India's new sunrise industry, e-commerce, is set to achieve business worth $16 billion (Rs 108,100 crore) this year, according to an Assocham-Deloitte joint study.
Encompassing an increasing range of economic activities such as retail, travel, tourism, food and beverages, the e-commerce (digital commerce) market has already grown from $4.4 billion in 2010 to $13.6 billion in 2014 on the back of a growing Internet population and increased online shoppers, reveals a study, ‘The Future of e-Commerce: Uncovering Innovation’.
Online travel accounts for nearly 61 per cent of e-commerce business while e-tailing contributes about 29 per cent. Spend data from Visa India showed a 53 per cent growth in the number of e-commerce transactions in 2014, D. S. Rawat, Secretary-General, The Associated Chambers of Commerce and Industry (Assocham), said on Wednesday.
With slower growth in their home markets, e-commerce players from the US, Europe and Japan are increasingly looking to enter the developing economies of India, Brazil and China, which have forecasted growth rates of more than 20 per cent in the coming years. The most popular e-commerce categories are non-consumable durables and entertainment-related products.
Internet, smartphone usage
Greater adoption of Internet and smartphones is the biggest driver of e-commerce growth in India. Internet penetration is rapidly increasing with around 300 million users in 2014. The smartphone segment accounts for 35 per cent of the overall mobile phones market in the country and the success rate of some of the technologies is directly connected to the success of e-commerce, he said.
The e-commerce companies are concentrating their efforts on increasing the penetration of their mobile apps for higher growth. Big players in this space claim to have more than 50 per cent of their revenue coming from mobile apps.
More than 235 million people in India access the Internet through mobile devices, the primary reason for e-tailers to focus their efforts on mobile app penetration across the country. Mobile applications are helping reach more customers located even in remote and rural areas. E-commerce companies have been able to bridge the service gap considerably by sending service updates and other communication via their mobile apps, e-mail, and SMS, adds the study.
The availability of e-commerce applications on various mobility devices is helping drive sales and revenue. E-tailers, including Flipkart, Amazon and Jabong, generate nearly 50 per cent of their revenues from consumers using mobile phones to shop.
The digital advertisement industry is also growing rapidly as there is a growth in digital communication devices around the world. The increase in smartphones and tablets is enabling advertisers to reach a wider audience. According to the study, the Indian online ad market will grow 30 per cent year-on-year.
The valuation of Flipkart sharply increased from $1.9 billion to $11 billion in 2014. It raised $1.9 billion in three rounds of fund raising, despite losses. Similarly, Snapdeal saw its valuation increase from $350 million to $3 billion after raising funds of $850 million, again despite losses. Valuation can play a major role for an e-commerce player irrespective of the profitability of the company, Rawat said.
Big retailers are trying to complement traditional retailing with digital commerce by tying up with big e-tailers. The partnership between Snapdeal and Croma or Amazon and the Future Group-owned Big Bazaar are such examples.
In the next three years, global e-commerce sales made via mobile devices is expected to top $638 billion, adds the study.