International Journal of Computer & Mathematical Sciences

IJCMS
ISSN 2347 – 8527
Volume 7, Issue 2
February 2018

Exploring the Potential of E-Commerce in the Digital Era:

Opportunities and Challenges

Dr. R. Lavanya Kumari* Dr. R. Anita Ms. Smriti Nagaria***

Associate Professor
Department of Business Management
DAVID MEMORIAL INSTITUTE
OF MANAGEMENT
Tarnaka, Hyderabad, Telangana
Dean Academics & Associate
Professor
Department of Business Management
ST.JOSEPH’S DEGREE & PG.
COLLEGE
King Koti Road, Hyderabad,
Telangana
Assistant Professor
Department of Business Management
ST.JOSEPH’S DEGREE & PG.
COLLEGE
King Koti Road, Hyderabad,
Telangana

ABSTRACT: E-commerce sector in India has taken birth almost 20 years ago and now it has taken a proper shape and
is expected to continue its phenomenal growth. Its growth in the world, and especially in India can be accounted to many
factors such as increased use of smart phones, convenience and economic internet access, busy schedules of working
professionals etc., Moreover, the speed of the growth of E-commerce in India is remarkable. Due to the digital
revolution, the e-commerce sector in India has become 4 times its size, from $3.8 billion in 2009 to $17 billion in 2014,
growing at a CAGR of 37% and this will transform India into a connected economy. Digital innovation is disrupting
economies, sectors and industries across the world and transforming the way we live, works and run businesses. Digital
India has touched upon nearly all aspects of our lives, ranging from work, travel and communication to healthcare,
education and shopping. The push for e-governance and Digital India comes from the booming telecom sector,
increasing Internet penetration and proliferating mobile devices. Digital technology is playing a vital role in helping our
country leapfrog to the next stage of development. It is bridging the gaps in financial and social inclusion with initiatives
such as Direct Benefit Transfer (DBT). Hence, this paper presents the initiatives taken by digital India in exploring the
potential of e-commerce in digital era, the current and future scenario of internet users in India and e-commerce
opportunities and challenges.
KEYWORDS: Digital India, E-commerce, Internet users, Challenges, Opportunities.

1. INTRODUCTION
Ecommerce is transforming the economic landscape and the manner economic transactions are made within
the worldwide. With the appearance of the virtual technology, the exponential boom of e-trade within the
ultimate decade is anticipated to grow in future years irrespective of any accompanying change rules. For
developing countries like India, e-commerce provides considerable opportunity.
Electronic commerce or ecommerce refers to any form of business transaction that is undertaken
electronically to create, transform and redefine various relationships for creating value in the organisations. It
includes wide range of online business activities for goods and services.
Modernization of countries, easier access to computers, increased communication networks and increase
usage of smartphone around the world has given the opportunity to people to use internet more frequently and
with greater ease and convenience. This in turn was the driving factors for the tremendous growth in India’s e-
commerce sector. This is evident from the fact that, in June 2017, there were 1.9 trillion people internet users
in Asia itself and 659 million internet users in Europe. From another study in March 2017, it was found that
there were approximately 731 million total internet used in China and 287 million total internet users in
United states.
In 2016, 1.61 billion people purchased goods online amount to global e-retail sales 1.9 trillion US dollar and
estimated that it would grow upto 4.06 trillion U.S. dollars by 2020. Asia Pacific, e-retails alone accounted
for 12.1% of retail sales in 2016 and very less percentage that is 1.8 percent of retail sales were accounted in

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 International Journal of Computer & Mathematical Sciences
IJCMS
ISSN 2347 – 8527
Volume 7, Issue 2
February 2018

