View from India: E-commerce expected to create over a million jobs in India by 2022
The Indian e-commerce market will exceed 100 billion USD by 2022, with online financial services set to grow the fastest. All this and more is documented in the September 2018 report, ‘Propelling India towards global leadership in e-commerce’ from software industry lobby group Nasscom and consulting firm PwC India.
“By the year 2022 - coinciding with the nation’s 75th Year of Independence - it is estimated that India will have nearly 850 million Internet users, of which 150 million are expected to start transacting online. Those with a very high frequency of online transactions - we choose to call them Digital Champions - will number 50 million at the very least. A massive surge in the numbers of the consuming class (affluent and middle class) is foreseen,” stated Debjani Ghosh, president, Nasscom, in a foreword address in the report.
Growth is expected from the next 100 million users with starkly different demographical backgrounds and preferences vis-à-vis existing users. To cater to their needs, e-commerce players need to innovate across the value chain through initiatives such as custom assortments, targeted marketing, local language content and online-over-offline (OOO) infrastructure.
E-commerce companies have to focus on building loyalty which will translate into repeat sales. In India, the marketplace model which is similar to successful American models is prevalent. In this, e-travel and e-tail are the two dominant areas. To experience exponential growth in the next phase, the existing barriers pertaining to language and tech usability, logistics and regulatory compliances will have to be removed.
“The overall contribution of this sector is quite substantial. In the next four to five years, it can create a million jobs, in allied industries like logistics and warehousing as well. In addition, the foreign direct investment (FDI) attracted enhances the country’s positioning significantly on the global stage,” predicted Ghosh.
Several factors will boost the e-commerce industry. By 2022, the Indian middle class will be the largest segment of the population. Indian consumers have already experienced a shift in purchasing behaviour as their focus has moved from ‘buying necessities’ to ‘improving their quality of life’, and this trend is only expected to continue further as customers spend more on discretionary products and services.
Additionally, owing to a young population, India is expected to reap a rich demographic dividend, with the labour force growing at a compounded annual growth rate (CAGR) of around 2 per cent (2017–2022E), against a population growth of approximately 1 per cent over the same period. These spenders constitute a large internet and smartphone user base: with increased accessibility to mobile internet, Indian consumers have already experienced a shift in purchasing behaviour as their focus has moved from ‘buying necessities’ to ‘improving their quality of life’, and this trend is only expected to continue further as customers spend more on discretionary products and services.
The e-commerce segment, both vertical and horizontal, is well represented by Indian start-ups. Many of these start-ups are receiving investments from global funds or global retail/e-commerce giants that intend to participate in the growth of Indian e-commerce. Multiple global e-commerce firms are marking their presence in India by setting up local operations and are competing for a share of the market. Vertical businesses such as retail chains and banks are trying to set up digitals arms or omni-channel operations to target the growth.
E-commerce in India is expected to create over one million jobs by 2022, both directly and in allied industries or the e-commerce eco-system. Among the 0.65 million core jobs, retail-oriented jobs (such as category management, merchandising) will be key. Around 0.1 million core jobs will focus on e-commerce technology such as algorithms and the development of interfaces. These technology-oriented core jobs will also include the need for digital skills including social, mobile, analytics and cloud (SMAC). The share of these skills is expected to increase further by 2022.
Within ancillary jobs, e-logistics is expected to be the largest segment, creating more than 0.3 million jobs. Delivery/last-mile delivery will contribute to approximately two-thirds of the jobs, as e-commerce grows beyond Indian metros.
The telecommunications sector provides the infrastructure for mobile communications and internet connectivity, both of which are crucial enablers for the e-commerce sector. In the light of fast-evolving network technologies, which have implications for businesses and the way they are regulated, the Department of Telecommunication (DoT) issued a new telecom policy - the draft National Digital Communications Policy, 2018, signaling a shift in focus towards digital infrastructure and services. The Policy (which has been reported in VFI in May 2018) lays the foundation for efficient spectrum utilisation, creation of robust infrastructure, promotion of next-generation technologies and security in the digital eco-system.
“There is a gradual shift in the focus of both companies and investors towards adopting a sustainable economic model centred on the customer. As a result, the industry is seeing a growing focus on customer experience, thereby taking e-commerce beyond just selling things online. The next frontier for the battle in the Indian e-commerce industry is set to be fought around a seamless shopping experience, building digital trust, voice-based or ‘conversational’ commerce and creating a catalogue of localised content,” explained Sandeep Ladda, PwC India.
This will result in the growing use of disruptive technologies such as machine learning, artificial intelligence and augmented reality/virtual reality as a means to improve customer engagement. “However, along with opportunities, these technologies are also posing significant technical challenges for businesses when it comes to ensuring the integrity of IT systems and protection of customer data,” cautioned Ladda.
Consequently, the industry looks forward to small steps which will empower e-commerce customers. In order to enable consumers to transact online effectively, online players should be encouraged through online-offline parity in regulations. Supporting infrastructure must include a comfort level of interacting in English and using technology. In case of small regions, vernacular content and audiovisuals must be made available.
It’s essential to study the needs of Tier II/III customers and launch appropriate products (such as agricultural spares or emergency torches). Feature phones should be equipped to enable e-commerce with voice or there has to be provision to adapt to offline-over-online models.
Be it English or vernacular, basic digital interactions and financial awareness must become part of the school curriculum. Digital literacy can improve when citizens are trained under the ‘Skill India’ and ‘Digital India’ initiatives. In a nutshell, Make in India policy with a conducive environment will add to the overall growth of the e-commerce industry in India.