of

NUMBER TWO.

NUMBER THREE.

sense to the retailer, allowing him to save money on valuable real estate, delivery and storage charges. In fact, the size of the store can be directly related to the number of people they hope to serve at any single point of time, rather than the number of products they hope to stock and sell.

These three things, if they happen in the way I’m imagining them, will break down the walls we have created between online and offline shopping. We’ll be living in a world where we’ll shop without worrying about these distinctions. There are many obvious positives for retailers and consumers. For example, non-availability of a product will be a thing of the past. Children born the latter half of this decade will not be able to properly process the concept of something being out of stock. After all, if it isn’t physically present in the store, it’ll still get delivered to them in double-quick time.

E-commerce as we know it will be dead. But, commerce and trade, in all its glorious variations will thrive in a world where there will be more people and more choice than ever before. Ten years from now.

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180 (2010)

4,536,000

100 million+

8.4% of population

22.39 million

13.35 million

59%

256 kb/second; internationally, it is 5.6 mbps, according to the International Telecommunication Union

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First computer, ENIAC, constructed at University of Pennsylvania

To counter Soviet technological advances, US forms the Advanced Research Projects Agency (ARPA) to develop leadership in military science and technology

ARPANET, forerunner of the Internet, established

First applications of electronic data interchange (EDI) surface

First international connection to ARPANET. Initial work on a transmission protocol (later called TCP/IP) that allows computer networks to communicate

BBN opens Telnet, first commercial version of ARPANET

Michael Aldrich invents online shopping

Thomson Holidays, UK, is first B2B online shopping destination

Transmission Control Protocol (TCP) and Internet Protocol (IP) established by ARPA. This leads to a definition of an ‘internet’ as a connected set of networks

Science fiction author William Gibson coins the term ‘cyberspace’ in his novel ‘Neuromancer’. Gateshead SIS/Tesco is first B2C online shopping destination and Mrs Snowball, 72, is first online home shopper. CompuServe launches Electronic Mall in the US and Canada; it is the first comprehensive electronic commerce service

Nissan UK sells cars and finance with credit checking to customers online from dealers’ lots

Internet users exceed 10,000

Internet users exceed 100,000

ARPANET shut down

Sir Tim Berners-Lee, working at CERN at Geneva, develops a hypertext system, posts first computer code of World Wide Web in a newsgroup, ‘alt.hypertext’

World Wide Web released by CERN

Pizza Hut sells pizza on its website. First Virtual, the first cyber bank, opens

Jeff Bezos launches Amazon.com. First commercial-free 24-hour, internet-only radio stations, Radio HK and NetRadio start broadcasting. Dell and Cisco begin to aggressively use internet for commercial transactions. eBay is founded by Pierre Omidyar as AuctionWeb.

US Postal Service issues electronic postal stamps

Alibaba Group is established in China

Internet users exceed 360 million, dot-com bust occurs

Groupon reportedly rejects $6 billion offer from Google. Instead, the group buying websites plans IPO in mid-2011

Internet users at 2 billion

India and theinternet

The e-commerce evolution

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