VALUE CHAIN IN E-COMMERCE
Every activity within a physical value chain has an interent information component. The amount of information that is present in activities determines, company’s orientation towards e-commerce. It has been observed that companies with high information presence will adopt e-commerce faster rather than companies with lower information presence.
For example:- a computer manufacturer has high information presence, i.e. they can provide a great deal of product information through their website. Consumers also have flexibility to determine the product configuration using the website. Such computer manufacturers and companies with comparative business model are also likely to adopt e-commerce.
Activities which comprise of the value chain are undertaken by companies to produce and sell product and services. Some of the activities done within the value chain are understanding customer needs, designing products, procuring materials for production, production, storage of products, distribution of products, after sale services of products and customer.
The value chain shows relationship between among two activities as:-
Primary Activities of the Value Chain
All five primary activities are essential in adding value and creating a competitive advantage. The first activity in the value chain is inbound logistics, which includes all receiving, warehousing and inventory management of raw materials ready for production. The second activity is operations and encompasses all efforts needed to convert raw materials into a finished product or service.
Outbound logistics is the third activity in the value chain and occurs after all operations are completed and the end product is ready for the customer. Activities required to deliver a product to the end user are considered part of outbound logistics. Marketing and sales are the fourth part of the value chain and include all strategies used to get potential customers to purchase a product, such as channel selection, advertising and pricing. Service is the fifth and final step in a company’s value chain and describes all activities that create better consumer experiences, such as customer service and repair services.
Companies can harness a competitive advantage at any one of the five activities in the value chain. Creating outbound logistics that are highly efficient, for example, cuts down on a company’s shipping costs and allows it to either realize more profits or pass the savings through to the consumer, lowering the price point.
Support Activities of the Value Chain
Support activities facilitate the efficiency of the primary activities in a value chain. The four support activities are procurement, technological development, human resource management and company infrastructure. Increasing the efficiency of any of the four support activities increases the benefit to at least one of the five primary activities. These support activities are normally denoted as overhead costs on a company’s income statement.
E-COMMERCE IN INDIA
India has an internet users base of about 450 million as of July 2017, 40% of the population.Despite being the second-largest userbase in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but is growing at an unprecedented rate, adding around 6 million new entrants every month.The industry consensus is that growth is at an inflection point.
In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.
In 2015, the largest e-commerce companies in India were Flipkart, Snapdeal, Amazon India, and Paytm.
Since 2014, the Government of India has announced various initiatives namely, Digital India, Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective implementation of such programs will likely support the e-commerce growth in the country. Some of the major initiatives taken by the government to promote the e-commerce sector in India are as follows:
Reserve Bank of India (RBI) has decided to allow “inter-operability” among Prepaid Payment Instruments (PPIs) such as digital wallets, prepaid cash coupons and prepaid telephone top-up cards.
Finance Minister Mr Arun Jaitley has proposed various measures to quicken India’s transition to a cashless economy, including a ban on cash transactions over Rs 300,000 (US$ 4,655.1), tax incentives for creation of a cashless infrastructure, promoting greater usage of non-cash modes of payments, and making Aadhaar-based payments more widespread.
The e-commerce industry been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well. The total size of e-Commerce industry (only B2C e-tail) in India is expected to reach US$ 101.9 billion by 2020.
Technology enabled innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements will likely support the growth in the sector. With the increase in the number of electronic payment gateways and mobile wallets, it is expected that by the year 2020, cashless transaction will constitute 55 per cent of the online sales. The growth in e-commerce sector will also boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.