E-commerce in India

India has an internet users base of about 475 million as of July 2019, about 40% of the population.[1][2] This number is expected to be 627 million by the end of 2019.[3] Despite being the second-largest user base in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but is growing, adding around 6 million new entrants every month.[4] The industry consensus is that growth is at an inflection point.[5]

In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities.[6] Demand for international consumer products (including long-tail items) is growing faster than in-country supply from authorised distributors and e-commerce offerings. Long tail business strategy allows companies to realize significant profits by selling low volumes of hard-to-find items to many customers, instead of only selling large volumes of a reduced number of popular items. The term was first coined in 2004 by Chris Anderson.[7]

In 2017, the largest e-commerce companies in India were Flipkart and Amazon.[8] In 2018, Amazon beat Flipkart and was recorded the biggest ecommerce in india in terms of revenue.[9]

Market size and growth

2009

India's e-commerce market was worth about $3.9 billion in 2009.

2011

As per "India Goes Digital",[10] a report by Avendus Capital, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India had a growth rate of 22% over the next 4 years and reach Rs 54,800 crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 million) in 2011 and estimated to grow to Rs 53,000 crore ($11.8 billion) in 2015.

2013

The market went up to $12.6 billion in 2013. In 2013, the e-retail segment was worth US$2.3 billion. About 79% of India's e-commerce market was travel related in 2013.[11]

2014

According to Google India, there were 35 million online shoppers in India in 2014 Q1 and was expected to cross 100 million mark by end of year 2016.[12] CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.

2015

Overall e-commerce market had reached Rs 1,07,800 crores (US$24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.[13]

2016

2016 also saw online sales of luxury products like jewellery also increased. Most of the retail brands have also started entering into the market and they expect at least 20% sales through online in next 2–3 years.[14] According to Google India Research in 2016, by 2021 India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce.[15]

2017

The ecommerce industry was reported at USD 24 billion in 2017 and was recognised as the fastest growing industry in India.[16]

2018

The ecommerce market grew to USD 38.5 billion in 2018.[17]

2019

It is estimated that one in every three Indian shops via smartphone and online retailers deliver to 20,000 pincodes out of the 100,000 pincodes in India.[18]

Closures

Though the sector has witnessed tremendous growth and is expected to grow, many e-commerce ventures have faced tremendous pressure to ensure cash flows. But it has not worked out for all the e-commerce websites. Many of them like Dhingana, IndiaPlaza.in, eBay-India, Rock.in, Seventy MM amongst others had to close down[19] or change their business models to survive.[20] In March 2020, the Government of India restricted online sales of all goods except for critical items including food, pharmaceuticals, and medical equipment. Many indian startups including Urban Company, BookMyShow, Pepperfry.com and Nykaa, which do not feature in the government’s list of notified essential services, are running at a loss due to Covid-19 pandemic.[21][22]

Collaborations

In light of the Covid-19 pandemic, the Indian government issued a directive to stop delivery of non-essential items by e-commerce platforms.[23] This led to many e-commerce platforms to collaborate and sell essential goods. For e.g. Myntra partnered with Wildcraft to sell protective face masks.[24] McCoy Mart partnered with Rossari Biotech Ltd to sell hand sanitizers. Flipkart partnered with Uber for last mile delivery of essentials to its customers.[25]

Infrastructure

There are many hosting companies working in India, some of which offer SaaS for hosting web stores.

India has got its own version of Cyber Monday known as Great Online Shopping Festival which started in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the US for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day.[26] Most recent GOSF Great Online Shopping Festival was held during Dec, 2018.

In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns. In July 2014, Amazon had said it will invest $2 billion (Rs 12,000 crore) in India to expand the business, after its largest Indian rival, Flipkart announced $1 billion in funding. In June 2016, Amazon agreed to invest another $3 billion to further pressure rivals Flipkart & Snapdeal[27] Amazon has also entered grocery segment with its Kirana now in Bangalore and is also planning to enter in various other cities like Delhi, Mumbai and Chennai and faces stiff competition with Indian startups.[28] A large proportion of traffic towards e-commerce sites is driven by coupon sites.[29]

Funding

Examples of venture capital firms having invested in e-commerce companies in India are as follows: Flipkart.com raised about USD 2.3 billion.[30] On 10 July 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital, and an additional $160 million from Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.[31]

In February 2014, online fashion retailer Myntra.com raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for ₹2,000 crores.[32]

In September 2015, PepperTap raised $36 million from Snapdeal and others.[33]

Niche retailers

The spread of e-commerce has led to the rise of several niche players who largely specialize their products around a specific theme. As many as 1,06,086 websites are registered daily and more than 25% are for niche businesses.[34]

During 2014, Royal Enfield sold 200 bikes of special series Online.[35]

Online apparel is one of the more popular verticals, which along with computers and consumer electronics make up 42% of the total retail e-commerce sales.[36] Niche online merchandising brands like Headbanger's Merch, Redwolf and No Nasties partner with and even help sustain independent musicians.[37] Some established brands like Arvind are now creating clothing lines just for the e-commerce markets.[38] Some of the bigger online retailer like VoxPop Clothing have secured multiple rounds of funding, the last round raising $1 million from Blume Ventures in 2014.[39]

As these niche businesses get popular, they are slowly getting acquired by the big players. BabyOye was acquired by Mahindra Retail, part of the $17 billion Mahindra Group.[40] Ekstop was acquired by the Godrej Group to complement their offline chain of Nature's Basket stores.[41]

Mergers and acquisitions

According to a report by Grant Thronton, as much as US$2.1 billion worth of mergers and acquisitions were inked in 2017 in the booming Indian e-commerce industry.[42] Here is the list of Mergers & Acquisitions which happened in India over a period of time:

Mergers & Acquisitions in Indian E-commerce Market
DateMerger/AcquisitionCompanies InvolvedCostRefs
May 2014AcquisitionFlipkart acquires MyntraUS$300 million
March 2015AcquisitionSnapdeal acquires UnicommerceUndisclosed[43][44]
April 2015AcquisitionSnapdeal acquires FreeChargeUS$400 million[45]
April 2016AcquisitionFlipkart acquires PhonePeUndisclosed[46][47]
June 2016AcquisitionMyntra (owned by Flipkart) acquires JabongUS$70 million[48]
July 2017AcquisitionAxis Bank acquires FreeChargeUS$60 million[49]
May 2018AcquisitionWalmart acquires FlipkartUS$16 billion[50]
January 2020AcquisitionZomato acquires Uber EatsUS$350 million[51]

Regulation

Foreign e-commerce is subject to regulations in India; under local law, foreign companies are to serve solely as marketplaces between vendors and their customers, and are forbidden from holding inventory in the country. Under new regulations effective 1 February 2019, foreign companies will be forbidden from selling any products from vendors that they control or have equity stakes in, and it is forbidden to enter into exclusivity deals between vendors and websites. This regulation is seen as a counter to Amazon and Walmart's influence on the market, which have given smaller traders a disadvantage in the market.[52][53][54]

See also

References
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