21st June 2024
E-commerce, a burgeoning industry worldwide, has revolutionized retail, encompassing both developed and developing nations. The global e-commerce market has surged beyond US$6 trillion, representing nearly 10% of total retail sales. This meteoric rise, however, is rooted in a complex history of technological advancements, consumer behavior shifts, and economic factors that have varied across different regions.
The Genesis of E-commerce in the USA
The United States is often credited as the birthplace of e-commerce, driven by a quest for convenience. The conventional retail model in the USA faced significant challenges. Consumers frequently had to travel to neighborhood stores or shopping malls, a task compounded by suboptimal public transportation systems in many parts of the country. This inconvenience was particularly pronounced in suburban and rural areas, where access to retail outlets was limited.
The USA’s high internet and PC penetration rates provided a fertile ground for the early adoption of e-commerce. Companies like Amazon and eBay emerged in the mid-1990s, leveraging the widespread availability of the internet to offer consumers an unprecedented level of convenience. By enabling purchases from the comfort of home, these platforms addressed the inefficiencies of traditional retail, laying the groundwork for e-commerce to flourish.
E-commerce Evolution in the Asia-Pacific Region
The Asia-Pacific region saw a staggered yet impactful adoption of e-commerce, marked by unique triggers and timelines. China’s e-commerce ascent was notably accelerated by the 2002-2003 SARS outbreak, which curtailed physical shopping. Entrepreneurs seized this opportunity, tapping into China’s vast population and burgeoning middle class. The widespread use of smartphones and high-speed internet further propelled online shopping, leading to the creation of e-commerce giants like Alibaba and JD.com. Today, China boasts nearly 1 billion e-commerce users, underscoring its dominance in the global market.
In Japan, South Korea, and Australia, the adoption of e-commerce followed a trajectory similar to the USA, driven by a need for convenience. Japan’s e-commerce landscape is characterized by a blend of global and local players. Amazon Japan is a significant player, while Rakuten Ichiba stands out as the largest homegrown platform, catering to a user base of 500 million. The competitive landscape includes other notable local entities like DMM and Mercari, the latter being Japan’s first unicorn.
The Indian E-commerce Journey
India’s e-commerce journey began in earnest in the mid to late 2000s, albeit with initial challenges due to low internet and smartphone penetration. The turning point came with the success of the Indian Railway Catering and Tourism Corporation’s (IRCTC) online booking system, which showcased the practical utility of the internet. The entry of Flipkart in 2007 marked a significant milestone, followed by other players like Snapdeal and Myntra, which capitalized on the growing internet access and smartphone adoption.
India’s e-commerce sector is dynamic and continually evolving, adapting to new trends and technologies. Today, the competitive landscape in India is multifaceted, featuring both global and local players:
- Market Leaders: Flipkart, with nearly 50% market share, and Amazon India, with approximately 25%, dominate the market.
- Local Powerhouses: Homegrown platforms like Snapdeal, Myntra, and Meesho have established niches in specific segments like fashion, beauty, and value purchases.
- Hyperlocal Focus: Grocery delivery services such as BigBasket and quick commerce players like Swiggy Instamart, Blinkit, and Zepto meet the demand for fast and convenient city deliveries.
This blend of competition fosters a dynamic market where players innovate on features, pricing, and logistics to attract customers. As internet penetration approaches 100% and smartphone adoption increases, more sellers from smaller towns and rural areas will enter the market, broadening the e-commerce ecosystem.
Challenges and Regulatory Interventions
Despite the vibrant growth, the dominance of a few large players poses challenges. For example, almost 75% of Indian ecommerce market is captured by Flipkart and Amazon and rest one fourth is distributed across many other players. Their practices, such as deep discounting, exclusive deals, and prioritizing their inventory, often disadvantage smaller sellers, limiting their visibility and sales opportunities. This concentration of power can stifle competition and innovation, necessitating regulatory interventions.
To address this issue, the Indian government started the Open Network for Digital Commerce (ONDC). The ONDC plans to make e-commerce unbiased and more inclusive with these goals:
- Encouraging fair competition: ONDC nurtures an environment where small businesses can effectively compete with bigger fish in ecommerce business
- Broadening Access and Inclusion: ONDC’s standardized system facilitates easier entry for small businesses into the e-commerce market, giving consumers a broader selection of products.
- Providing customers more Choices: ONDC allows consumers to discover a variety of products from different sellers, potentially through familiar applications, leading to better prices and a richer shopping experience.
- Establishing an Open Ecosystem: ONDC’s open design permits participation from any platform or application, driving innovation and adaptability within the e-commerce industry.
Although it’s still being developed, ONDC could change India’s e-commerce scene dramatically. Globally, similar initiatives include regulatory measures by the European Commission to ensure fair competition and the Open Data Protocol (ODP) in the US, which explores standardized ways for marketplaces to share information. The success of ONDC could inspire similar efforts worldwide.
Conclusion
E-commerce is a thriving global industry, but the concentration of market power among a few large players raises concerns about fair competition. The Indian government’s ONDC initiative represents a promising step toward fostering a more open and inclusive e-commerce ecosystem. For a fair and thriving e-commerce environment, collaboration between governments and e-commerce platforms is crucial. Governments can implement regulations to ensure fair competition, while platforms should prioritize transparency and open access for sellers, maintaining a level playing field. By working together, stakeholders can create an e-commerce sector that benefits businesses and consumers alike.
