Trade Analytics
Ecommerce
The Indian E-commerce market is expected to reach US$ 200 billion by 2026.

E-commerce Industry in India

Latest update: January, 2020

Growth

 

Last Updated: January, 2020

Indian Ecommerce Industry Report  (Size: 539.88 KB ) (January, 2020)

Introduction

The e-commerce has transformed the way business is done in India. The Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much growth of the industry has been triggered by increasing internet and smartphone penetration. The ongoing digital transformation in the country is expected to increase India’s total internet user base to 829 million by 2021 from 636.73 million in FY19. India’s internet economy is expected to double from US$ 125 billion as of April 2017 to US$ 250 billion by 2020, majorly backed by ecommerce. India’s E-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51 per cent, the highest in the world.

Market Size

Propelled by rising smartphone penetration, the launch of 4G networks and increasing consumer wealth, the Indian e-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion in 2017 Online retail sales in India are expected to grow by 31 per cent to touch US$ 32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.

During April-June quarter 2019, smartphone shipment in India grew 9.9 per cent year-on-year to 36.9 million shipments. It is expected to reach 160 million in 2019.

During 2018, electronics is currently the biggest contributor to online retail sales in India with a share of 48 per cent, followed closely by apparel at 29 per cent.

Investments/ Developments

Some of the major developments in the Indian e-commerce sector are as follows:

  • In August 2019, Amazon acquired 49 per cent stake in a unit of Future Group.
  • Reliance to invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to expand its broadband and E-commerce presence and to offer 5G services.
  • In September 2019, PhonePe launched super-app platform 'Switch’ to provide a one stop solution for customers integrating several other merchants apps.
  • In November 2019, Nykaa opened its 55th offline store marking success in tier II and tier III cities.
  • Flipkart, after getting acquired by Walmart for US$ 16 billion, is expected to launch more offline retail stores in India to promote private labels in segments such as fashion and electronics. In September 2018, Flipkart acquired Israel based analytics start-up Upstream Commerce that will help the firm to price and position its products in an efficient way.
  • As of March 2019, Flipkart launched its internal fund of about US$ 60-100 million to invest from early stage to seed innovations related to e-commerce industry.
  • Paytm has launched its bank - Paytm Payment Bank. Paytm bank is India's first bank with zero charges on online transactions, no minimum balance requirement and free virtual debit card
  • As of June 2018, Google is also planning to enter into the E-commerce space by November 2018. India is expected to be its first market.
  • Reliance retail is going to launch online retail this year. It has already launched its food and grocery app for beta testing among its employees.
  • E-commerce industry in India witnessed 21 private equity and venture capital deals worth US$ 2.1 billion in 2017 and 40 deals worth US$ 1,129 million in the first half of 2018.
  • Google and Tata Trust have collaborated for the project ‘Internet Saathi’ to improve internet penetration among rural women in India.

Government initiatives

Since 2014, the Government of India has announced various initiatives namely, Digital India, Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective implementation of such programs will likely support the e-commerce growth in the country. Some of the major initiatives taken by the government to promote the e-commerce sector in India are as follows:

  • Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.
  • In February 2019, the Government of India released the Draft National e-Commerce Policy which encourages FDI in the marketplace model of e-commerce
  • In order to increase the participation of foreign players in the e-commerce field, the Indian Government hiked the limit of foreign direct investment (FDI) in the E-commerce marketplace model for up to 100 per cent (in B2B models).
  • The heavy investment of Government of India in rolling out the fiber network for 5G will help boost ecommerce in India
  • In the Union Budget of 2018-19, government has allocated Rs 8,000 crore (US$ 1.24 billion) to BharatNet Project, to provide broadband services to 150,000 gram panchayats
  • As of August 2018, the government is working on the second draft of e-commerce policy, incorporating inputs from various industry stakeholders.

Achievements

Following are the achievements of the government in the past four years:

  • Internet subscribers in India stood at 665.31 million in June 2019.
  • In the festive sale (September 29-October 4, 2019), the e-tailers in India achieved US$ 3 billion of Gross Merchandise Value (GMV).
  • Amazon India launched the Amazon Marketplace Appstore which will provide solutions to sellers .
  • Value of Unified Payments Interface (UPI) transactions recorded 1.15 billion transaction worth more than Rs 1.913 trillion (US$ 27 billion) in October 2019.
  • Under Internet Saathi project over 26 million women were benefitted in India and it reached 2.6 lakh villages and reached 20 states.
  • Under the Digital India movement, government launched various initiatives like Udaan, Umang, Start-up India Portal etc.
  • Under the project ‘Internet Saathi’, the government has influenced over 16 million women in India and reached 166,000 villages
  • Udaan, a B2B online trade platform that connect small and medium size manufacturers and wholesalers with online retailers and also provide them logistics, payments and technology support, has sellers in over 80 cities of India and delivers to over 500 cities.
  • According to the UN’s eGovernance index, India has jumped 11 positions to 107 in 2016 from 2018 in 2014.
  • The government introduced Bharat Interface for Money (BHIM), a simple mobile based platform for digital payments.

Road Ahead

The e-commerce industry been directly impacting the micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well. 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.  Technology enabled innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements will likely support the growth in the sector. The growth in e-commerce sector will also boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term.

E-retail market is expected to continue its strong growth, by registering a CAGR of over 35 per cent and to reach Rs 1.8 trillion (US$ 25.75 billion) by FY20.

Note: Conversion rate used as on September 2019, Re 1 = US$ 0.014019

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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