Despite the global economic slowdown, the Indian e-commerce industry grew from $8.5 billion in 2012 to $16 billion in 2013 – a staggering 88% year-over-year growth. And a recent survey by Associated Chambers of Commerce and Industry of India, Assocham, reveals that the industry can expand to $56 billion by 2023 – an impressive 13.3% annual growth rate. Let's see what Amazon (NASDAQ: AMZN ) , Groupon (NASDAQ: GRPN ) and J.C. Penney (NYSE: JCP ) are doing to capture this expected growth.
Amazon marked its entry in India with the launch of Junglee.com in 2012. With over 30 million listings from 1,600 online retail websites and 50,000 offline sellers, Junglee.com allows users to compare deals and product prices to make informed decisions. And on the back-end, it collects critical metrics — like pricing trends, keyword popularity, click-through-rates and user trends — which are required for inventory optimization.
The U.S based e-retailer uses these metrics to drive the growth of its own Indian marketplace. Amazon.in, launched only last year, currently consists over 12 million offerings in 15 categories. And to continue growing, Amazon is leaving no stone unturned.
- Its "Sell on Amazon" program allows merchants to list their products for free during their first year.
- In addition, its "Fulfillment by Amazon" program provides pick-up services and storage space for a paltry fee of just $0.3 per package.
- The e-retailer will be opening a 150,000 sq. ft. fulfillment center near Bangalore this month. This will allow it to store even more inventory.
- And most importantly, Amazon's merchant fee of up to 8% is much lower than other leading e-retailers; Shopclues and Snapdeal charge up to 15% and 23% respectively.
These promotional discounts will act as a barrier to entry for up and coming online retailers, disrupt the economies of existing players and position Amazon as a formidable competitor in India. And the addition of a new fulfillment center will allow Amazon to upscale its operations without any hassle.
Groupon is another popular e-commerce portal in the country. The company launched a unique promotional campaign a few months back, wherein it sold 22,500 kg of onions at about an 85% discount. The campaign received nationwide attention which could have a lasting impact on its business.
Ankur Warikoo, CEO of Groupon India, recently noted,
...last year, we sold a deal every 33 seconds, this year that number has reduced to 26 seconds, so we are now selling a deal every 26 seconds on an average. The average deal is around Rs. 1,300 [about $25]...We have a 48 per cent repeat buying ratio which means 48 per cent of the customers who bought anything on day one are likely to buy again by day 30.
It's worth noting that Groupon India launched its services in Goa last month. With that, its network now covers 12 major metropolitan cities. Considering that Goa has one of the highest per-capita-income rates in the country, Groupon's recent expansion will further propel its growth going forward.
Although J.C. Penney has also setup its online retail store for Indian shoppers, I doubt if it will generate sizable revenue from the country.
It doesn't have a warehouse in the country yet, without which it has to fulfill its orders from international couriers. As stated on its website, these international couriers can take up to 16 days to deliver, which is pretty long considering that several Indian e-retailers are offering same-day delivery.
In addition, Indian shoppers have to bear international courier charges along with the levied import duties. With these pricing nuances, J.C. Penney doesn't offer much value to cost-conscious consumers. Thus, management of J.C. Penney needs to work on these issues if it aims to take advantage of the booming Indian e-commerce industry.
Foolish final thoughts
Clearly, Groupon and Amazon seem well-gpositioned to benefit from the Indian growth story. But since the Indian e-commerce industry is still in its nascent stages, investors shouldn't expect these companies to generate sizable profits from India immediately.
The Indian e-commerce market isn't the only great area for growth
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