E-commerce Industry in India to reach USD 229.48 billion by 2025

E-commerce Industry in India was valued at USD 60.16 billion in 2019 and is estimated to reach USD 75.2 billion by the year 2020.

It is expected to grow at the CAGR of 25% within the time horizon of 2020-2025 because of increasing internet penetration, shifting consumer preferences toward online shopping, and growing digitalization programs.

Its market value will reach USD 229.48 billion by the year 2025.

Definition / Scope
Market Overview
Market Risks
Top Market Opportunities
Market Trends
Industry Challenges
Technology Trends
Pricing Trends
Regulatory Trends
Market Size and Forecast
Market Outlook
Distribution Chain Analysis
Competitive Landscape
Competitive Factors
Key Market Players
Strategic Conclusion
References
Appendix

Definition / Scope

E-commerce is concerned with activities related to the buying or selling of goods and services through the use of information technologies such as electronic media and the internet.

It uses a digital shopping cart system and a worldwide web to allow the digital sale and payment through either debit, credit of electronic fund transfer payment system.

The most commonly used online retail sales platform are Flipkart, Amazon India, IndiaMart, Snapdeal, Firstcry, BookMyShow, and Paytm Mall. This type of e-commerce portals provides either all categories of goods and services (health & beauty products, home appliances, vehicles, jewelry, travel tickets, etc) or a single category of products.

Based on the type of product, the e-commerce industry is categorized into electronics, apparel, home & furnishing, books, and others while based on the method of payment, its market consists of cash on delivery, online payment & cards, e-wallets, and other segments.

Market Overview

The total market size of the e-commerce industry is valued at USD 60.15 billion in 2019 and is expected to reach USD 75.19 billion by the year 2020. Its market value is expected to grow at the CAGR of 25% within the forecasted period of 2020-2025.

The market value is expected to reach USD 229.47 billion by the end of the year 2025. The market share of E-commerce is expected to be 7% of the Indian retailing market by the year 2021.

Based on the type of product, the electronics segment is leading the market with a market share of almost 47% of the Indian e-commerce industry. The market size of this segment is valued at USD 28.27 billion in 2019. Based on the methods of payment for e-commerce, the cash on the delivery segment is leading the market with a market share of almost 71.38% of the Indian e-commerce industry.

The market size of this segment is valued at USD 42.94 billion in 2019. As the market players are concerned, Flipkart is leading the market with a market share of almost 32% of the Indian e-commerce industry.

Increasing internet penetration, shifting consumer preference towards online shopping, execution of digitalization initiatives, and increasing investment from vendor capital firms are the factors driving the growth and development of the e-commerce industry in India.

However, consumer perceived risks about the online retailing and increasing cyber-attacks might create the risk for the growth and development of its market. The key market players engaged in the Indian e-commerce industry are Amazon India, Flipkart, IndiaMart, Snapdeal, BookMyShow, Myntra, and Firstcry.

Market Risks

Perceived risk related to online retailing

In India, the consumers perceived certain types of risk related to the online retailing in terms of performance, quality of the product, return policy, and price of the product.

A study conducted by Sunita Guru and colleagues in India published in the year 2020 has found that perceived performance risk, perceived financial risk, and perceived time-loss risk as to the influencing factors for the consumers to decide about the online retailing.

Almost 55% of the study participants aren’t engaged in online shopping because of their inclination to look at the products before buying and almost 11% of them don’t trust the quality of the online products. This perceived consumer risk might create a significant risk for the growth and development of the e-commerce industry in the context of India.

Top Market Opportunities

Execution of Multiple digitalization program

In the context of India, the governmental authorities and other organizations are implementing a range of digitalization programs. The government of India has launched initiative digitalization programs such as Digital India; Make in India, Udaan, Umang, Bharat Interface for Money, Start-up India, Skill India, and Innovation Fund.

The government has also signed the Memorandum of Understanding with Union Bank of India to promote the use of cashless, paperless, and transparent payment system in 2019. The Paytm has also launched its payment bank with the provision of the zero charges on the online transactions, no minimum balance requirement, and a free virtual debit card.

Along with this, investment of the governmental and non-governmental organizations for the promotion of digital technology in India is also increasing. For instance, the government of India has allocated almost USD 1.24 million for the BharatNet project to provide the broadband services to 150,000-gram panchayats for the union budget of the year 2020-2021.

Flipkart also launched the fund of almost USD 60-100 million for the investment related to the e-commerce industry. Reliance has invested almost USD 2.86 billion to expand its broadband and offer 5G services in India. The multiples initiatives of the digitalization programs in the context of India are creating a favorable environment for the growth and development of the e-commerce industry in India.

Increasing internet and smartphone penetration

India has the second-largest internet user base of almost 636.73 million, which accounts for almost 40% of the population of India in 2019. The total number of internet users is expected to increase from 636.73 million in 2019 to 829 million by the end of the year 2021.