Middle East and Africa. These online purchases mostly from bricks-and-mortar retailers, such as Walmart and
online retailing corporations such as Amazon.com and Rakuten.
Despite the fact that the worldwide virtual divide has created assumptions that on line shopping is especially a
Western phenomenon, but the digital trade is booming in various international locations too. With the recent
digital development exploding in the Asia Pacific region, one can understand that Indonesia and India are the
fastest growing online retail markets followed by Mexico and China. Based on the m-commerce sales,
Amazon, Apple and JD.Com are the leading global e-retailers with Amazon as the market leader generating
about 28 billion US dollars in mobile sales in 2015 alone. With the current mobile internet penetration rate in
China, it can be estimated that online sales are said to account for one third of total retail sales in China in
2019. It is also predicted that number for digital buyers worldwide will increase from 1.66 billion global
digital buyers in 2016 to over 2.14 billion people worldwide.
Elizabeth Goldsmith and others (2000) reported that the general category of e-commerce is of two parts:
1 E-merchandise: selling goods and services electronically and moving items through distribution channels,
for example through Internet shopping for groceries, tickets, music, clothes, hardware, travel, books, flowers
or gifts.
2 E-finance: banking, debit cards, smart cards, banking machines, telephone and Internet banking, insurance,
financial services and mortgages on-line

1.1. OBJECTIVES OF THE STUDY

The following are the objectives of the paper:
1. To study the current and future scenario of internet users in India
2. To study the initiatives taken by digital India in exploring the potential of e-commerce in digital era
3. To analyse the E-commerce opportunities and challenges.

1.2 RESEARCH METHODOLOGY

Secondary data sources that is web sources- articles, e-journals etc. were used for the study. Descriptive study
is undertaken to explore potential of e-commerce, its opportunities and challenges.

2. CURRENT AND FUTURE SCENARIO OF INTERNET USERS IN INDIA

Today India is amongst the largest and fastest growing in terms of internet population with the penetration of
19%. It is the third largest internet population country after China with 620 million (45.80 % penetration) and
the U.S. with 275 million (84.20% penetration). This incredible development of India’s Internet user base is
worthwhile to notice. In 2001, there were only about 7 million Internet users in India and now it has grown
tremendously by 25 times in the last 15 years at a compounded rate of 30 percent year-on-year. The year 2014
was considered as a landmark year for a digital revolution nationally and also globally. A report published by
Boston Consulting Group (BCG) in association with Internet and Mobile Association of India (IMAI), shows
that the number of internet user population in India will jump to over 650 million till 2020 with increase in
urban & rural internet users, more older, female, more vernacular and mobile led population.

Fig 1: India Internet population

Image Source: India@Digial Bharat, BCG - IAMAI report

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ISSN 2347 – 8527
Volume 7, Issue 2
February 2018

India is the second largest market for social networking sites like Linkedin and Facebook. Though in India
there is a great scope for e-commerce market, it is found that only 3% of the population shop online for goods
and services. Mobiles are the primary device for accessing the internet in India and around 77% of them are
mobile users and expected to reach to 85% in 2020. In the next 3-4 years internet users will be from rural
India and will contribute to more than 50% of the growth. It is also expected that there will also be high
growth in internet users over 25 years of ages as well to 65% in 2020 from 50% percentage in 2016.
As India’s internet economy is expected to double from USD 125 Billion to USD 250 Billion, e-commerce
and financial services are projected to lead this growth. Digital adoption increases the share of digital payment
transactions nearly 30-40%, which is almost double by the end of 2020.

