E-Commerce to get bigger focus at RCEP talks

Context:

Discussion on e-commerce is expected to have a significantly bigger footprint than earlier at the 19^th Regional Comprehensive Economic Partnership (RCEP) negotiations.

Introduction:

• Sixteen Asia Pacific nations, including India, are ready to discuss in detail the norms on e-commerce as part of negotiations on the proposed mega Free Trade Agreement know as the Regional Comprehensive Economic Partnership (RCEP).
• India has been opposing binding norms on opening up the e-commerce sector at the level of RCEP as well as the global level (WTO) talks on grounds including that India is yet to have a comprehensive national policy on the topic.
• Many RCEP nations including Australia, Japan and China, are pushing for inclusion of a host of elements for ‘Terms of Reference’ for RCEP negotiations concerning e-commerce.

What is E-Commerce?

• Electronic commerce or e-commerce is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, mainly from the internet.
• Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business.
• E-Commerce processes are conducted using applications, such as email, fax, online catalogues and shopping carts, electronic data interchange (EDI), file transfer protocol and web services and e-newsletters to subscribers.
• Electronic commerce emerged in the early 1990’s and its use has increased at a rapid rate. Today the majority of companies have an online presence.

Some statistics related to e-commerce:

• With $ 681 billion in online retail sales in 2016, China is the largest market for e-commerce globally, followed by the US, and the fastest growing one is India.
• India has an Internet user base of about 243.2 million as of January 2014.
• Despite being third largest user base in the world, the penetration of Internet is low compared to markets like United States, United Kingdom or France but is growing at a much faster rate, adding around 6 million new entrants every month.
• In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.
• The retail market in India is expected to rise from 2.5% in 2016 to 5% in 2020.

Examples of e-commerce:

Two familiar examples of electronic commerce companies are eBay and Amazon. Both of these companies allow consumers to purchase a variety of goods and services online from business and other consumers.

Types of e-commerce:

• There are several types of electronic commerce. The most common is business to consumer, in which a business sells products or services directly to consumers over the Internet.
• Another type of electronic commerce is business to business, where companies sell products or services to other companies over the Internet.
• Consumer to business electronic commerce involves consumers selling products or services to businesses.
• There is consumer to consumer e-commerce, which is where consumers sell their products to other consumers.

Some advantages of e-commerce are given below:

• Faster buying and selling procedure, as well as easy to find products.
• Buying and selling day and night
• More reach to customers, there is no theoretical geographic limitations.
• No need of physical company set-ups
• Easy to start and manage a business.
• Customers can easily select products from different providers without moving around physically.
• E-Commerce helps in creating new job opportunities due to information related services, software app and digital products.
• E-commerce offers the consumer or enterprise various information they need, making information into total transparency, and enterprises are no longer is able to use the mode of space or advertisement to raise their competitive edge.

Some disadvantages of e-commerce are given below:

The invention of faster internet connectivity and powerful online tools has resulted in a new commerce arena-E-Commerce. E commerce offered many advantages to companies and customers but it also caused many problems. The issues and problems which affect the development of Internet, e-commerce and e-business applications are discussed below:

• There is no guarantee of product quality
• Mechanical failures can cause unpredictable effects on the total processes.
• As there is minimum chance of direct customer to company interactions, customer loyalty is always on a check.
• There are many hackers who look for opportunities, and thus an e-commerce site, service, payment gateways; all are always prone to attack.
• E-commerce is lack of human interaction for customers, especially who prefer face-to-face consumption

Security and Privacy issue:

• The Internet is not a particularly secure place. The information is widely published throughout the Internet which can be used for criminal and near-criminal activities.
• The second aspect is that since the Internet is an open system, details of its underlying technologies are freely available to anybody. This means that the way data passes through the Internet is in the public domain; the consequence of this is that, theoretically, anyone with the right tools can eavesdrop on data passing from one computer on the Internet to another
• Conflict of laws in cyberspace is a major hurdle for harmonization of legal framework for e-commerce around the world.

Net Neutrality Issue:

Net Neutrality is a principle which advocates that Internet service providers and governments should treat all data on the Internet equally, not discriminating or changing deferentially by user, content, site, platform, application, type of attached equipment, or mode of communication.

Challenges that e-commerce business face in India:

The growth of ecommerce volumes in India is attracting the attention of players around the globe. India, the second most populous country in the world, is home to 1.2 billion people. The combined populations of Germany, UK, France, Italy, Netherlands, Belgium, and Greece equal one-fourth the population of India alone. Despite lower per-capita purchasing power, this still makes India one of the most attractive emerging markets for ecommerce. But India is far from being a bed of roses. Here are some challenges that ecommerce businesses face in India

• Indian customers return much of the merchandise they purchase online.
• Cash on delivery is the preferred payment mode
• Ecommerce companies using Indian payment gateways are losing out on business, as several customers do not reattempt payment after a transaction fails.
• Though the total number of mobile phone users in India is very high, a significant majority still use feature phones, not smart phones. So, for all practical purposes this consumer group is unable to make ecommerce purchases on the move.
• The logistics challenge in India is not just about the lack of standardization in postal addresses.
• Given the large size of the country, there are thousands of towns that are not easily accessible. Metropolitan cities and other major urban centers have a fairly robust logistics infrastructure.
• Overfunded competitors are driving up cost of customer acquisition.
• The vibrancy in the Indian startup ecosystem over the past couple of years has channeled a lot of investment into the ecommerce sector. The long-term prospects for ecommerce companies are so exciting that some investors are willing to spend irrationally high amounts of money to acquire market share today. Naturally the Indian consumer is spoiled for choice.

Solutions:

• E-commerce readiness: It is essential to fully understand the payment and logistical infrastructure, consumer behaviour, retail opportunity and technological developments.
• Scope of growth: It is also important to look at the internet penetration, demographics of the online buying population.
• Barriers to entry: Players should understand the regulatory environment and connect with solution providers, content distribution networks, and digital agencies.
• Competition: There is also a need to do an in-depth assessment of what competitors are doing, their online strategy and the nature of each offering.

Government initiatives:

• In India, the Information Technology Act 2000 governs the basic applicability of e-commerce.
• The Indian Government’s “Digital India” initiative is also expected to boost the e-commerce industry. The government will deliver service via mobile connectivity and in doing so, is expected to bring the internet and broadband to remote corners of the country.
• The Indian Government is also modernizing Indian Post and aims to develop it as a distribution channel for e-commerce related services. It will improve delivery services and cash transactions in more remote and rural areas, thus increasing the reach of e-commerce players and expanding the potential market.
• An online Consumer Mediation Centre (OCMC) for e-commerce complaints was launched in December 2016 is in the process of being opertaionalized. A mobile app named “Smart Consumer” has also been launched in December 2016.

Conclusion:

The E-Commerce industry in India may currently be behind its counterparts in a number of developed countries and even some emerging markets. However, with India’s GDP growth pegged at 6.4% by the International Monetary Fund and the World Bank, it is expected to grow rapidly. Moreover, the Indian e-Commerce industry has access to funds from within the country and international investors. Overall, the e-Commerce sector is maturing and a number of serious players are entering the market.