From time to time we have written a lot about ecommerce and India and how ecommerce is spreading it territory on the country housing the second largest population of the world. From Global players like Amazon (AMZN, Financial) to Alibaba (BABA, Financial) to Local Players like Flipkart and Snapdeal, India is on the top destination list for the whole etailing fraternity. Since mid-2014 we have seen how the ecommerce companies stepped up their activities in the subcontinent through different promotional events and sale offers. These new developments in the ecommerce arena have set the ground clear for a more aggressive 2015. Let us take a closer look at how the ecommerce industry will fare in 2015 in India.
Indian ecommerce stage
The average annual spending of Indians on online purchases is expected to rise 67% to $158 next year, according to a study.
Currently, online shoppers spend around $95 a year on average, said the Assocham-PwC study.
2014 has been a remarkable year for ecommerce when online shopping in India surged to a hit formula from an oblivion concept just a couple of years ago. About 40 million consumers went through online shopping mode this year and the number is expected to see an upward movement to 65 million by 2015 with better infrastructure in terms of logistics, broadband and Internet-ready devices.
The overall ecommerce industry stands at $17 billion and has been growing at a compounded annual growth rate of about 35% each year, the study said, adding that it is expected to exceed the $100 billion mark in the next five years.
According to the sectorial analysis in 2014 the ecommerce sector has been able to successfully attract the attention of investors, including top global firms and leading Indian industry leaders like Azim Premji and Ratan Tata, with indigenous names like Flipkart and Snapdeal enjoying the home turf benefit compared to the global leader Amazon.
The lion share of the Indian ecommerce industry is held by apparel sales which has shot a number of ecommerce startups to fame overnight and has fuelled a number of mergers as well like the Flipkart-Myntra deal. Apparel sales are closely followed by consumer electronic sales like laptops, smartphones, tablets and their accessories.
Ecommerce India road ahead
“The smartphone and tablet shoppers will be strong growth drivers. Mobile phones already account for 11 percent of ecommerce sales, and their share will jump to 25 percent by 2017,” Assocham Secretary General D S Rawat was quoted as saying.
Computer and consumer electronics, along with apparel and accessories, have been the major business drivers of India’s retail ecommerce sales. Going by the market reports these account for around 39% of Indian ecommerce business in 2014 and are all set to move up to around 42% in 2015.
Indian travel and tourism is the second-fastest growing travel and tourism industry in the world. Nearly 75% of the total-travel related business has been bagged by ecommerce sites like Yatra.com and Makemytrip (MMYT, Financial).
With nearly one-third of netizens already going the online shopping route, the ecommerce growth will rely more on increased spending from existing buyers than first-time online buyers.
The other factors which would majorly drive ecommerce growth in the subcontinent would be aggressive merchandising and discounting from flash sales and daily deals, more online loyalty programs and increasing popularity of smartphones and tablet computers among consumers.
The industry is also expected to spend an additional $500 million to $1 billion on logistics improvement and better technical support which has been the major goof-ups in 2014 especially during the festive season bonanza sales, leading to a cumulative spend of $950 million to $1.9 billion till 2017-20 in order to enhance the online shopping experience of the consumers and make it a household shopping practice of the fast urbanizing subcontinent.
Going by the studies the ecommerce sector has created an employment opportunity for about 25000 people in e-retailing warehousing and logistics alone. It is estimated that this headcount number will rise to around 100,000 in warehousing and logistics segment of the business alone by 2017-20.
Ecommerce is on a wild run towards higher highs and so is the Indian economy. One of the fastest developing economies in the world and the fastest urbanizing country housing the second largest population in the world makes the soil fertile for any consumer based business in India. With a lot happening in the global ecommerce front and internet of things taking almost all formats of business into its ambit etailing is one segment which will see maximum growth in 2015. Taking these developments into consideration it would be prudent for investors to step up their stakes in the companies of this segment like Amazon and Alibaba and also keep an open eye for public listing of companies like Flipkart and buy in stakes in such companies as and when opportunities pop up.