Everything You Need to Know About Selling in India

If you’re considering expanding your business into Asia Pacific, India may be the place to begin. It’s the fastest-growing e-commerce market in the region, worth 16 billion USD in 2014. While only a small fraction of the population is online, 75% of them are below 35, the demographic most likely to participate in e-commerce. There are a few significant drawbacks which may prevent you from expanding into India, so here is a detailed look at everything you need to know before you make that decision.

SellinginIndia

In the Everything You Need to Know series, we take a look at a specific e-commerce market to help you decide whether you should expand online sales across borders. As a provider of comprehensive payment processing services, we at DalPay specialise in cross-border commerce and have first-hand experience facilitating business in over one hundred markets worldwide.

Online marketplaces vary significantly around the world in a wide number of ways, such as their level of economic development, shopping habits, preferred payment methods, access to technologies, legality, logistics, etc. Because of this, there are a great many factors to consider when choosing which international markets to expand to. This series is designed to provide you with all the information you need to choose which countries are a good fit for your business and to begin selling across borders.

Unless otherwise noted, figures in this article are sourced from:

The growth of e-commerce has changed the way people shop all around the world. While still representing only a fraction of total retail sales, e-tailers are part of the foundation of the global digital economy, which in turn has an effect on the lives of everyone who takes part in the economy, whether or not they buy or sell online.

It is not just a matter of convenience. There are two key reasons why e-commerce has been so successful: first, it allows consumers to purchase and receive goods without ever leaving their home; and second, it allows barriers to commerce such as distance and geopolitical boundaries to be break down.

India is the fastest-growing e-commerce market in Asia Pacific, so if you’re getting ready to expand your e-commerce business into the region, India may be a good place to start. However, it is still primarily a cash-based economy and there are some restrictions which may limit what you’re capable of selling. To help you decide whether it’s the right cross-border market for your business, we’re going to take a closer look at the market trends and realities of selling online in India.

Quick Figures

  • Total population: 1.2 billion
  • Internet penetration: 11.4% (137 million)
  • Mobile penetration: 72%
  • Online shoppers: 20 million
  • E-commerce sales: USD 16 billion
  • M-commerce sales: USD 800 million
  • E-commerce annual growth rate: 37.4%

The reality is that India is an immature e-commerce market. As the above figures show, internet penetration is still low. Being the second most populous nation, that still represents a very large community of internet users nationally, but the number of online shoppers is also quite a small proportion of that group, with only 20 million people.

Still, 20 million is nothing to scoff at, and that number is growing, with the young, middle-class mobile-ready population in particular driving the growth of cross-border commerce. Hindi is the dominant language, but 20% of the population is fluent in English and that proportion is higher among younger demographics, the same demographics that are more likely to shop online. English-language websites can therefore be effectively marketed in India.

What You Need to Know

  • The US and China are the main countries for cross-border e-commerce sales to India.
  • The demand for international consumer products is growing more rapidly than domestic distributors can keep up with.
  • Consumer electronics, apparel and media products represent the vast majority of online retail spending.

Preferred payment methods

Credit card penetration is very low in India, with only 2% of the population owning a credit card. For online payments, credit cards represent 24% of total value, behind bank transfers (29.3%) and cash-on-delivery, which leads with 37.5%. The popularity of cash-on-delivery indicates a low acceptance for online payments. The lack of credit card penetration and low market share of e-wallets (1.5%) pose a challenge for international sellers.

However, m-commerce may be the solution. Already representing 4% of e-commerce payments, nearly triple those represented by e-wallets, the 10 million mobile shoppers in India spent 800 million USD in 2013. 30% of total e-commerce traffic comes from mobile devices and 14% of all websites visited via mobile device were e-commerce sites.

With 72% mobile penetration and e-commerce being driven by a younger, increasingly connected and mobile crowd, m-commerce is poised to become the driving factor in the continued growth of e-commerce in India.

Cybercrime report

As the second-biggest internet market after China, India is naturally a target for cybercriminals, accounting for 6.5% of all attacks. According to research conducted by Aite Group, 37% of Indian cardholders has experienced fraud in the past 5years, more than in any of the other 16 countries surveyed.

The Reserve Bank of India adopted PCI DSS in 2013 and has enforced two-step verification procedures, identifying the need for payment card security relatively early in the development of the local e-commerce industry. As a result, Sift Science has placed India low on its list of countries most subject to e-commerce fraud.

Legality

The legal restrictions may prove to be too much of a challenge for many e-tailers considering selling physical goods to India. India requires that cross-border retailers source 30% of their products and services locally, which means that businesses shipping all their goods from a centralised location will face significant barriers when selling to India.

However, there are no sales taxes on goods shipped into India and certain types of goods, including laptops and other consumer electronics, aren’t subject to duty. So it’s important to consider what type of goods you’re selling and where you are supplying them from when deciding whether India is a good market for your business.

Indian E-Commerce in Brief

Pros:

  • 20 million potential customers and growing
  • High demand for international consumer products
  • No sales tax

Cons:

  • Low credit card penetration
  • Low e-commerce penetration
  • 30% of products must be sourced locally

On the plus side, India is the second-largest internet market in the world and the fastest growing e-commerce market in Asia Pacific. Though still an immature e-commerce market, nearly the entire population has access to postal delivery to their door, which is rarely true in emerging markets, so the necessary infrastructure for e-commerce shipping and fulfillment is in place.

On the downside, it’s still a cash-based economy, with few people owning credit cards or e-wallets, which, coupled with the fact that e-tailers are legally limited in their ability to sell certain products, is why the U.N. Conference on Trade and Development called India one of the least e-commerce friendly markets.

