The Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034. India e-commerce sector will reach US$99 billion by 2024 from US$30 billion in 2019, expanding at a 27% CAGR, with grocery and fashion/apparel likely to be the key drivers of incremental growth.
The Indian e-commerce sector is ranked 9th in cross-border growth in the world, according to Payoneer report. Indian e-commerce is projected to increase from 4% of the total food and grocery, apparel and consumer electronics retail trade in 2020 to 8% by 2025.
As most Indians have started shopping online rather than stepping outside their houses, the Indian e-commerce sector witnessed an increase. Also, as per the Mckinsey report, ~96% consumers have tried a new shopping behaviour; ~60% consumers are expected to shift to online shopping in the festive season and continue shopping online beyond the COVID-19 pandemic.
Huge investments from global players—such as Facebook, which is investing in Reliance Jio—are being recorded in the e-commerce market. Google also reported its first investment worth US$ 4.5 billion in Jio Platforms. This deal was followed by the purchase of Future Group by Reliance Retail, expanding the presence of the Ambani Group in the e-commerce space.
Much of the growth in the industry has been triggered by increasing internet and smartphone penetration. As of August 2020, the number of internet connections in India significantly increased to ~760 million, driven by the ‘Digital India’ programme. Out of the total internet connections, ~61% connections were in urban areas, of which 97% connections were wireless.
Smartphone shipments in India increased by~8% y-o-y to reach 50.0 million units in the first-quarter of 2020, driven by positive shipments of all smartphone vendors in the market. Samsung led the Indian smartphone market with 24% shipping share, followed by Xiaomi at 23%.
The Government of India's policies and regulatory frameworks such as 100% Foreign Direct Investment (FDI) in B2B E-commerce and 100% FDI under automatic route under the marketplace model of B2C E-commerce are expected to further propel growth in the sector. As per the new FDI policy, online entities through foreign investment cannot offer the products which are sold by retailers in which they hold equity stake.
In October 2020, Minister of Commerce and Industry, Mr. Piyush Goyal invited start-ups to register at public procurement portal, GeM, and offer goods and services to government organisations and PSUs.
Through its Digital India campaign, the Government of India is aiming to create a trillion-dollar online economy by 2025.
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