2.1 FUTURE OF E-COMMERCE IN INDIA

With the increasing awareness among the consumers about the product and service quality, change in
consumer behavior, attitude and shopping habits, India’s e-commerce market, the business-to-business (B2B)
segment is set to grow at a burgeoning rate by 2020 that is by 2.5 times and is expected to touch to Rs 45 lakh
crore. This is the result of rise of high speed internet users which is encouraging the businesses to innovate
and offer a diversified varieties of products & services online. Global business-to-business market is expected
to reach $6.7 trillion, almost four times from present size. Countries like USA, China, and Japan have the
highest share of business-to-business market as compared to B2C. Over the past few years, there has been a
significant development in the payment structure in e-commerce market too as there is a paradigm shift of the
consumers from brick and mortor to online space. Especially consumer electronics, apparel and accessories
and online travel are the major market segments exhibiting promising growth. The prompt and immediate
services provided by online groceries stores is also one of the reason prompting the consumers to enter into
the country’s online space.
According to TechSci Research report “India E-commerce Market Forecast and Opportunities, 2020”, the
country’s e-commerce market is expected to grow over 36% at a CAGR during 2015 – 2020. And this growth
can be accounted to the expanding smartphone user base, growing youth population, increasing per capita
disposable income, huge discounts and other offers extended to customers by the e-commerce companies.

3. INITIATIVES OF DIGITAL INDIA IN EXPLORING THE POTENTIAL OF E-COMMERCE

Government projects along with digital India, skill India, and Make in India also are contributing to the boom
of the E-commerce industry. The government of India introduced ‘demonetization’ to address counterfeiting
and the black market cash supply. In a single day, 86% of India’s foreign money turned into nullified, which
completely disrupted the social, political, and financial spheres of India’s economic system. Demonetization
saw numerous reactions throughout verticals. Gross merchandise charge fell through 40-50%. However,
online sellers of food and grocery noted huge income and the boom to the digital payment mechanism also
anticipated to assist in longer term. Hence, adopting disruptive technology and taking advantage of Digital
India movement, the e-commerce sector though slowed down initially in 2017 but benefited from the note
ban. Demotisation accelerated online transactions and spawned a plethora of e-payment gateways in India.
The Digital India programme is a formalized initiative by way of the government of India on 2 July 2015.
Digital India offers advanced internet accessibility whilst Make in India assists in indigenizing product
manufacturing. The campaign envisages a whole digital transformation of society and the development of an
information economy. The programme has been established into three vision regions and 9 pillars. After
restructuring and re-focusing, existing schemes and tasks have been brought underneath each of these pillars.
Digital transformation is deeply impacting the companies and our society. The digitization of information
helps make things extra green with the aid of saving on paperwork, manpower and time, wherein a couple of
things are now in reach at the clicking of a button. E-commerce and different virtual technologies have
supplied customers with a multitude of methods to select, purchase, and acquire goods and have concurrently
fuelled an expectation for this all to take place within a short timescale.

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ISSN 2347 – 8527
Volume 7, Issue 2
February 2018

Fig 2: Vision of Digital India

Source: http://meity.gov.in/divisions/national-e-governance-plan

Disruptive technology is revolutionizing the economics of global manufacturing and exchange, together with
the possibilities of developing countries in the global economy. E-commerce, 3-D printing, online bills, the
“internet of the entirety,” and other technologies using on the net are empowering agencies of all sizes to
reduce charges, streamline deliver chains, and marketing services and products globally with greater ease than
ever. The digital revolution is remodeling and is opening opportunities for hundreds of thousands of micro
entrepreneurs and small corporations to engage in cross-border trade, develop into multinational dealers, and
craft their very own global deliver chains.
E-commerce players in other sectors like government services, B-2-B and B-2-C were benefited with the
introduction of The Unified Payment Interface (UPI) of the National Payments Corporation of India (NPCI)
which inturn helped to spawn number of state-run and private digital payment channels across the country.
Online payments were made more acceptable through state-run BHIM (Bharat Interface for Money) and
Bharat QR code for scanning and paying.
With the smartphone revolution, within the next five years there is absolutely new possibilities for pass-border
sales of digital items, content, and offerings. Digitization is simply one of these transformative forces in 21st
century trade. The digital revolution now not only creates vast monetary advantages for developing
international locations but also increases productivity of companies to deeper specialization of people and job
creation.

