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Footnotes
1Machine‐to‐machine (M2M) communications is used for automated data transmission and measurement between mechanical or electronic devices. The key components of an M2M system are: Field‐deployed wireless devices with embedded sensors or RFID‐Wireless communication networks with complementary wireline access includes, but is not limited to cellular communication, Wi‐Fi, ZigBee, WiMAX, wireless LAN (WLAN), generic DSL (xDSL) and fiber to the x (FTTx) [5]. A smart meter is such a M2M device.
2Currently German household consumers mainly use electromechanical electricity meters (Ferraris meters). These traditional meters only provide very limited information and no electronic data transfer. In comparison intelligent measuring systems consist of a digital meter and a communication unit, the smart meter gateway, which allows the integration of the smart meter into a smart grid.
3The “Digitisation of the Energy Turnaround Act” (“Gesetz zur Digitalisierung der Energiewende”) contains a framework for the electricity sector to become digital. The central part of the Act is the “Smart Meters Operation Act” (“Messstellenbetriebsgesetz”), that deals mainly with the installation and operation of intelligent metering systems [6].
4The Federal Network Agency is the German regulatory office for electricity, gas, telecommunications, mail and railway markets. It is a federal government agency of the German Federal Ministry of Economics and Technology [8].
5The information is based on an internal presentation on Opus, screened for utilities during a recent event. With Opus IBM wants to build a system that optimally plan and orchestrate energy systems of the future by using its expertise in analytics, big data and the Internet of Things.
6A “prosumer” produces and consumes energy.
7A blockchain is a type of distributed ledger, comprised of unchangeable, digitally recorded data in packages called blocks. These digitally recorded “blocks” of data is stored in a linear chain and each “block” contains data, a timestamp and a link to a previous block. The blocks of cryptographically hashed data drawn upon the previous‐block in the chain, ensuring all data in the overall “blockchain” has not been tampered with and remains unchanged. It is a peer to peer platform using blockchain ledger to report transactions (e. g. bitcoin transaction) [19, 20].
8Microgrids are localized grids that can disconnect from the traditional grid to operate autonomously [23].
© Springer-Verlag GmbH Germany 2018
Claudia Linnhoff-Popien, Ralf Schneider and Michael Zaddach (eds.)Digital Marketplaces Unleashedhttps://doi.org/10.1007/978-3-662-49275-8_74
74. Harnessing the Digital Marketplace in India: Revolutionary Growth, Challenges and Opportunities
L. L. Ramachandran1 , M. P. Sebastian2 and R. Radhakrishna Pillai2
(1)BPCL, Kochi, India
(2)IIM Kozhikode, Kerala, India
L. L. Ramachandran (Corresponding author)
Email: [email protected]
M. P. Sebastian
Email: [email protected]
R. Radhakrishna Pillai
Email: [email protected]
n
74.1 Digital Marketplaces in India: An Overview
74.1.1 Introduction
India is at a tipping point on the digital market place growth. There is a lot of interest and positive forecast about the digital marketplace growth in India. All the stakeholders like online retail companies, financial institutions, public, government, logistics companies, banks, payment companies, mobile and internet service providers have a positive outlook on the rapid growth of this sector. India’s unique demographic dividend with 50% of the 1.3 billion population less than 25 years, rising middle class income, the mobile and internet growth are fueling the highest e‐commerce growth rate in the world.
As given in Table 74.1, India has become the highest in digital online retailing growth worldwide and is predicted to retain the leadership position in the coming years [1]. Table 74.1Online retailing growth in India (in percentage). (Source: eMarketer [1])
Country
2014
2015
2016
2017
2018
2019
India
133.8
129.5
75.8
60.3
40.1
23.9
China
48.6
42.1
35.6
32.6
29.8
25.8
USA
14.4
14.2
13
12.2
11.6
11
Russia
23.5
22.7
19.3
17.4
15
14.7
Germany
15
12
11.5
10.9
8
6
Worldwide
26.3
25.1
22.7
21.9
20.7
18.7
Morgan Stanley predicts that India’s online retail market will reach USD 102 billion by 2020 and will have a CAGR growth of 66% from 2013 to 2020 [2]. In spite of having the highest growth rate in the world, the ratio of percent of online retail sales to total retail sales in India, as given in Table 74.2, is very less compared to other countries in the world [1]. The online retail in China was only 1% of the total retail market in 2008, but it rose to 8.4 in 2013 [1]. One of the reasons for this was doubling of internet penetration during this period. The inflection point in China was in the year 2010–11 when Smartphone overtook Personal Computers. During that 2–3 year period Chinese online market grew from USD 70 billion to USD 300 billion [2]. In India the Smartphone is overtaking personal computers and the Indian internet users are leapfrogging to mobiles. With high internet penetration, especially mobile internet and Smartphone penetration, we see a tipping point of digital marketplace in India from 2014. Table 74.2Retail e‐commerce sale as a percentage of total retail sales. (Source: eMarketer [1])
Country
2014
2015
2016
2017
2018
2019
India
0.8
1.7
2.6
3.6
4.4
4.8
China
12.4
15.9
19.6
23.8
28.6
33.6
USA
6.4
7.1
7.8
8.4
9.1
9.8
Worldwide
6.3
7.4
8.6
9.9
11.4
12.8
India has online demographic advantage for the growth of digital economy. As of May 2016, 50% of India’s 1.3 billion populations are below the age of 25 years, median age is 27 and 65% of population is below the age group of 35 years. The younger citizens are digital savvy, use mobile phones and internet, and hence are potential online shoppers who can drive the online retail growth.
