<h2>Touted to soon become the world’s second largest eCommerce market, India is full of digital potential. But wary shoppers, challenging logistics, and inefficient payment systems contribute to a high mortality rate for digital startups in this market.</h2> Many people are trying to solve India’s eCommerce challenges but for now, this high-potential market remains at best quirky and at worst, a real danger zone for online retailers. For a start, there’s the established market landscape to consider. India’s <a href="http://www.globalconveniencestorefocus.co.uk/newsletter/201610/India-market-report-convenience-retail-in-the-world%27s-secondmost-populous-country" target="_blank" rel="noopener noreferrer">retail landscape</a> tends to be dominated by small, independent stores that are often family run. These small retailers aren’t always able to keep up with the times and increasingly sophisticated consumers are demanding access to a greater array of products that they can offer. <blockquote>That’s a need that digital retail can certainly resolve. One solution that works within the existing market landscape may be to bring these smaller retailers on board using the marketplace model offered by Amazon and the like.</blockquote> But some consumer needs are more likely to be met by cross-border retail and by larger retailers located within the same market. Perhaps this retailer profile explains why India’s consumers have tended to be reluctant online shoppers – there’s a strong personal connection with small local retailers that can’t always be replicated digitally. <blockquote>Indian consumer loyalty is more often with local retailers rather than with retail brands. There’s therefore less incentive to seek out a retail brand’s online offering.</blockquote> Branding is a way to build trust between a retailer and a consumer, making the transition to digital buying a little easier. Overcoming mistrust via brand building is one of the challenges for Indian online retailers. <h2>Payment problems</h2> To the frustration of retailers, <a href="http://uk.businessinsider.com/cash-on-delivery-remains-the-preferred-method-of-payment-in-india-2016-6" target="_blank" rel="noopener noreferrer">72% of online purchases</a> in India’s market are via cash-on-delivery. This is a costly way for them to do business. Only 20% of purchases are made via online payments and bank cards, but the average order value is higher for these purchases. 40% of Indians are unbanked (ie outside the formal financial systems), although numbers have at least halved since 2011. The present political administration is making aggressive and not always uncontroversial moves to modernise financial systems and raise the level of participation. <blockquote>Some of these political decisions have bred mistrust in the financial system but it’s also true that many new bank accounts have been created in the last few years – although the government’s own data shows 40% of these <a href="http://www.livemint.com/Industry/v4zrym0BCjNvXg3qcUD30K/Indias-unbanked-population-halves-to-233-million.html" target="_blank" rel="noopener noreferrer">new accounts</a> remain empty.</blockquote> Mobile money transfer may also be an option for Indians, whether banked or unbanked. This payment method has been embraced in other emerging markets such as Kenya, and it can also be used to pay wages and arrange loans. <blockquote>Typically it acts as a useful bridge to participate in the formal banking system, with users paying small amounts of cash into local provider kiosks that are then credited to their mobile wallet.</blockquote> Could mobile payment help move Indians away from COD eCommerce? This remains to be seen. <h2>Supply chain</h2> It’s common for retailers entering India’s market to encounter a host of supply chain challenges that aren’t so present in other regions. Consumer insistence on the cash-on-delivery payment option forces retailers to keep local warehouses stocked: a logistical challenge in any market. <blockquote>Distribution networks tend to be weak and there’s low adoption of the kind of technology that’s required to support a modern supply chain network. The trucking industry is fragmented, and there are few providers of organised logistical services.</blockquote> Add in transport infrastructure difficulties, which can be locally severe, and a complex tax structure and the supply chain becomes a major battleground. The result of these supply chain challenges is that retailers feel they need to stock more inventory than they would in a more established market. Market entrants may need to invest more into setting up their supply chain than they are accustomed to. These factors all raise costs and helps explain why Indian e-tail offers such low margins. <h2>Other quirks</h2> Indian eCommerce shows other characteristics unique to this market. For example, men tend to spend more online, and buy more frequently, compared to women in <a href="http://onlinesales.ai/current-trends-about-indian-e-commerce-industry/" target="_blank" rel="noopener noreferrer">India’s market</a>. Offline, the reverse is true as many women make buying decisions for the household in brick-and-mortar stores. This trend may reflect the differing rates of participation in the formal economy for each gender. One other curious quirk of this market is that the majority of buying seems to happen during office hours: 60% of it in fact. This may reflect the fact that Indian consumers are more likely to have access to the internet at work compared to at home, and internet-enabled devices may be shared at home. <blockquote>Growth in <a href="/?p=169330">smartphone</a> ownership could challenge this pattern as Indians would probably start to adopt the habit seen in other markets of phone users shopping on their commute, or perhaps dual screening in the evening.</blockquote> India’s smartphone market is booming, with increasing rates of smartphone ownership. But unlike many other markets, <a href="http://onlinesales.ai/current-trends-about-indian-e-commerce-industry/" target="_blank" rel="noopener noreferrer">desktop</a> still dominates. 66% of purchasing is done via desktop, only 1% via tablet, and the rest via smartphone. <blockquote>This could very likely change as it looks as if smartphone ownership will continue to expand, partly thanks to the availability of cheap handsets. Here too the gender divide is apparent, with men much more likely to own a smartphone than women.</blockquote> There’s no doubt about it; India’s online retail arena is a challenging place to be. Margins may be low, and market entrants often face operating at a loss. The vast size of India’s potential market means that retailers that manage to overcome these challenges will eventually find it pays off.