The 4 Most Important Things to Know Before Doing Business Online in India
This past June, KPCB released its annual Mary Meeker Internet Trends Report, which identified the top emerging markets markets worldwide for digital business. This year, a newcomer is at the top: India -- ranking No. 1 in new-user additions. For businesses everywhere, the takeaway is simple: If you don’t have a strong, clear strategy for working in India you had better get one.
Many U.S.-based companies have already found great success in India. It's a top market for a number of social media platforms, including WhatsApp, Twitter and LinkedIn (all of which work with my company, Dyn). It's also a top market for Amazon.
But India’s market character is multifaceted, and the process to set up your online shop or provide software-as-a- service tools to foreign customers is by no means simple. Following are the four most important things to know for any business looking to enter and grow rapidly in India.
1. India is a complex landscape.
There’s no plug-and-play strategy for doing business online in India. It’s an incredibly diverse country, with an equally diverse business landscape. You can’t expect to fit the same success metrics you’d use in the West to your ventures in India. The landscape is just that different. Consider:
Though still an emerging market, India is already incredibly competitive -- so you need to make the quality of the products or services you’re bringing to the table your highest priority.
Society and business there are hierarchical: Unlike the startup disruption we have here in the United States, India typically functions top-down.
The sense of time there is different. Everything tends to take longer (up to four times the time needed in the West), as decisions are made from the top. But they can also be quickly resolved and executed once decisions are made.
Most companies are best served by finding a partner (on both the business and online infrastructure fronts) to help lay the groundwork for an initial launch. As you business grows, this partner may prove vital in advising about expansion efforts into different areas of the country.
2. Commerce is mobile but not app-based.
In 2014 alone, mobile sales accounted for a whopping 41 percent of ecommerce in India -- more than in any other country, including China (33 percent) and the United States (15 percent).
Digital is still relatively new in India -- meaning that the digital habits of its people are unique. The nation's major online shopping companies have a greater proportion of mobile commerce (mCommerce) purchases, even, than giants like Alibaba and eBay. In fact, some commerce companies are so popular via mCommerce that they’ve transitioned to an app-only model to limit demand.
They’re able to remain profitable this way because apps allow for direct customer access, so vendors can deliver relevant alerts and coupons based on customer data to keep them coming back -- and the push notification response rate is 8 times that of email.
Still, considering that only 8 percent of the country's citizens have a smartphone to access those apps, companies looking to start doing business can’t cut out that share of market potential right away. Instead, start by making sure that any customers can easily browse and purchase goods via mobile or apps.
Just be prepared to transition to the app model: within three to four years, it's estimated, nearly every adult in India will own a smartphone.
3. Content isn’t local.
The general rule of thumb for fast, uninterrupted Internet access is to make sure content is hosted as close to users as possible. Given the massive population of individuals accessing the Internet in India, you might expect them to have a high percentage of locally hosted content.
In reality, however, only 30 percent of the Alexa 100 located in India actually use a host server within the country. While this is above average for the region -- Sri Lanka hosts 14 percent of content locally, Pakistan, less than 5 percent -- the size and complexity of India’s Internet market makes the host server issue a major challenge for doing business in the region.
What this all boils down to is that in India, Internet users have relatively high latencies when connecting to most European and U.S. businesses.
Companies looking to do business online in India, then, should make it a priority to ensure inbound customer access to their content is quick and seamless.That means finding a way to host your content locally or finding a reliable cloud service provider. CSPs have access to multiple networks, giving companies the ability to direct traffic in the most direct way possible: day-to-day as well as during outages, pipeline failures and other IP complications. Staying relevant in India will mean making sure your content has the most direct journey, from cloud to user.
4. More changes are coming.
India is likely to keep its No. 1 ranking in new user additions, due in large part to the government’s plans for national reform. Prime Minister Narendra Modi announced plans for the Digital India Initiative in 2014, which aims to implement digital infrastructure, allow universal access to digital services and promote digital access and literacy. The Initiative is scheduled for completion by 2019.
In the interim, however, the Initiative will face a host of issues, including privacy regulations, data protection laws and cyber security issues.
For companies, those challenges make finding local partners even more important. Your success will depend on their help to stay informed of the political climate and navigate the impending changes. Business models should be designed, first and foremost, around flexibility and the information your partner is able to provide.