The domestic e-commerce (B2C) market could grow to almost $102 billion by 2020 from $16 billion in 2015, according to the latest report by the Confederation of Indian Industry (CII) and consultancy firm Deloitte.
The report says factors such as government initiatives (including Digital India, Make in India and Start-up India) increase internet penetration, growth in adoption of smartphones, evolution of new payment solutions, partnerships among hyper-local companies and India Post in the logistics space, and likely adoption of the goods and services tax regime at the earliest and empowerment of MSMEs are expected to enhance the growth of e-commerce.
The number of online shoppers could rise to 220 million by 2020 from 39 million in 2015, the report says. While the number of mobile internet users is estimated to rise to 371 million by 2016 from 150 million in 2013, that of 3G users is forecast to surge to 219 million by 2016 from as low as 42 million in 2013, the report says.
“Rise of the middle class consumers and changing shopping habits are adding to the online shopping demography. Increased access to global products and services at a click of a button, and delivery to even remote locations would further drive up this number,” the report says. However, while the e-commerce space has rapidly evolved, several challenges have surfaced primarily in areas of taxation, logistics, payments, internet penetration and skilled man power, it says.
Key challenges include the fact that although B2C e-commerce companies have raised and infused capital from investors to scale operations, from a profitability perspective, losses have grown faster than sales.
The report says majority of the companies rely on customer discounts, leading to an absence of long-term sustainable business models. Similarly, due to the absence of a uniform tax structure, states have adopted different tax frameworks and inter-state goods movement is a challenge. It not only increases operational and compliance costs but also delays timely delivery of goods. The increasing incidences of cyber thefts and payment thefts in the industry also pose risks, along with counterfeit products.