It might be due to the project entitled Internet Saathi developed by the collaboration of the google and Tata trust, to improve internet penetration among the rural women in India. From this program, more than 26 million women were benefited in India and have reached almost 20 states.

Along with this, the shipment of the smartphone has been increased by almost 8% annually and is recorded as 152.5 million units in 2019. Because of this, the number of people using the online platform for shopping is also expected to be 175 million by the year 2020 from 120 million people in 2018.

The increasing penetration of the Indian population in mobile phone and Internet use will create a significant opportunity for the growth and development of the e-commerce industry in India.

Market Trends

Shifting consumer preferences towards online shopping

In the context of India, almost 59% of people use physical retail stores for shopping while the remaining 41% of people use online retail stores for buying the products. This shopping pattern is expected to change after the pandemic outbreak of COVID-19 disease as the government of India has enforced lockdown in its multiple cities.

A survey conducted in April 2020 has revealed that the proportion of the Indian population engaged in online shopping will increase to almost 54% from 41% within the next nine months. Along with this, almost 78% of consumers will prefer to increase the use of the digital payment system.

The existing pandemic outbreak of coronavirus, enforcement of lockdown will drive the growth and development of e-commerce in the context of India.

Increasing investment from venture capital firms in the e-commerce industry

Most of the venture capital entities are showing their interest and increasing their investment in the Indian e-commerce industry.

For instance, investors such as Tiger Global, Naspers, Accel Partners, has invested almost USD 200 million and Dragoneer investment group, Morgan Stanley Wealth Management, Sofina, and Vulcan invested about USD 160 million in one of the leading e-commerce company, the Flipkart.

Along with this, the Premji investment company and Wipro invested Myntra also has received almost USD 50 million in Myntra and PepperTap also raised USD 36 million from the snap deal and others.

The increasing investment in this industry is driving the market for the growth and development of the e-commerce industry in India.

Increasing number of Cyberattacks

According to the Data Security Council of India, India is the second most affected country in terms of cyberattacks. In the first quarter of the year 2020, cyberattacks have been increased by almost 37%.

The Kaspersky Security Network has detected and blocked almost 52,820,874 local cyber threats in this period, increased from 40,700,057 in the year 2019.

It has been estimated that the Indian companies lose almost USD 4 billion annually due to the cyber-attacks. The increasing number of cyberattacks might restrain the growth and development of the e-commerce industry in India.

Industry Challenges

Highly concentrated market

The e-commerce industry in the context of India is highly concentrated as more than 75% of the market value is accounted for by just the top five market players. The top five market players are Flipkart, Amazon India, Paytm mall, Myntra, and Snapdeal.

Here, the Flipkart is the leading market players of the Indian e-commerce industry, which alone accounts for a market share of almost 32% of the total Indian e-commerce industry.

The Amazon India, Paytm Mall, Myntra, and Snapdeal accounts for a market share of almost 31%, 6%, 5%, and 2% of the total e-commerce industry in India respectively. It is quite challenging for the other market players engaged in the Indian e-commerce Industry to establish and enhance their market value.

Technology Trends

Advancement in science and technology is widening the scope for the growth and development of the e-commerce industry in India. Some of the key technological changes occurred in the e-commerce industry in India is discussed as follows:

Digital payments system: This system allows the consumers for the payment of the goods and services through an electronic medium without the use of either cash or cheque for online transactions. It has assisted to develop more effective, efficient, and safe transactions.

Chatbots and virtual assistants: it is used to improve the experience of the customers in the online retailing by providing details about the order status and delivery details.

Product customization and personalized recommendations: This technological system facilitates the online retailing process by eliminating the inconvenience in shopping and meeting the demanding needs of modern clients based on the consumer’s recommendations.

Augmented and virtual reality: This technology allows the consumer to image and view the outfit of the product in the real world through the mobile device incompatible 360 videos. It has changed the way of visualization.

Pricing Trends

The price of the online retailing products depends upon the type of product, type of online retailing platform, brand name, geography, and quantity of products.

For instance, the price of the Sunsilk hair shampoo for a person in IndiaMart is about USD 1.42 per milliliter while the price of Sunsilk lusciously thick and long shampoo is about USD 3.68 per 650 milliliters in amazon India.

Regulatory Trends

Some of the regulatory trends directly and indirectly related to the e-commerce industry in India are discussed as follows:

Information Technology Act: This act was developed by the government of India in 2000 to deal with cybercrime and electronic commerce. It provides the guiding framework for the offense related to hacks with a computer system, cheating using computer resources, acts of cyberterrorism, misrepresentation, etc.

National e-commerce Policy: the government of India in February 2019 drafted this policy. According to it, the government of India has increased the limit of foreign direct investment up to 100% in the e-commerce marketplace.

Foreign Exchange Management Act: It was developed by the parliament of India in 1999 to facilitate the external trade and payments and promote the orderly development and maintenance of foreign exchange market.

