'Indians’ touch-and-feel attitude impacts online sales'

Indian consumers look for information online but purchase goods offline because they need to “touch and feel” the product or they have security concerns, a World Bank report on e-commerce in South Asia said on Monday.

The report also said that in India, online sales as a percentage of total retail sales were only 1.6% versus over 15% for China and around 14% globally.

The World Bank said the trust gap can be bridged by building credibility in electronic transactions.

“Increasing use of e-commerce by consumers and firms in South Asia could potentially help increase competition and firm productivity, and encourage diversification of production and exports,” said the Bank.

The report, which focuses on business-to-consumer e-commerce, said there were wide variations within South Asia. Of those firms in South Asia that are connected to the Internet, about 50% of them market and sell online and fewer than 40% purchase online.

It, however, said while Indians and Pakistanis make significant use of online connectivity, other countries such as Bangladesh and Nepal fare worse than many African countries on most e-commerce indicators.

“In e-commerce, South Asia is one-third of its potential, and trade among Bangladesh, India, and Pakistan in particular has been estimated to be well below its potential,” according the World Bank.

This shortfall stems from high tariffs and para-tariffs, disproportionately high trade costs due to poor logistical infrastructure and inefficient trade facilitation, the existence of complicated and non-transparent non-tariff measures, constraints on services trade, below-potential foreign direct investment (FDI), and the lack of regional value chains, it said.

In addition, the pervasive lack of mutual trust between countries in the region hurts trade, said the Bank.

The report said the benefits of e-commerce can be realised through reduction in transaction costs but in South Asia, e-commerce faces challenging transport-related constraints.

“This issue is acute in a vast country such as India. More than 90% of the country’s air cargo shipments are handled in six main airports (Delhi, Mumbai, Bengaluru, Chennai, Kolkata, and Hyderabad), which poses significant challenges for large parts of the country located at some distance from a major air hub,” it said.

Another hurdle was prevalent in cross-border e-commerce. Firms in Afghanistan, Bangladesh, India, Nepal, and Pakistan rated the cost of cross-border logistics as being among their top 10 specific hurdles, while firms in Afghanistan, India, Pakistan, and Sri Lanka said that taxes and trade barriers in export markets were among their main challenges.

However, the benefits of e-commerce was well reflected in the case of China, where, for instance, Alibaba alone is reported to have created 30 million job opportunities, according to the Bank data.