November 28, 2018 by Sujay Seetharaman

This report by PipeCandy chalks out the trends shaping the growth of the Indian eCommerce sector and estimates the Total Addressable Market (TAM).

For the purpose of this report, we restrict our focus to Business-to-Consumer (B2C) eCommerce & Marketplaces.

The trends analyzed include Market size & Growth rate, Growth factors, Government policies (FDI, GST, and Demonetization), Payment modes, Average Order Values, and Private Equity and Venture Capital Investment growth curve. We also pinpoint the major challenges in the industry, Key players and estimate the TAM through a combination of secondary research and proprietary data analysis.

India is one of the fastest-growing eCommerce markets worldwide with millions of new internet users taking advantage of cheap mobile connections to send text messages, stream online content and shop online.

  • As of 2018, 25% of the local population was using the internet; almost ten times the user base from a decade prior.
  • Mobile phone internet user penetration in India is projected to reach 36% of the population in 2020, representing a huge potential in terms of digital and mobile buyer audience.
  • With a population of 1.3 billion, India currently has an estimated 490 million mobile internet users in 2018. This user base is estimated to surpass 829 million in 2021.

India’s rising internet and smartphone usage have majorly contributed to the upsurge of digital buyers. Various reports claim that by 2022, the share of digital buyers will rise to 41%, wrapping in a quarter of the country’s population.

The growth of eCommerce has also enabled the growth of ancillary services such as logistics. Several eCommerce focused logistics players such as Delhivery, Ecom Express are competing in a market that is dominated by Amazon’s FBA and Flipkart’s ekart.

India has approximately 10,000 – 11,000 companies that operate across the inventory-led & marketplace models of Indian eCommerce.

Further, there are an estimated 600,000 – 700,000 marketplace sellers.

India has turned into a battleground for retailers like Amazon and Walmart.

  • In May this year, Walmart acquired a 77% stake in India’s largest marketplace eCommerce company Flipkart.
  • Snapdeal, another major marketplace operator is piling up losses and is fast losing market share to Flipkart, Amazon and Paytm.
  • For its part, Alibaba has ensured key stakes in Paytm mall – a marketplace spin-off by the homegrown financial services app Paytm, Bigbasket – India’s leading online grocery retailer and Zomato – one of India’s largest food aggregator platforms.

The Indian government permits 100% Foreign Investment in the marketplace model of eCommerce under the automatic route for B2B marketplaces while it puts forth some caveats for B2C marketplaces like Amazon and Flipkart. Deep-discounting by these large players remains a cause for concern since the popularity of discounts could come at the expense of local retailers. Local traders have already raised their voices against the deal between Walmart and Flipkart. Although eCommerce is just 2-3% of the Indian retail pie, the pace at which global eCommerce companies innovate – Amazon in particular – shows just how fast retail can be disrupted. A collaborative approach – wherein these eCommerce giants partner with the local traders – at scale could bring a win-win situation to both the parties.

Two major reforms that recently impacted small businesses and eCommerce – albeit not in the same way – were Demonetization and the Goods and Services Tax. The former was a government reform that removed high-value currency notes out of circulation overnight in 2016. This led to a cash-crunch which severely affected individuals and businesses – particularly the Micro, Small and Medium Enterprises who were heavily dependent on cash. These difficulties have largely been ironed out but as an ironic consequence of Demonetization, 99% of the cash that was demonetized is now back into the system according to the Reserve Bank of India, leaving the dream of ‘cashless economy’ still a distant one.

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Sujay Seetharaman

Market Analyst @ PipeCandy

Currently donning the Researcher's hat. Talks to himself.