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e-commerce set for start-up boom after budget fillip

Saturday, 12 July 2014 - 7:00am IST | Place: Bangalore | Agency: dna

The e-commerce market in the country could witness the emergence of more start-ups, courtesy the allocation in the budget for start-ups.

The online retail market mostly consists of companies started by entrepreneurs, some of which have grown into firms of gigantic proportions that are now scaling the $1 billion sales mark.

Experts say the Rs 10,000 crore fund for start-ups proposed in the budget could pave the way for more entrepreneurs to try their hand at e-commerce, amongst other sectors.

According to Anand Agarwal, CEO of naturalmantra.com, which started in 2012, and sells natural and organic products, e-commerce can support a variety of start-up ideas.

"It is a fast growing sector. And this fund announced can lead to more firms popping up," said Ravi Kumar, founder, FreeKaaMaal.com, which started in 2010.

Retail consultancy Technopak has predicted online retail sales in India to grow to $76 billion by 2012, from just about $600 million at the end of 2012.

This $76 billion nonetheless looks minuscule compared to China, where online retail sales are expected to touch $ 650 billion by 2020, from about $ 20 billion two years ago, as per McKinsey numbers.

"Indians are still hesitant to actively shop online and buy in large numbers. The last few years have seen the rise of countless firms across product categories in the e-commerce domain. Average spends by Indian consumers are however limited," said a retail consultant.

Data from US-based analysts comScore and Retail Decisions states that Indians on an average spend of $24-35 per online transaction. American shoppers on the other hand spend $150-160 per online

Experts say the spending by Indian consumers will increase. The budget proposed allowing foreign manufacturers who manufacture in India to sell directly through e-commerce, which is seen as a step towards liberalising the foreign investment in the sector.

Presently, foreign manufacturers who sell online do so through local franchisees or licensing agents.

"If a brand is able to selling online directly, instead of through third parties, the end consumers could get the products at slightly lower rates," said Kumar.

However, entrepreneurs like Agarwal feel that to encourage more start-ups, the government should have eased out the regulatory mechanisms that exist while starting businesses.

"Setting up a company, however small, means doing multiple registrations and adhering to a lot of paperwork. If this process is a bit simplified, it would encourage more people with ideas to get into business," said Agarwal.

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