E-commerce in India set for WINNING STREAK

Propelled by rising smartphone penetration, launch of 4G network and increasing consumer wealth, the Indian e-commerce market is expected to grow to $200 billion by 2027.

India's e-commerce sector is set to break new records over the next few years as a result of the growing Internet penetration rate, a young digital-savvy population, and favour­able market conditions.

In addition, the drive to digitise the economy and provide cheap and reliable Internet to the popula­tion are also factors that have aided the growth of the sector. According to reports, e-commerce sales across India in 2018 were estimated to increase by around 25 per cent. The average retail e-commerce revenue collected per user in India in 2018 was more than $50; experts estimate that this figure will rise to cross $75 by 2024.

Dr Dhananjay Datar, Chairman and MD of Al Adil Group, described India's e-commerce sector as being on a "fast growth mode" and that the sec­tor has transformed the way business is done in the country.

"The growth of e-commerce has been triggered by a substantial increase in Internet and smart­phone penetration. According to a report, it will reach around $99 billion by 2024. According to my analysis, grocery and fashion, as well as ap­parel, are likely to be the key drivers of this growth."

On account of the Covid-19 lockdown, he noted that the sector saw an increase in usage from new online shoppers, existing shoppers buying more food and grocery, and mature shoppers moving more of their buying to online platforms.

"This is bound to increase in the coming years and the upward growth trajectory will make India one of the top e-commerce markets in the world. I am also happy to state that the Government of India, over the past has announced various initia­tives, namely Digital India, Make in India, Start-up India, and Skill India, which has served as growth catalysts," Datar added.

Reports have revealed that the market value of the e-commerce industry in India was approxi­mately $50 billion in 2018. Favourable market conditions will mean that this number is estimat­ed to reach $200 billion by 2027.

With some of the cheapest Internet rates in the world, India has seen its Internet user population skyrocket in recent years. According to the Internet and Mobile Association of India's (IAMAI) Digital in India report, India now has over 500 million ac­tive Internet users. Of the total Internet population, 433 million are more than 12-years old, while 71 million are in the age of 5-11 years, who access the Internet on devices of their family members. Today, India is the second-largest online market in the world, ranked only behind China. It was estimated that by 2023, there would be over 650 million In­ternet users the country.

The steady growth in Internet penetration rates was identified by Ashraf Ali MA, executive direc­tor of LuLu Group, as a major factor in how the country's e-commerce sector will continue to ma­ture over the next few years.

"India, with its huge aspiring population and heavy penetration of connectivity, is one of the biggest markets for e-commerce, if not the biggest, and almost all international and local players are gunning for a slice of the pie," he said. "E-com­merce, the world over, is seeing unprecedented growth and acceptance obviously with the ad­vancement of technology and ease of doing busi­ness. No doubt, the current pandemic situation has worked as a big catalyst in speeding the up­ward trajectory."

Like Datar, he pointed to various initiatives that have accelerated momentum in the sector. "Through its Digital India campaign, the Govern­ment of India is aiming to create a trillion-dollar online economy by 2025. Much of the growth in the industry has been triggered by increasing In­ternet and smartphone penetration. As of August 2020, the number of Internet connections in India significantly increased to 760 million, driven by the 'Digital India' programme."

He added: "India's e-commerce sector is ex­pected to reach $99 billion by 2024, expanding at a 27 per cent CAGR, with grocery and fashion/ apparel likely to be the key drivers of incremental growth. We, at LuLu, currently have online shop­ping operations in Kerala, but will soon be rolling out to other major cities in India."

Experts have noted that digitisation also made huge leaps due to the Digital India initiative en­abling electronic and online infrastructure throughout the country. The demonetisation of selected currency notes in November 2016 played a major role in expanding the reach of digital pay­ments in particular. Despite the massive econom­ic disruption and chaos in the weeks following the announcement, digital use, especially for pay­ments, exploded because of the shortage of cash. In 2020, the economic impacts of the Covid-19 lockdown since late March also boosted the adop­tion of online payments due to home confinement measures.

Fashion, specifically clothing ranked highest on the list of categories that online shoppers spent money on across India, according to reports for last year. Mobiles and electronics followed for the same time period. The country is expected to have up to 350 million shoppers by 2025.

The number of digital buyers across the country was estimated to be approximately 330 million in 2020. The figure suggests that almost 71 per cent of Internet users in the region will have purchased products online last year. The sector is driven by personalised advertisements, attractive discounts, quick delivery and return infrastructure, and a high penetration rate of smartphones. The retail ecosys­tem combined with the comfort of being at home and getting all your purchases delivered to your doorstep has helped the e-commerce sector mature quite significantly.

Smartphone usage has also supported the tran­sition to mobile shopping to a point where it was estimated that every third Indian shops online using a smartphone. Amazon and Flipkart were the largest players in the segment, offering ex­travagant sales every festive season. Discounted periods during Dusshera and Deepavali in 2019 generated about $3 billion in gross merchandise value within this market.

Analysts have pointed out that policies from the government have strengthened the market fur­ther. This was propelled by government policies that allow 100 per cent foreign direct investment in B2B e-commerce. In addition, 2019 frame­works expect FDIs for e-commerce in the market­place model and ensured a level playing field for all companies. As of April 2017, Amazon India was the leading online market place in the country with more than $500 million in sales. In a survey conducted in May 2020 about permitting e-com­merce platforms to deliver goods in India after coronavirus lockdown, the majority of respon­dents voted in favor.

But, while there has been an impressive expan­sion in the sector, the penetration rate in the country is relatively low compared to markets such as China and the U.S. Challenges have arisen in the form of trust issues due to a large number of fake websites and products, which was the reason that over 20 per cent of the buyers refused to buy goods or services online in 2016. Reliable websites and quality assurance from manufacturers are tackling the issues headfirst, as they look to provide better products and ser­vices to customers and seek growth and benefits for the industry in the long run.

- rohma@khaleejtimes.com

Dr Dhananjay Datar, Chairman and MD of Al Adil Group

Ashraf Ali MA, Executive Director of LuLu Group

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