3.1 REGULATORY PANORAMA FOR E-COMMERCE FOREIGN DIRECT INVESTMENT (FDI):

 In B2B, 100% Foreign Direct Investment is permitted in enterprises engaged in B2B (business to
business) eCommerce such as Walmart, Alibaba can perform coins and bring business.
 In B2C market, 100% Foreign Direct Investment is permitted in online retail of multi emblem goods and
services in B2C below the marketplace version such as Amazon, Flipkart, and Snapdeal.
 In B2C stock-based, FDI isn't permitted in inventory-based model of eCommerce.
 A single brand retail trading entity working through brick and mortar stores is allowed to undertake retail
buying and selling through eCommerce challenge to nearby sourcing requirements.
 In Food retail, a 100% Foreign Direct Investment is allowed for trading (which include eCommerce) food
merchandise manufactured or procured in India.

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ISSN 2347 – 8527
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February 2018

 In Multi Brand, no FDI is allowed in businesses which interact in multi brand retail trading by using
eCommerce.
Government has taken steps for transforming India (NITI Aayog) by installing stage committees to check out
problems associated with eCommerce which includes FDI. Food safety and standards Authority of India
(FSSAI) has additionally issued draft norms for licensing on-line meals operators. Consumer Affairs Ministry
is likewise making plans to modify eCommerce through the proposed new customer safety law.

4. E-COMMERCE – OPPORTUNITIES AND CHALLENGES

Opportunities
Increased online user base and Internet penetration are the major factors affecting the growth of e-commerce.
The following are the areas of opportunities for e-commerce.
 E-tail - Electronics, Apparels & Accessories, Health & Personal Care, Books & Media, Home Appliances,
etc.
 E-commerce creates new opportunities for entrepreneurial start-ups.
 E-services - Online Travel, Online Payments, booking tickets for watching films, Online Classifieds, etc.
 E-business - Online stock trading, virtual shopping,selecting, ordering, transacting business in retail and
other sectors like logistics, education, procurement, healthcare
 E-recruitment
 E-insurance
The opportunities can also be increased with
 Growing consumerism, increased disposable incomes, changing lifestyles, extended work hours and
increased social gatherings which inturn lead to multiple e-payments.
 The increasing mobile and Internet usage, mobile-commerce sales, advanced shipping, multiple payment
options and discounts
 Increasing awareness on the benefits of online trading
According global professional services firm KPMG report: online spending, including domestic and cross-
border shopping is forecasted to grow 31 per cent annually to $136 billion by 2018. It is projected that E-
commerce market size would be USD100 billion by 2020, USD300 billion by 2030 and Online Shoppers as
36% age of total internet users by 2020.

CHALLENGES
E-commerce sectors have been facing multiple challenges in their business operations.
 Ethical issues(Privacy and Security issues)- Data/cyber security is the major challenges as the players deal
with huge volumes of customer information and a lot of which is shared with third parties such as logistics
providers, there is a raising concerns about exploitation by external entities.
 E-Infrastructural Issues: Provision of high speed internet is necessary as it is the backbone for
ecommerce. Internet penetration is low when compared to other countries
 Absence of proper cyber laws : The India’s Information Technology (IT) Bill passed by the Indian
Parliament on May 17,2000 though it intends to tackle legislatively the growing areas in e-commerce it
deals with only commercial and criminal areas of law and ignores individual property rights, content
regulation to privacy and data protection specific legislation.
 Declining Margins: With entry of a large number of players in the already competitive e-commerce
market, the e-commerce industry has seen the intensified competition in the various sectors which in turn
has forced many companies to adopt aggressive pricing strategies, and the customers are given heavy
discounts, offers, taking returns etc. resulting in razor-thin margins.

