1 Its Shallow Penetration

While it seems like China has a big head start, India is only about seven years behind it in terms of Internet penetration. Around 20% of Indians have access to the Internet today. Chinaâ€™s ratio was that low in 2008 and has more than doubled since then. The surge in Internet use could be even faster in India where a tidal wave of smartphones that cost less than $100 is making online access affordable to hundreds of millions of people for the first time.

2 Its Online Newbies

Less than 1% of shopping is done online in India. While that may not sound like a huge success, it is a huge opportunity. Again, it was about seven years ago that China was in the same place. Today around 12% of Chinaâ€™s shopping is done online. Books, apparel, cosmetics and consumer electronics are product categories that have boomed in China over the last five years, and Indian consumers are following suit by increasingly buying these products as well as furniture and groceries online.

3 Itâ€™s unorganized

India is similar to China in that only a small slice of its retail industryâ€”about 8% in India and 20% in Chinaâ€”is organized through modern branded chains. Online shopping actually has bigger potential in countries where the offline experience is less organized.

4 Its small town advantage

Most Indians--about 85%--live in small towns with a population of less than a 500,000. This could be a good thing for e-commerce firms. While delivering their goods to so many tiny towns can be expensive, the fact that most people live in cities without a mall or chain store should make them more likely to buy things online, the report said.

Last year, Snapdeal, one of Indiaâ€™s largest e-commerce firms, said it would use much of the $627 million it raised from Japanâ€™s Softbank Corp., to tap into these small towns and cities.