Still, the number of internet and mobile device users is expected to more than double in the next 5 years, with most of the growth accounted for by young, middle-class, English-speaking consumers. This is an untapped consumer base whose loyalties are undecided and who are thirsty for international consumer products. Considering the growth of this audience, there may be the best time to begin selling in India, despite the hurdles.

Expanding into a new international market is a risky venture but a very rewarding one if done correctly. For the latest information about how you can build and maintain a strong e-commerce enterprise and keep it compatible with legislation and buying habits at home and abroad, subscribe to the DalPay Blog and follow us on Facebook and Twitter for the latest industry news.

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Virtual Commerce Part 1: The Role of E-Commerce in MMOGs

Role Ecommerce MMO

We are living in a digital economy. Commerce as we know it, based on digital technologies, has become dependent on the internet, even when it comes to traditional brick-and-mortar retail. But this phenomenon is not limited to commerce – it’s taking place in all industries, including video games. This is visible in the now-widespread and growing popularity of Massively Multiplayer Online Games or “MMOGs”.

The video game industry is in very good shape at the moment. Thanks to online gaming, developers and publishers have been able to reach a much wider audience than ever before, and MMOGs are the tool they are using to attract and retain these customers.

MMOGs include the traditional “online role-playing” MMORPGs, often considered the domain of hardcore gamers, as well as casual free-to-play games, browser-based games and “social gaming”, which blurs the line between games and social media. All of these can be classified as virtual environments (VEs).

As the popularity of virtual environments balloons, not just among gamers but all across the demographic spectrum, we’re witnessing what economist Edward Castronova has called “a mass exodus to virtual worlds and on-line game environments.” This has led to VEs recreating many real-world activities, including the development of local economies using in-game monetary systems, also known as virtual currencies.

What is a Virtual Currency?

Virtual currency refers to a type of digital money issued by its developers and used and accepted within a specific virtual community, such as the in-game currencies in Second Life, World of Warcraft or EVE Online. This in-game money is used to purchase virtual goods or services within the game world.

These currencies are so important to the experience of VEs that some MMOG developers have employed economists to define and manage the in-game money. For example, EVE Online has an incredibly deep economic infrastructure within which players are free to operate, from trading goods to building their own corporations. However it is explicitly prohibited to exchange the in-game currency for real-world currency. This type of virtual currency is centralised – i.e. control of the money supply is in the hands of the MMOG’s developers.

The virtual currency of Second Life, Linden Dollars, on the other hand, is freely exchangeable with real-world currency, making it possible for players to openly make a living based on a successful in-game enterprise.

A Meeting of Worlds

As fascinating as the development of isolated local economies within these virtual worlds is, what we’re interested in is the way virtual currencies interact with real-world currencies and the places where virtual commerce and e-commerce overlap.

Game developers and publishers are enjoying the fruits of a very healthy marketplace. Online gaming has never been such a promising industry for both long-established MMOG developers as well as new market entrants. There are a variety of different payment models foronline games, such as:

Subscription-based

Typical of AAA games and popularised by MMORPGs such as World of Warcraft, traditionally players would purchase online games from a store the same way they would purchase offline, single-player games. However, for the majority of these games players would have to pay a monthly subscription fee to allow them access to the persistent online world. As MMOGs began to attract a wider population, developers began to create new revenue streams in the form of:

  • In-game purchases: While players can earn money within the economy of most VEs, developers often also give them the option of using real-world money to purchase items or in-game currency; and
  • Downloadable content (DLCs): DLCs are optional expansion packs players can purchase to add content to their game, such as new items, areas, characters, quests, customisation tools, etc.

The success of these additional revenue streams allowed for the development of a new pricing model for MMOGs:

Freemium

A portmanteau of the words free and premium, freemium games get their name from the fact that they are free-to-playbut players must pay to unlock optional “premium” content and features.

This has proven a successful model for many developers, as 50% of all MMOG players only play free-to-play games and because of the habit-forming nature of online gaming, it’s easier to sell premium features to existing players than to sell the complete game to someone who hasn’t played it yet. However, this model has received criticism for encouraging predatory tactics in game design.

Pay-once-and-play

This model is the alternative to freemium. Whether it’s players who are uncomfortable with having locked content in their games or it’s parents who are sick of unexpected charges for premier content on their credit cards, there is a market for games that come with all content included at initial purchase. Apple has recognised this market by implementing a pay-once-and-play section in iTunes.

Needless to say, all of these pricing models require a robust e-commerce platform in place to allow developers to reliably accept payments with as little impact on the player’s gaming experience as possible. In order to provide the best customer experience and in turn maximise your profits, we recommend providing players with:

  • Flexible payment methods: Offering more payment options is proven to increase conversion. DalPay provides support for several payment methods.
  • A localised buying experience: Supporting local languages and locally-preferred payment methods inspires confidence in international customers. DalPay supports 24 languages and over 150 currencies.
  • A seamless buying experience: In-game purchases should be just that – in the game. If players have to leave their game or visit a website to complete a purchase, they will likely abandon the purchase and possibly even the game entirely since their immersion has been broken. Well-integrated in-game purchases encourage players to keep playing and keep buying.

Online game distribution is a healthy, growing market and as it continues to mature more and more players are expecting the seamless gaming experience spearheaded by AAA developers (and willing to pay for it). But even if you’re a new indie developer it’s possible to offer the same experience to your customers, with the right e-commerce service provider.

Read our second installment in this series: Virtual Commerce Part 2: How MMOGs are Pushing E-Commerce Forward.

For more about how DalPay can help your business whether you’re expanding into international markets or just getting off the ground, visit our website and follow us on Facebook and Twitter.

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