E-RETAILING could be a major business opportunity, since physical retail infrastructure is still in its infancy. There are not many department stores, discount stores, and catalog houses in India, and the number of online retail stores are endless.

However, several factors throw a spanner in the wheels of progress. According to Ajit Balakrishnan, CEO of Rediff-on-the-Net, there are several limiting factors to e-retailing in India. One of the key drivers of online retailing is a large user base, but India lacks this-currently India has close to one million users" Balakrishnan said, speaking at Nasscom's E-biz conference, held July 20.

He said another limiting factor is that credit cards are not too popular. "Unlike the West, only 40 per cent of the online community in India have credit cards. This is similar to the situation in Japan," Balakrishnan said, adding, "Women in India don't have credit cards, and out here women do most of the shopping," he said. Besides, credit card companies charge a commission of 4 percent on the transaction, which is too high.

To promote e-commerce more seriously, Rediff has invited top 100 Indian brands to sell products through the Rediff portal. However, sales tax is an unresolved problem. Since, in an online transaction, the buyer and seller could be in different states, sales tax authorities have not yet been able to determine whether tax should be levied as per the policy of the state where the buyer is located or the seller.

In the US, the government has given a 3-year tax holiday to online transactions. In India, Nasscom is lobbying the Indian Government to do the same. Should this happen, it will be an important factor for e-commerce in India. "Indian companies go to any length to save sales tax and this could be a driving factor for the success of e-commerce," Balakrishnan said.