Why companies are jumping on the M-Commerce bandwagon?

By April 14, 2016 Technology

Cheaper smart phones and a ballooning telecommunications industry have together rushed India to the peak of digital revolution. Today, India has around 243 million internet users – more than the United States and second only to China. The recent trends are even more exciting as now they are leaping the traditional desk-bound technology. Facebook, the world’s biggest social networking site, says that it has more than 100 million users in India, of which nearly 84 million access the site through mobile phones. This clearly suggests the rise of the “mobile first” generation of internet users. India is getting richer and phones are getting cheaper. Domestic producers are now selling smart phones for as little as Rs. 6000, and have captured nearly 50% of the market. They are selling Android-based handsets in villages so remote that even basic necessities like access to safe drinking water is a major challenge there. Broadband internet connectivity, considered a luxury some 10 years ago across India, is spreading fast, this time through mobile phones, and is set to advance the country’s digital economy.

In the past, the lack of a high-speed broadband network and the cost of computers hampered the internet’s reach in India. In addition, the strength of the country’s traditional media means that many people continue to rely on like newspapers and TV for information and entertainment rather than seeking out digital content. However, with the rapid spread of high-speed mobile data, that is changing fast. India’s internet contribution to GDP could increase from 1.6% in 2012 to between 2.8% and 3.3% by 2015, according to McKinsey Reports. The widespread use of English on Indian websites has made it easier for global companies to enter the market, which has given consumers a much wider choice of applications and also boosted local application developers and technology start-ups. Online shopper penetration (as a percentage of internet users) in India is expected to increase from 9% in 2013 to 36% in 2020, primarily led by mobile users. With mobile usage increasing, advertisement costs (primarily search engine optimization) are declining as traffic is increasing either directly to the website or through a mobile application. It is estimated that the mobile application download would grow six-fold by the end of this year to 9 billion applications, adding India to be the fastest growing mobile application market in both 2014 and 2013. With several such mobile/technology avenues opening up, marketers, content creators and advertisers are expected to continue working towards new and more innovative ways to reach out to their target audience. It is also said that among the entire application usage, shopping tops, with mobile commerce likely to overtake e-commerce.

Seeing the upsurge, younger startups have begun operation as mobile-only platforms, a shift from the concept of “mobile-first” adopted by the first wave of technology companies. All major e-commerce companies have been pushing offers exclusively on their applications with the aim of getting consumers on to the platform. Most leading Indian e-commerce players have seen mobile contribute to greater than 50-60% of transactions today from under 5% a year ago. With a fierce battle going on, the e-commerce retailers are always searching for better avenues to gain the business advantage. From Amazon to Flipkart, from Snapdeal to Myntra – everyone is trying to move away from the traditional browser-based offering to the mobile-application-based shopping.

The growth of the local online industry in India is being amplified by the return of talent from overseas. Indian-born engineers have played a key role in the success of Silicon Valley on the United States. Many are starting to look back, investing resources and expertise in one of the world’s fastest growing online markets- India. As more Indians start using the internet on phones, they are gaining access to products and services that were otherwise tough to find or access. The internet has revolutionized travel, education, retail, and agriculture across the world, but the combination of India’s unique characteristics and the leap to mobile is accelerating a particularly profound shift on the subcontinent.

Scenting market opportunity, overseas companies are taking an interest, particularly in retail. Despite restrictions on foreign direct investment in the sector, eBay has invested in Snapdeal, while Amazon launched an online marketplace last year. As more and more Indians access the internet, this connected revolution will gather momentum, changing the shape of the economy and helping to cut costs and improve choices for consumers. India is the new e-frontier. A rapidly expanding middle class, with smart phones in hand and cash in their pockets are looking to the future and finding it online.

Currently, Myntra draws as much as 80% of its traffic and 70% of sales from its mobile application. Flipkart, too, registers more than 60% of sales through its application. Sachin Bansal, CEO Flipkart had in February this year, said Myntra’s (acquired by Flipkart) 100% focus will be on mobile and making all investments on the platform going forward. Flipkart’s largest Indian rival Snapdeal too is placing mobile-commerce at the centre of its strategy, as it closes in on the acquisition of Freecharge, an online provider of recharge services for a variety of products, for a whopping $ 450 million.  In Mumbai, Pranay Chulet, the 41-year old founder of Quikr, an online classifieds site said that the amount of time users spend on Quikr has increased six or seven fold after they launched a mobile application. For fashion portal Jabong, M-commerce constitutes 30% of its sales. Ashish Goel, co-founder of Urban Ladder, an online furniture and home furnishings venture said they expect that by December 2015, 70-75% of all their transactions will be on mobile application.

However, despite growth in the number of applications developed and downloaded, companies are finding it difficult to encourage users to switch to paid versions. This has been a critical challenge, as 90% of the applications downloaded in the country are free.  Adding nearly 98% of Google Play’s global revenue from applications and games is coming from the ‘freemium’ apps. These applications allow free access for limited services or a ‘lite’ version of the application. User is expected to pay for additional services or a premium version.

M-commerce is estimated to be 30%of the $ 3 billion e-tailing industry and is likely to grow to nearly 40% of the industry that is expected to be 32 billion by 2020. Booking a rail or plane ticket once took hours of queuing, or paying an agent. Today, the government’s railway ticketing website is biggest e-commerce portal in the country. Numerous coaching classes and computer training institutes have developed on-line platforms for students who no longer need to travel to bigger cities for education or training. The internet has also helped Indian farmers, who can use their cell phones to find real-time information on commodity prices and then dispatch their produce to the appropriate market, which gives them higher returns. Convenience is what makes all these things tick, cause as consumers we are genetically programmed to be drawn towards things that make our like easy.

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