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Allowing FDI in inventory-based e-commerce firms will help grow Internet usage in the country and provide players access to funds for investing in technology and back-end operations, industry body IAMAI said.
According to the Internet Mobile Association Of India (IAMAI), only 25 million of over 231 million Internet users in India transacted online (as of December 2013), taking the Indian e-Commerce market to Rs 62,697 crore.
"It must be noted that the number of online buyers and size of consumer e-commerce industry is high in countries where FDI in inventory based e-commerce business is allowed," IAMAI President Subho Ray told PTI.
He added that the US has 245 million Internet users, of whom 156 million are online buyers, while China has 538 million Internet users with 270 million online buyers.
"Even Sri Lanka, with 3.2 million internet users, has two million online buyers. Unfortunately, India, with over 231 million internet users, has a mere 25 million online buyers," he said.
Ray said Internet usage will grow much slower than expected if the number of online buyers does not increase.
"(e-Commerce) players will have to employ innovative customer acquisition tactics going ahead. This, coupled with a clearly defined customer retention strategy, would enable growth of not just the e-Commerce segment but Internet usage as a whole," he said.
Ray stressed that inventory-based e-Commerce firms need to make "deep and sustained" investments on technology and other back-end operations, marketing and brand building areas where domestic investment is not forthcoming.
"Opening up of inventory based e-commerce would also take care of the current anomaly where FDI in multi-brand retail is allowed up to 51 per cent whereas it is not allowed on inventory based e-commerce business," he said.