From expecting the Indian ecommerce firms to benefit from the lockdown just as they have in the US and China, analysts and industry watchers are now expecting overall growth in the sector to be in the mid-single-digits this year, down from almost 35% in 2019.
For the two largest players in the space, Walmart-owned Flipkart and Amazon, daily deliveries are down to around 10% of what they were prior to the lockdown, while the gross merchandise value (GMV) of products they sell has fallen to around 5% of what it was a month ago, top executives told ET.
Moreover, both companies are bleeding more money on every delivery than before as the margins on food and fast moving consumer goods (FMCG) are far removed from the margins they used to earn on smartphones and apparel.
“We have already cut down our forecast for the year to 6.2% and will update again in the week of May 15th,” said Sateesh Meena, senior forecast analyst at Forrester Research, commenting on the state of India’s online commerce sector. He added that these growth estimates could fall further if ecommerce firms are disallowed to sell non-essentials beyond May 3.
Even the little growth that is expected in India’s online commerce industry will be driven by the spike in people ordering groceries and food via ecommerce, a trend that’s expected to stay even after the mandatory lockdowns end. For Flipkart and Amazon, which don’t have a very large exposure in this segment, growth prospects are looking grim.
Goods sold by both firms made up almost 85% of the value of all products sold online in 2019, but that number could fall this year, said an analyst who pleaded anonymity as he works with both companies. Ankur Pahwa, Partner at EY, agrees with this. “The contribution of horizontal platforms to overall aggregate ecommerce will certainly go down compared to before as discretionary spending slows down,” said Pahwa.
He added that while overall business growth for the horizontal ecommerce players could come down, growth in their fresh and grocery businesses caused by the Covid-19 pandemic is a certain fillip which will help them in the long term.
Apart from the two large players, other marketplaces such as Snapdeal, Paytm Mall and large vertical players such as fashion marketplace Myntra, Nykaa, FirstCry and Lenskart too which largely sell non-essential items are expected to see lower growth.
While the opening up of ecommerce could see a spike in orders for non-essential goods due to pent up demand, industry watchers said some of this could bleed away to local stores which have been allowed to operate while online sales remain shut. The government‘s move according to Kazim Rizvi, a public policy researcher at The Dialogue, goes against the spirit of equality and the lockdown.
“…for now we have to make sure that all options are exercised to minimise the gaps in delivery of essentials and nonessentials to the people,” Rizvi said.
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