India’s e-commerce industry likely to reach $125-150 billion by FY20

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New Delhi | Published: February 5, 2019 4:37:12 AM

Of over 500 million active internet users in 2018, 110 million shopped online at least once and this number is expected to grow by 32% by CY2022, analysts at RedSeer Consulting say

ecommerce industry, retail industry, india , china, flipkart, amazon, DPIIT trade, FDI guidelinesThe e-commerce sector saw 21 private equity and venture capital deals amounting to .1 billion during 2017 and 40 deals valuing .12 billion during the six months to June 2018, according to analysts at Care Ratings.

India’s e-commerce industry is expected to reach $125-150 billion by FY20 on increased internet penetration, analysts at Care Ratings estimate. Cheap mobile data tariffs have aided internet consumption in the country, which is adding approximately 10 million daily active internet users each month. Internet subscribers are expected to increase to 830 million by 2021 from around 560 million as of September 2018, the firm said.

India had 400 million smartphone users in 2018 and this number is likely to reach 650 million by CY2022, market research firm RedSeer Consulting estimates. Of over 500 million active internet users in 2018, 110 million shopped online at least once and this number is expected to grow by 32% by CY2022, analysts at the firm said.

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Convenience, promotional prices, improved supply side and various payment options will also drive growth in the sector that stood at $38.5 billion in 2017, accounting for 5.7% of the overall retail industry, according to the Care Ratings report. Giving a leg-up to e-commerce players is also the fact that organised retail penetration in newer markets like India and China is low, unlike in developed markets.
“In relatively mature markets, like US, where the organised retail penetration is high, multi-channel retail chains lead to online markets. While in newer markets like India and China, web-only players are dominating the market.” A mere 9% of the $670 billion retail industry in India is organised retail, the report adds.

Rising online spending by consumers attracted hefty funds into the sector. The e-commerce sector saw 21 private equity and venture capital deals amounting to $2.1 billion during 2017 and 40
deals valuing $1.12 billion during the six months to June 2018, according to analysts at Care Ratings.
The report claims that in the festive month beginning October 10, 2018, gross merchandise value (GMV) for Flipkart grew 90% year-on-year and for Amazon, it grew as much as 70% y-o-y. Analysts opined that the interim budget 2019-20 that announced tax reliefs for three crore middle-class taxpayers will further boost online consumption. However, the government’s new foreign direct investment guidelines that came into effect on Friday “will impact e-commerce majors such as Amazon.com and Flipkart Group, owned by Walmart, preventing deep discounts and regulating prices in the online marketplace,” the Care Ratings report says.

In late December, the department for promotion of industry and internal (DPIIT) trade issued the new FDI guidelines that bars online marketplaces with foreign investments from selling products of the companies where they hold stakes or control inventory, and also ban exclusive marketing arrangements. It said the inventory of a vendor (except food retail) will be “deemed to be controlled by an e-commerce marketplace if more than 25% of purchases of such vendor are from the marketplace entity or its group companies” As a result, Amazon which has an investment in Cloudtail, can’t sell the latter’s products on its platform, and RetailNet can’t sell on Flipkart. Amazon’s website hardly shows the mention of sellers Cloudtail and Appario Retail. The companies will need to restructure their operations, analysts noted.

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