Local Law: According to this law, foreign companies are prohibited from selling any products from vendors that they control and have equity in and to enter the deals between vendors and websites.

Market Size and Forecast

The market value is expected to reach USD 229.47 billion by the end of the year 2025. The market share of the E-commerce market share is expected to be 7% of the Indian retailing market by the end of the year 2021.

Based on the type of product

The electronics segment is leading the market with a market share of almost 47% of the Indian e-commerce industry. The market size of this segment is valued at USD 28.27 billion in 2019.
The apparel segment accounts for a market share of almost 31% of the total Indian e-commerce industry. Its market size is valued at USD 18.65 billion in 2019.
The home & furnishing segment accounts for a market share of almost 8% of the total Indian e-commerce industry. The market size of this segment is valued at USD 4.81 billion in 2019.
The apparel segment accounts for a market share of almost 7% of the total Indian e-commerce industry. Its market size is valued at USD 4.21 billion in 2019.

Based on the methods of payment for e-commerce

The cash on the delivery segment is leading the market with a market share of almost 71.38% of the Indian e-commerce industry. The market size of this segment is valued at USD 42.94 billion in 2019.
The online payments & cards segment accounts for a market share of 20.83% of the Indian e-commerce industry. The market size of this segment is valued at USD 12.53 billion in 2019.
The e-wallets segment accounts for a market share of 20% of the Indian e-commerce industry. The market size of this segment is valued at USD 12.53 billion in 2019.

Market Outlook

The e-commerce industry in India is expected to grow at the CAGR of 25% within the forecasted period of 2020-2025 because of Increasing internet penetration, shifting consumer preference towards online shopping, execution of digitalization initiatives, and increasing investment from vendor capital firms. Its market value will reach USD 229.48 billion by the year 2025.

Distribution Chain Analysis

The key stakeholders involved in the operation of the e-commerce market are product manufacturers, distributors, online retailers, and consumers.

At first, the manufacturers are engaged in the production of essential products such as electronic devices, home appliances, apparel, etc. Then the products are distributed to the online retailers and the products are available at the online retailing platform for the consumers.

Competitive Landscape

The top five key market players engaged in the Indian e-commerce industry are Flipkart, Amazon India, Paytm Mall, Myntra, and Snapdeal. Flipkart is leading the market with a market share of almost 32% of the Indian e-commerce industry followed by Amazon India which accounts for almost 31% of the Indian e-commerce industry.

The Paytm mall accounts for a market share of almost 6% of the Indian e-commerce industry.

Competitive Factors

The key market players engaged in this e-commerce industry in India are focused on the expansion of the product portfolio, collaboration with other business entities.

The pandemic outbreak of the COVID-19 disease is creating a favorable environment for the collaborations between the e-commerce companies.

For instance, Myntra has established a partnership with wildcraft to sell protective face masks. Along with this, McCoy Mart partnered with Rossari Biotech Ltd to sell hand sanitizers.

Key Market Players

Short profile of the key market players engaged in the e-commerce industry in the context of India are discussed as follows:

Amazon India: It is one of the leading global e-commerce engaged in the provision of a range of diversified products such as electronics, apparel, furniture, food, toys, and jewelry. The average monthly traffic on this site is almost 365.5 million visits.

Flipkart: It is one of the leading national e-commerce company in the context of India. It is engaged in the online sale of mobile phones, electronics, fashion, and lifestyle products. The average monthly traffic in this Flipkart webpage is about 221.5 million visits.

Snapdeal: It is the online shopping platform providing a range of electronics, fashion, home appliances with its investors from the Alibaba Group, Foxconn, and Softbank. The average monthly traffic on this site is about 83.5 million visits.

IndiaMart: It is one of the Indian online B2B company engaged in the manufacture, supply, and export of the apparel, electronics, furniture supplies, and other products through the online retail platform tolexo. The average monthly traffic is its site is estimated at 42.8 million visits.

BookMyShow: It is one of the leading Indian portal and retailer platforms selling tickets for movies, sports events, plays, and other events. The average monthly traffic is about 43.4 million visits.

Myntra: It is the Indian online retailing site of fashion, home, and lifestyle products, which was launched in 2007. The average monthly traffic at this site is about 27.8 million visits.

Firstcry: This e-commerce platform is specialized in the online retailing of baby care products, kids’ clothes, and other products for children. The average monthly traffic on its site is about 16.1 million visits.

Strategic Conclusion

The e-commerce industry in India is growing at the rate of 25% because of Increasing internet penetration, shifting consumer preference towards online shopping, execution of digitalization initiatives, and increasing investment from vendor capital firms.

However, consumer perceived risks about the online retailing and increasing cyber-attacks might create the risk for the growth and development of its market. So, the market players must be focused on the development and adoption of advanced technology to address the cyber attacks.

References

Appendix

USD= United States Dollar
CAGR= Compound Annual Growth Rate