The Indian eCommerce sector has seen unprecedented growth over the past few years.
The growth was driven by rapid technology adoption caused by the increasing use of devices such as smartphones and tablets, as well as access to increasing internet access, altogether leading to a fast growing online consumer base. Favorable demographics and rising income levels also contribute positively to this development, with a growing young population increasingly using mobile phones to accommodate their consumer lifestyles.
In terms of highlights, the growth of homegrown players such as Flipkart and Snapdeal and the huge investor interest surrounding these companies displays the immense potential of the market. Since the e-commerce industry is rising fast, changes can be seen within just one year. India's e-Commerce revenue is expected to jump from $30 billion in 2016 to $120 billion in 2020, growing at an annual rate of 51%, the highest in the world. India is at the brink of a digital revolution. Internet has become an integral part of the growing urban Indian population.
Various factors have been driving this trend, such as:
- Considerable rise in the number of internet users: 25 million new internet users annually
- The introduction of mobile technology infrastructure (3G, 4G), greatly enhancing nation-wide internet penetration and leading to an ever-increasing number of ‘netizens’.
- Declining broadband subscription prices
- Urban India’s changing lifestyle and demographics: around 75% of Indian internet users are in the age group of 15 to 34 years. This category also shops more than other Indian citizens.
- Convenience of online shopping and acceptance of online payments
- Changes in the supporting tech-infrastructure
Online travel, one of the key drivers of India’s e-commerce market, accounts for nearly 71% of e-commerce business in India. Though the online retail market in India, currently at $1.6 billion, is a miniscule fraction of India’s overall $500 billion retail industry; retail e-commerce has recorded a three-fold growth since 2011, predominantly driven by million dollar investments by domestic and foreign investors.
Across the globe the e-commerce industry is a force which continues to grow and which investors cannot afford to ignore. This is especially true in India where there are so many opportunities. For example, just focusing on B2B e-commerce, the market is both large and broad which provides the potential for amazing innovations. E-commerce has namely become a key driver to create new markets in erstwhile unreachable geographies The Government of India has also taken several initiatives for modernization and for improving sustainability of the e-commerce sector, such as the ambitious Digital India project and the modernization of India Post. The Digital India initiative, through a targeted investment of nearly $17 billion, will transform India into a connected economy and also attract investment in electronics, manufacturing and create millions of jobs. India’s overall retail opportunity is therefore substantial and continuous growth in e-commerce is expected. From an investment perspective, the market is a primarily minority stake market, with maximum traction in early-stage deals. Such early stage funding will help companies develop a strong foundation to start off from. It should be said that the e-commerce sector is still in an early phase, making it difficult to pinpoint exactly where opportunities are. However, giving the novelty and considerable dynamism and growth of the sector, there is a lot of room for initiative and innovation.