It is the global ‘Big Daddy’ of the e-commerce business. After entering India through the acquisition of Baazee.com almost a decade ago, California-headquartered eBay has come a long way, ushering in a burgeoning e-marketplace. Latif Nathani, Managing Director, eBay India, spoke to The Hindu about eBay’s ‘first mover’ advantage in India, and the challenges facing the rapidly evolving industry. Edited excerpts:
The evolution of the e-commerce market in India has been quite remarkable over the last few years. What does the future hold for this fast-growing industry?
E-commerce in India has evolved significantly in the last decade, and there are many aspects of e-commerce like TV shopping, online shopping and mobile, which are all part of what is digital commerce. That journey has happened over the last decade.
eBay entered India nine years ago through the acquisition of Baazee.com, and five years prior to that was the start of organized retail in India. So, it is about 15 years old.
What is interesting though in India is that the entire evolution of e-commerce happened over 15 years. In advanced markets like the U.S., it took over 50-60 years.
First you had organized big-box retail, then catalogue shopping, then TV shopping, Internet and then the mobile shopping. In India, this entire journey is compressed into 15 years, and especially e-commerce has been compressed in nine years since we came in. It is moving forward quite rapidly. Industry statistics talk of a 55-60 per cent year-on-year growth, and moving from a $2.1 billion to a $3.2 billion market in 2014.
Given the size of the addressable market, what are the main challenges faced by the industry?
India now has more than 200 million Internet users, with 89 million users visiting online shopping sites. The challenge though is that the number of people actually shopping is a fraction of that, at 14-15 million. That is because in developed markets, infrastructure was quite developed by the time e-commerce came in. People had credit cards, the market had gone through TV shopping, catalogue shopping etc. In India, all that is new.
The main challenges facing the e-commerce industry are infrastructure and trust-related challenges. We are working on both. On the infrastructure side, we work with the government and industry bodies. On the trust side, we have done a lot by ourselves. Having been here for nine years and having understood the Indian consumer and the landscape, we have innovated in areas of logistics with a service called ‘Power ship’ and innovated in the area of trust with `Paisa Pay’ and `eBay Guarantee’ where we guarantee that whatever buyers buy, there is a 100 per cent guarantee up to 30 days for a full refund or replacement.
We have taken these challenges head-on.
What can e-commerce do for India considering it is still a miniscule portion of the overall retail pie?
I make a very extreme statement usually that e-commerce is the future of India. I see India benefiting significantly from it. eBay was among the first to enter the country, and we have invested significantly here.
In our report, we have an example of a 24-year-old matriculate from a small shanty in Dharavi (Asia’s largest slum in Mumbai) making leather jackets and selling them on the eBay platform to 30 countries worldwide.
The report shows the picture of e-commerce in India today. We have 30,000 sellers on eBay India selling domestically, and 15,000 that sell across the globe. We are present in 201 countries with 128 million buyers. The 15,000 sellers here are micro-multi-nationals – small sellers who sell across the globe to 31 countries.
Other than the domestic market, which are the largest markets for Indian eBay sellers?
We are a trusted marketplace. Sellers list their goods, and we have 128 million buyers who visit our site. We facilitate the entire transaction. After listing, there is discovery where buyers find what they want. Then, we facilitate payment and create the trust aspect and then through intermediate logistics . The 30,000 sellers selling within India are selling on average across 19 states and 83 per cent of the value is being shipped across states. So, a small seller or artisan being able to sell across states.
Our biggest markets are the U.S., the U.K. and Australia with the fastest growing markets being Russia and Australia. Every 44 seconds someone buys a product from a mobile device, every eleven seconds, someone in the world is buying a product from an Indian eBay seller, and within India, we sell 16 products every minute.
In India, there has been a proliferation of e-commerce companies, several of whom have managed to get sizeable funding. What are the factors determining success in the Indian context?
There are a lot of companies coming in, and the determining factor is understanding the Indian consumer. `Paisa Pay’ was uniquely developed for the Indian market in India by Indian employees. It is not a technology used by eBay anywhere else in the world. So, understanding the Indian consumer is critical.
The evolution has been quick and with Indian consumers, trust has to be earned. That is based on the experience and how smooth the transaction flow is. Those are key determinants.
Are we likely to see a consolidation or shake-out in the near future?
I think we are already seeing that. E-commerce is like any market that evolves. It has a lot of players coming in and then there is consolidation. Then again, players coming in have identified niches. We are seeing all that today. Companies identify a very narrow niche and are going into it as opposed to horizontals or say a marketplace.
Consolidation is a factor of quite a few things—it is a factor of your business model, your path to profitability and funding. It is very hard to predict.
The Indian market is a huge market and we are nowhere near maturity. In terms of percentages, India has among the lowest Internet penetration in BRICS markets at around 12 per cent. In terms of online shopping we are very far behind BRICS and China in particular. In any market, consolidation happens due to multiple reasons and we are seeing that.
The spread of e-commerce is predicated on Internet access, which is poor here. What other barriers hinder the growth of e-commerce in India?
We have identified a couple of things. We know the government is trying to push towards a digital economy, which is there in the Reserve Bank’s vision statement . We know that in a market like India, cash-on-demand is very high.
There are certain states which have regulations which cause friction in the e-commerce experience. For example, some states need the buyer to fill a form and send to the seller before he can ship the product. That completely defeats the e-commerce experience.
The 15,000- odd micro-multinationals are doing an amazing service to India. These artisans make hand-made products and bring in valuable foreign exchange but are not recognized as exporters as they do not do bulk exports. We have made representations to the government with industry bodies like FIEO. Steps in that direction would help e-commerce exports, which is a huge opportunity. There is also the point of trademark exhaustion. If someone procures a product legally outside India, he cannot sell it in India as it is a violation of the brand—trademark exhaustion. It is an industry issue that needs resolving.