In an exclusive e-mail interview with SME Times, Kashyap Vadapalli, Director, Category and Business Development, eBay India Pvt.Ltd said India's e-commerce industry is at a stage of explosive growth but there are still many challenges such as slower broadband access, low penetration of online payments, lack of logistics and fulfillment services, unnecessary paperwork and non-standard tax regime, which are hindering the growth of the industry.

What kind of growth is taking place in Indian e-commerce market?

Kashyap Vadapalli: Indian e-commerce industry is at a stage of explosive growth. The joint study by IMRB and IAMAI released earlier this year expected that the product-e-commerce space would grow by 47% YoY in 2011. But with many new formats - flash-sales, coupon-sales, niche-sites, vertical-sites etc. - coming in and scaling, we believe that overall e–commerce growth in the country is extremely robust and is growing well ahead of the above mentioned figure.

Another proxy measure for growth could be the unduplicated e-commerce Internet traffic in India which according to some estimates has doubled (100 percent) in the last one year. We believe that the overall market growth [product– e-commerce] is somewhere in between these two numbers.

Can e-commerce industry contribute to the GDP growth of the country?

Kashyap Vadapalli: Among the various e-commerce models, there are three or four – supply-side models that have scaled.

a) e-tailing model: In this model the website takes ownership of the products they sell to the end consumers, they are very much like retailers in the real-world but operating online.

b) Marketplace Model 1: An open marketplace like eBay, in this model multiple sellers can use a 'marketplace-platform' like eBay to sell their products, the website facilitates the interactions between the buyers and sellers by providing the various infrastructure elements like merchandising, finding, check-out, payments, complaints-handling, buyer/seller protection, ensuring fair-practices etc. In a sense in this model the website operates like a super-large 'Mall' where many sellers offer their products for sale to the buyers who come.

c) Marketplace Model 2: A closed marketplace where a certain number of sellers operate as suppliers to the website and the website promotes these sellers only more like a hypermarket where many sellers offer their goods through-shop-in-shops, etc.

d) In fact, a blend of the above models – e-tailing+Marketplace that some websites offer help to generate both additional employment and also consumer spending.

The open marketplace model like eBay has the potential to contribute significantly to the GDP growth. Given the nature of the marketplace, many entrepreneurs – whether they are manufacturers, wholesalers, retailers, distributors, importers, brands, individuals – can use the eBay platform to begin trading and build their businesses.

Today, we have more than 15000 people who use eBay to sell their products, almost 1 out of 5 of the number are professional sellers who are building their business on eBay. These sellers in turn generate employment for others to help run their eBay accounts/stores and service the business. In addition, eBay serves as a platform for my Indian artisans, manufacturers to sells their products to overseas buyers, thus generating export income and contributing to the GDP of the country.

Could you highlight on the challenges of this industry?

Kashyap Vadapalli: The key challenges in the industry are:

a) Broadband access: While internet access in the country is growing quite fast, broadband access is growing slower.

b) Penetration of online payments: While these have gone up, there is still pre-dominance of Cash-On-Delivery transactions.

c) Logistics and fulfillment services: The third party parcel companies are not attuned to delivering e-commerce friendly service levels at justifiable costs.

d) Shipping products: The shipping products across states or outside the country for that matter involves paperwork not inline with a retail shipment model and,

e) Tax: Also, non-standard tax regimes across the country make pricing and delivery more complex.

Why do you think e-commerce is set to boom in India?

Kashyap Vadapalli: New products don’t get launched and distributed effectively across all classes of towns where as demand exists. E-commerce companies are providing great range and deals to the consumer.

Internet connectivity beyond metros need to develop potentially. What is take on this?

Kashyap Vadapalli:  As I said earlier that Internet access in the country is growing quite fast, broadband access is growing slower. Hi-bandwidth/hi-speed access is critical to success of e-commerce.

(Namrata Kath Hazarika can be contacted at namratakh@tradeindia.com)