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ISSN 2347 – 8527
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February 2018

 Logistics & Supply Chain: Logistics failure in any area can do detrimental damage to a startup’s future
and mar the brand overall. Add to this the need for a guaranteed return policy.
 Tax related issues: Tax rate system of Indian market can result in lesser growth rate of e-Commerce in
India in comparison to other developed countries like USA and UK as tax structure of India varies from
sector to sector. There is ambiguity with respect to categorization of offerings into ‘goods’ or ‘services’
since there is no uniform tax structure across various states. The guidelines on taxation of certain
transactions like e-wallets, cash on delivery, gift vouchers etc. are not clearly defined. Some of these
challenges are expected to be resolved after the implementation of the Goods and Services.
 Touch and Feel: Indian customers are more comfortable in buying products physically. Especially
products like apparel, handicrafts, jewellery have to face challenges to sell their products as the buyers
want to see and touch before they buy these things.
 Cash on delivery: In India, most of the people prefer to pay Cash on delivery due to low credit card
diffusion and low trust in online transactions. Receiving payment in cash (COD) makes the process
laborious, risky and more expensive for the companies as their working capital requirement increases.
 Digital Illiteracy: The continuous exodus of skilled computer engineers to other countries cause brain –
drain and posed a real threat to the Indian IT industry..
 Consumer Psyche : The Indian consumer prefers to choose a neighbourhood store which provides him
whatever he wants rather than other means.
 Virus Problem:The computer virus is a formidable problem in the execution of e-transactions
 English Specific: In order to make e-commerce reach to the small enterprises, it needs to be available in
the languages (regional) of the owners of the small enterprises to enable them to adapt e-commerce
processes in their operations.
 Payment gateways: Ecommerce companies using Indian payment gateways are losing out on business, as
several customers do not reattempt payment after a transaction fails.
 Postal addresses are not standardized: there is little standardization in the way postal addresses are written.
Last mile issues add to ecommerce logistics problems.
 Different national rules on data management, consumer protection and the availability of online
information are major impediments to cross border trade

CONCLUSION
From the surveys and studies it can be concluded that India has a great potential for E-commerce market. To
increase the e-commerce market tremendously the internet services, awareness of the market, strong cyber
security law and digital literacy increases. Various opportunities can be found for retailers, distributers,
wholesalers, producers and people. It is difficult to predict whether it will capture a large share of e-commerce
market in India. But the future of e-commerce in India would be bright in the upcoming years if all essential
factors would be implemented effectively.

REFERENCES
[1]Georgios I. D. Nikolaos, M. Nancy, P. (2004). Social and Economic Transformation in the Digital Era.Idea
Group Publishing. USA.
[2] Deloite, ASSOCHAM. (2015). Future of E- commerce: Uncovering innovations. INDIA: Touche
Tohmatsu India Private Limited.
[3] Elizabeth, G. and Sue L.T. McGregor. (2000). E-commerce: Consumer protection issues and implications
for research and education. J Consumer Studies & Home Economics. 24(2). pp.124–127.
[4] Rama, Rao, T.P.(2001). E-Commerce and Digital Divide: Impact on Consumers, Presented at the Regional
Meeting for the Asia-Pacific: New Dimensions of Consumer Protection in the Era of Globalisation, Goa, India

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February 2018

Websites
 E-Commerce Guide.Com
 E-Commerce Times
 www.business.com
 www.forrester.com
 http://meity.gov.in/divisions/national-e-governance-plan
 www.oecd.org/going-digital/.
 www.statista.com
 https://www.mbaskool.com/business-articles/operations/14005-digital-india-and-cyber-security-industry.html
 http://www.cxotoday.com/story/indias-internet-economy-to-double-by-2020-bcg-tie-report/
 http://www.business-standard.com/article/companies/b2b-e-commerce-to-touch-rs-45-lakh-cr-by-2020-in-india-
115090400770_1.html
 https://www.techsciresearch.com/news/463-india-e-commerce-market-to-grow-at-over-36-by-2020.html
https://www.nitinbhatia.in/marketing-case-study/the-future-of-e-commerce-in-india/
 https://retail.economictimes.indiatimes.com/news/e-commerce/e-tailing/e-commerce-sector-rides-on-digital-india-
note-ban/62313974
 https://www.unido.org/sites/default/files/2017-10/WP_15_2017_.pdf

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