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E-Commerce In India Set To Reach $120 Billion In 2025, Says Report

Despite the onset of the Covid-19 pandemic, e-commerce growth in India fell back sharply in 2020. But estimates for this year, and forecasts to 2022 show a sharp pick-up, before moderating again out to 2025.

Data from London-based data and analytics company GlobalData indicate that e-commerce sales will rise at a compound annual growth rate (CAGR) of just over 18% between 2021 and 2025, to reach $120.1 billion (or 8.8 trillion Indian rupees).

Based on card payment values and GlobalData’s e-commerce analytics, the e-commerce channel now is on an accelerating upward trajectory (see chart below). Annual growth rates fell between 2017 and 2020: from close to 30% to just above 12% last year. This year the trend will be up again, to about 17%, pushing the market past the $60 billion mark, and then over 20% by 2022. This comes at a time when general consumer spending has been declining, and there has been an economic slowdown.

The V-shaped rebound that is kicking in possibly reflects the deep impact that the Covid-19 pandemic is having in India this year. Whereas in 2020 the infection wave was long, but low-level—for example daily cases never peaked above 100,000—this year coronavirus has ravaged the sub-continent, and quickly. Daily cases exceeded 400,000 at the peak in early May, and total deaths recently crossed 400,000—though daily deaths fell rapidly throughout June.

A guarded mood helps e-commerce
The speedy rise in infections took the Modi government by surprise and plenty of uncertainty now persists within the population, particularly in some regions where infection rates remain stubbornly high. This has led to a more guarded approach to any activities involving crowds and busy enclosed spaces.

E-commerce has been a beneficiary of this new caution. “Wary consumers prefer online channel for purchases,” said GlobalData in a statement. Ravi Sharma, banking and payments lead analyst at the company, added: “The Covid-19 pandemic fast-tracked consumers’ transition to digital payments in most markets, a trend also seen in India. With social distancing rules and the closure of many brick and mortar stores, shoppers have embraced online channels even for their day-to-day purchases.”

In most markets, e-commerce is transforming the way consumers shop and has triggered renewed interest in all things online, leading to big acquisitions like eBay Korea and a doubling down on partnerships as seen in China from Farfetch.

In India, supported by an increase in smartphone penetration—expected to rise from 42% today to 51% by 2025—and by a rise in digital literacy among consumers as well as the government’s own digital push, the e-commerce outlook is good.

Over the past couple of years, there has been a major uptick in the number of online shoppers in Tier 2 and 3 cities due to improving internet penetration, increasing awareness about e-commerce and adoption of cashless payments.

More than two-thirds of India’s online consumer demand comes from Tier 2 and lower cities in India, according to a Unicommerce e-commerce trends report from last year.

As sectors such as travel and accommodation continue to be affected by lockdowns and travel restrictions, the online purchasing of retail goods, including grocery, electronics, and healthcare, has been rising.

Retailers widen payment platforms
E-commerce market leading retailers like Flipkart, Amazon and BigBasket have seen an increase in orders each month since the outbreak of the virus, according to GlobalData. They have also widened their digital payment options to help expand their customer bases.

In June, Flipkart—which has a registered customer base of 300 million—introduced quick response (QR) code-based payments for pay-on-delivery shipments to enable consumers to switch from pay-on-delivery services. The company’s head of fintech and payments group Ranjith Boyanapalli said: “With pay-on-delivery technology customers have peace of mind with their payments and at the same time can shop within the safety of their homes.”

Buy now, pay later solutions are also gaining popularity in India. In April 2020, Amazon launched Amazon Pay Later—now at two million users—enabling consumers to shop and pay in monthly instalments. A host of other companies like ePayLater, LazyPay, Sezzle, and Simpl also offer payment services.

Sharma said: “The Covid-19 crisis has accelerated the digital payments shift in India and opened e-commerce to a whole new set of consumers and merchants who were not using the online channel before. A rising consumer preference for online shopping, proliferation of e-retailers and the emergence of new payment methods will continue to drive the growth.”

Unicommerce points to much of those e-commerce gains coming from what it calls “the hinterland of India” beyond the large metropolitan cities. Aspirational young Indian consumers in smaller cities are driving the biggest growth led by Tier 3 and beyond cities. Forbes

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