74.1.2 The Key Market Players in India
The e‐commerce eco system in India consists of online travel and ticketing, online retail, online marketplace, online deals and online portals. The top two segments are online travel and ticketing (about 70%) followed by online retail [3]. Some of the leading local players in India include Flipkart, Snapdeal, Paytm, Olacabs, Zomato and Bigbasket. International players like Amazon, eBay and Uber also have their presence. Even though Amazon wants to make India its second largest market after US, they have only 12% of the market share and lags behind Flipkart (45%) and Snapdeal (26%) [4]. These three companies are the top three players in the horizontal market in terms of sales in Gross Merchandise Value (GMV) and volume of social conversation [4]. The Chinese online marketplace behemoth Alibaba has plans to enter the Indian marketplace [5]. Rakuten, the Japan’s largest marketplace operator, may also follow its Chinese peer [6]. In the Indian horizontal market, it is a high volume low margin game. All the above key players have reported only losses and are yet to make profit.
In the vertical space many specific niche vertical players like Jabong, Lenskart, Pepperfry, Urban ladder and Bigbasket are also growing [7, 8]. The vertical marketplace companies are focusing on products in specific areas. Fashion segment is one of the fastest growing verticals. Jabong and Myntra are the two leading players in the fashion segment and they together cater to three fourth of the fashion market. The next leading verticals are furniture and grocery. In the furniture marketplace, Urban ladder and Pepperfry are the leaders while in grocery, Bigbasket and Aaram shop are the leaders. With many vertical players, the India’s online marketplace is growing more as a democratic market like Europe, unlike China where the market is dominated by a few big players.
Many innovative methods are being adopted by the digital marketplace players to drive their growth in India. These include convenient payment models like cash on delivery, customer friendly policies like easy returns, which drive the sales growth. With the growth of smart phone users, app only sales models are gaining edge over web models. As the customers in India are highly price conscious, new concepts such as invite‐only discounts, loyalty programs and special discounts, and cash back offers are also popular. Similarly, people celebrate many festivals across India and used to shop during these seasons [9, 10]. The special online discount sales during these periods, also drives the growth. As the market is crowded and the competition is intense, multiple models are adopted by these companies [11]. All the players adopt many innovative business models and processes to sustain the hyper competition in the digital marketplace in India.
74.2 Challenges and Opportunities
Even though India is predicted to have the largest growth rate in the coming years companies are faced with many challenges. Some of the key challenges faced by these companies in future growth include internet and technology infrastructure, business models, hyper competition, customer retention, logistics, electronic payment system, legislation, taxation structure and valuation.
74.2.1 Internet and Technology Infrastructure
India has 462 million internet users as of July 2016, which is the second largest internet user base in the world [12]. But as shown in Table 74.3, the percentage of population using the internet is less compared to the other BRIC countries and developed nations. Table 74.3Worldwide Internet user base. (Source: Interstat [43])
Country
Users million
% of population
India
462
34.8
China
721
52.2
USA
286
88.5
UK
60
Japan
115
91.1
Russia
102
71.3
Brazil
139
66.4
As per the United Nations UNCTAD Report, the online buyers’ share in India as a percentage of internet users is only 27% compared to 55.7% in China [13]. The reasons include limited broad band and mobile bandwidth availability and also the quality of service. As per Akmai 2016 Q1 report shown in Table 74.4, the average broadband connection speed in India is less compared to many other nations [14]. Table 74.4Average Broadband connection speed. (Source: Akamai [14])
Country
Avg. MBPS
Peak MBPS
% Above 4 MBPS
% Above 10 MBPS
India
3.5
25.5
23
4.8
China
4.3
31.0
44
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