5 Interesting Facts about Indian E-commerce industry in 2014

India’s entire e-commerce industry was worth only $11 billion in 2013. 

In a report on e-commerce, however, broking firm Motilal Oswal says that this is just the start of a multi-year growth for the e-commerce sector in India. Indian retailers, therefore, do not have to be too concerned as despite strong growth in USA and China, e-tailing is still only 5-6% of total retail sales there.

Here are five interesting insights from the Motilal Oswal report.

1. As of 2014 , India Lags Behind China in the E-commerce Space

India is almost 10 years behind China in the e-commerce space. China’s inflection point was reached in 2005 when its size was similar to India’s current market size. Thankfully for India the dynamics currently are similar to what existed in China then – growing broadband penetration, acceptance of online marketplaces, and lack of physical retail infrastructure in many places.

2.Bulk of E-commerce in India is Travel E-commerce

Travel is where the real money in India’s e-commerce is. Online travel accounts for nearly 71% of e-commerce business in India. This business has grown at a compounded annual growth rate (CAGR) of 32% over 2009-13. E-tailing, on the other hand, accounts for only 8.7% of organised retail and a minuscule 0.3% of total retail sales. Even within sales of physical goods, books are a mere 7% of total book sales, mobile phones are 2% of all handsets sold, and fashion goods sold online are just 1%. Online jewellery sales account for only 0.2 per cent of all jewellery sold. Motilal Oswal, however, expects e-tailing to pick up with a focus on fashion.

3. Customer Acquisition rather than profitability is the focus area for most of the players

Alibaba is an outlier when it comes to margins and making money in the e-commerce ecosystem. The Chinese company makes an operating profit of 40% compared to industry standard (US and China) of 8-10%. Travel sites typically make 2.3%. Amazon, the industry pioneer, is yet to achieve healthy profitability even after two decades of dominance. Indian players, the report points out, are not even thinking of profitability yet. It’s a game of market share and market penetration, causing all serious players to have a war chest ready for when the industry scales multiple times.

4. E-commerce companies are leading to growth of Companies offering support services

For every Rs 100 spent on e-tailing, Rs 35 is spent on supporting services like warehousing, payment gateways, and logistics, among others. Delivery costs a platform owner 8-10% implying significant burn. Though 50-60% of delivery logistics today are handled by large e-tailers themselves, this proportion may reduce going forward as the participation of lower tier cities picks up. Presently, aggressive pricing in India is leading to e-tailers making losses on every segment. For a Rs 100 sale of a book, the e-tailer incurs a loss of Rs 24, a loss of Rs 13 in mobiles, and Rs 8 in apparel. 

5. Tier 2 and Tier-3 will be growth drivers for E-commerce companies due to lack of organized Retail

Demand in India exists across 4,000-5,000 towns and cities, but there is no significant presence of physical retail in almost 95% of these. High real estate cost is one of the main reasons why organised retail is unable to expand at speeds expected earlier. Real estate as a percentage of sales is 14 times higher than in the US. For large retailers in India, it is 7% of sales as compared to 0.5% for Walmart. 

How colour impacts E-commerce Customer Behaviour?

The Psychology of Color

According to a study conducted by the Seoul International Color Expo, over 92% of people said that color plays an integral part when purchasing merchandise. Believe it or not, only 6% said that their sense of touch played a major role, whereas smell and hearing amounted to a tiny 1% of people’s votes - unless of course they were buying air freshener or music.

Further research carried out by the Institute for Color Research showed that shoppers subconsciously judge people, the environment, and the product within the first two minutes of the initial viewing. Crucially, 60% to 90% make an assessment that is solely based on color. Therefore, it goes without saying that catching the customer’s eye with an intelligent layout of colors is integral to ecommerce success. 

Here is a brief look at eleven widely used colors and the effect they have on online customers:

Brown

Brown is a strong and dependable color which is very reassuring to shoppers. It gives off an aura of confidence and, if used in the right amounts, can help convert a potential customer.

Orange

Orange radiates ambition and energetic warmth. It also represents passion, originality, and fresh beginnings. Orange paired with cool shades of blue can give off a positive and exciting vibe.

Yellow

Yellow is a cheerful and playful color that can really grab the customers’ attention. However, it should be used in moderation because an excessive use of yellow can turn customers off. 

Green

Green has a natural and organic aura, which is why it is considered to be very easy on the eye. When shoppers see green, they often relate the color to positivity, relaxation, safety, and harmony.

Pink

Even though pink is usually associated with femininity, it can appeal to males as well since it exudes kindheartedness, romance, and love.  Pink has a soothing effect so it can be used to offset more aggressive colors like black, orange and red.

Red 
Red taps into the deepest, most primal, emotions of shoppers. Since red is usually associated with love, life, and confidence, it can convert potential buyers into lifelong customers if used correctly. But beware, too much red on a webpage can be visually overwhelming.

White

White exudes purity, wholesomeness, and clarity, and it is essential to most web pages. It is recommended to  include empty white space around your content so that customers don’t feel boxed in.

Purple

Purple has long been associated with royalty, power, and affluence. Intelligent use of this color can help the customer into making a positive purchase.

Blue

Blue conveys feelings of trust, peace, and productivity. Although blue is one of the most common colors on the web, it should be avoided if your webpage is involved with the hospitality industry, especially with restaurants as blue is said to decrease appetite.

Grey

Grey is usually connected with seriousness and a conservative mindset. The right shades of grey can serve as a great backdrop for other more vibrant colors such as orange, red, and royal blue.

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Black

Black is associated with strength, power, and dominance. When used in ecommerce,it sends a confident message to potential customers. Excessive use can give off a bland and gloomy ambiance, so it should be used in moderation, along with other tranquil colors.