India’s e-commerce industry is expected to reach $99 billion in size when online commerce penetration will more than double to almost 11%.
The growth rate for the industry in India, for each of the next four years, would surpass the same of established economies like the US, China, the UK, Europe and Brazil, according to Goldman Sachs’s review of e-commerce markets globally.
E-commerce is expected to register a growth of over 18% for the current year but estimates for 2021 and 2022 show a year-on-year growth rate of over 33% and 28% respectively. To compare, growth rates for the same period for the US are 17% and 19%, while it is nearly 11% for China in the next two years. To be sure, the market size base is bigger in both the US and China along with higher penetration of the total retail market.
The pandemic is accelerating both growth and penetration of e-commerce further in these markets, including in India. At a recent industry seminar, Prashant Prakash, partner at venture capital firm Accel, which was one of the early-backers of Flipkart, said it took a decade for India to see e-commerce penetration of around 3% and that it has quickly moved to 5%.
This is further seen in the bullishness shown by both Amazon India and Walmart here. Amazon has committed an additional $1 billion investment for India while Walmart said it will invest $1.2 billion in Flipkart.
Among the sectors highlighted for e-commerce in India, the report estimated online grocery to be the biggest incremental growth driver for e-commerce with the segment expected to grow 20 times in India over five years to be of $29 billion in size (currently under $2 billion).
While smartphones, electronics, large appliances have relatively higher online penetration, there is significant room for growth in categories like apparel, appliances, health & personal care, compared to economies like China, it added.
“The category has been growing at more than 50% year-on-year for the last couple of years, but with the outbreak of Covid-19 resulting in a shift to online, and the recent entry of RIL, we believe growth will accelerate to 81% annual growth rate for the period of 2019-2024,” analysts at Goldman Sachs said.
While Bigbasket and Grofers held more than 80% market share in the online grocery last year, it estimates RIL (via JioMart) could end with 50% market share by 2024 but there will be space for two or more large players to exist in a large market like grocery.
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