MUMBAI: Companies in India's ecommerce sector face significant challenges to growth, according to a report from MSLGROUP India.
The Publicis-owned agency's new report, E-commerce in India: Evolution, Growth and Challenges, suggest that several factors, including a shared scepticism among Indians about paying for goods online, slow delivery times, state bureaucracy, inefficient inventory management and cyber-crime could all prove problematic.
"Establishing trust and winning confidence isn't easy," the MSLGROUP report added. "Brick and mortar stores tend to be more trusted. Ecommerce firms will have to work hard to gain consumers' trust."
Despite these problems, the Indian ecommerce sector has enjoyed stellar revenue increases over recent years. Figures from the Internet and Mobile Association of India (IAMAI) suggest that the market is expanding by around 70% per year.
But India radically under-indexes in terms of the value of its online sales compared to regional rivals. IAMAI data show that the market as a whole was worth $6.79bn in 2011, while eMarketer has put the value of Chinese ecommerce sales at $24.1bn for last year.
Nelson D'Souza, general manager of financial services site Fundsupermart.com, commented: "India has a lot to catch up on. In 10 years, we will be probably where China and the world are today."
MSLGROUP's report was upbeat about the Indian market's prospects for future growth, noting that many of the market's problems were being resolved. For example, greater uptake of SSL protections have improved users' online security, while certain laws governing investments have been liberalised, making it easier for online vendors to establish themselves.
Uplifts to the sector should also be provided by a general rise in India's web population, which is growing at around +13% per year, according to comScore figures cited by the report.
"Ecommerce in India is still nascent, but... the opportunities for e-commerce players are many – rapid urbanisation and rising literacy rates [and a] rapidly growing internet user population."
Data sourced from MSLGROUP India; additional content by Warc staff