India's burgeoning online retail market, currently led by Amazon and Walmart-owned Flipkart, is expected to grow at a compound annual growth rate of 25.8 per cent to $84.6 billion by 2023 in size from $26.9 billion in 2018.
India’s burgeoning online retail market, currently led by Amazon and Walmart-owned Flipkart, is expected to grow at a compound annual growth rate of 25.8 per cent to $84.6 billion by 2023 in size from $26.9 billion in 2018. The growth will be buoyed by the increase in online user base beyond metro and tier-I cities.
Beyond Smartphones and Fashion
India’s online spending was impacted in the first quarter of 2019 “due to the governmental changes in e-commerce policy” that government announced in December last year that had put restrictions on FDI-backed e-commerce companies. This led to “fewer choices for consumers,” said Satish Meena, senior forecast analyst at Forrester in a report.
Consequently, acquiring new customers and pushing for the online sale of products will be expensive that might risk retailers for loss this year. Still, the market is expected to grow to “$85 billion by 2023,” Meena said.
Online retailers are eyeing to grow their categories apart from smartphone and fashion to attract more online customers and per customer online spending. The two categories made up for 56 per cent of the online retail sales in 2018 out of which smartphone share is already reaching a whopping 41 per cent — triggering businesses to expand into categories including grocery, furniture, and appliances, the report titled State of the Online Retail Market in India in 2019 said.
Flipkart leads E-retail Market
The online retail market in India has almost a duopoly with Amazon and Flipkart having almost equal market share. While Amazon had 31.2 per cent market share in terms of gross merchandise value in 2018, Flipkart (excluding Myntra-Jabong) captured 31.9 per cent share.
The GMV numbers for FY19 wasn’t available however, investment bank Barclays, in December last year, had said that both Amazon India and Flipkart are on a similar run rate of $11.2 billion in gross merchandise value for FY19. The statement came as clarification following its report in the preceding week that said Amazon with $7.5 billion GMV was ahead of Flipkart with $6.2 billion GMV excluding its units Myntra and Jabong.
However, Amazon and Flipkart is set to be challenged by Mukesh Ambani’s Reliance Retail that has favourable policies, capital, and presence in the offline retail as groundwork to grow online.
Reliance Retail currently has 10,415 stores in over 6,600 cities, with 500 million annual footfalls that can easily allow the company to launch online swiftly. Moreover, it has more than 40 brands in the midmarket and beyond such as Hamleys and Marks & Spencer.
“Reliance is going to capture Indian household by not just spending on digital content but also on grocery, fashion, and electronics towards which majority household spending goes,” Meena had told Financial Express earlier.
India’s internet users are expected to grow from 483 million in 2018 to 666 million in 2023 and the country is the second largest online market after China, as per statistics portal Statista. Out of this, 501 million users would be accessing the internet on mobile phones in 2023.