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India's online retail to hit $100bn

News, 27 October 2015

BENGLARU: The rapid advance of India's online retail market – major players are expecting sales this year to be three times up on 2014 – has led to a prediction that ecommerce will be worth more than $100bn within five years.

In May, US investment bank Goldman Sachs forecast that India's overall online market – including travel, payments and retail – would be worth $81bn in 2020 but it has now revised this upwards by 27% to $103bn.

Virtually all of this increase, the Economic Times reported, is down to the performance of the etail segment, which is now expected to be worth $69bn against an earlier projection of $47bn.

"Higher growth in this space is due to the higher-than-expected internet and smartphone penetration, digital wallet adoption, last-mile logistics investments, continued discounting and better execution," the report said.

In 2015, Google India estimates the combined gross merchandise value (GMV) of India's e-commerce companies is likely to exceed $12bn, up from $4.5bn in 2014.

Earlier this month Snapdeal's chief product officer noted that traffic rose every year during Diwali, but "what is surprising is that the traffic does not go back to the previous rate in the week after Diwali … the new figure becomes the base for the next year".

And while the Big Three of Amazon, Snapdeal and Flipkart, which together account for almost 80% of the market, are driving this progress – Amazon, for example, says its India sales have grown four fold in the past year – smaller players are also benefiting from changing consumer behaviour.

"The overall ecosystem is growing," said Nitin Bawankule, head of e-commerce at Google India. "The good part is that many small guys are also growing rapidly with an increase in their shopper base and GMV," he told the Business Standard. "Even a niche e-commerce firm in furniture or baby goods is growing three to four times a year."

And while sales, discounts, promotions and offers have been a feature of the approach taken by the Big Three, not all players have felt it necessary to emulate them.

StoreKing, for example, which focuses on rural markets, expects to grow tenfold this year and to break even. "We offer convenience, not discounts," explained founder Sridhar Gundaiah. "We have depth in our inventory and catalogue, and we do not ship any consignment with value less than Rs 500."

Data sourced from Economic Times, Business Standard; additional content by Warc staff