E-Commerce Industry in India

E-Commerce Industry in India

Overview

E- commerce (Electronic Commerce) has completely transformed the shopping experience of people around the world. Brands shifting to online channels, overcrowded shopping malls, wide-range of product availability are some of the factors that made customers shop online. The E-commerce industry is one of the fastest growing sectors in India because of the increasing rate of internet usage among people. The current pandemic has boosted the e-commerce growth in India as more people shifted to buy things online to avoid physical store visits.

E-Commerce Market Size in India

Indian E-Commerce Industry market size stood at INR 2,418.49 billion in 2020 and with a CAGR of 12.5% the market is expected to reach INR 3,443.51 billion by 2025.

E-Commerce Industry Market Size

E-commerce Industry in India is primarily made of consumer electronics and apparels segments, together holding upto 80% of the overall market share.

E-Commerce Segments Market Share

Competitive Landscape

The major portion of the e-commerce market in India is controlled by Flipkart with 16.10% followed by Amazon India with 5.05% of the overall market.

E-Commerce Players Market Share

Growth Drivers for Indian E-Commerce Industry

Favourable Government Initiatives & Policy

  • Digital India initiative was introduced by the government of India to encourage electronic payment methods.
  • The Government e-Marketplace (GeM) Portal was created in 2016 to allow traders to sell goods and services directly to government departments and organizations.
  • Indian government allowed 100% FDI in the E-commerce sector.

Increasing Internet Penetration

With the developments of telecommunication, the E-commerce industry is witnessing tremendous growth due to the rising rate of internet usage. Around 50% of the country’s population had internet access in 2020 and this is expected to increase further in the coming years which pushes more customers towards online shopping.

Growth in Smartphone Usage

Due to rapid evolution of technology India’s smartphone adoption rate is on an increasing trend. Approximately 697 million people owned a smartphone in India in 2020. As E-commerce platforms can be accessed via smartphones this can further increase the demand for the e-commerce sector in the country.

Introduction of New Payment Methods

India’s digital India initiative allowed fintech companies to introduce various payment wallets that can be integrated to the e-commerce platforms. This encouraged more customers to switch from cash-on-delivery to electronic payment methods.

Challenges for Indian E-Commerce Industry

Counterfeit Products

Though the e-commerce industry has seen a massive growth in recent days, the sales of fake products still remain a great problem for online shoppers. Studies reveal that around a third of online shoppers receive a counterfeit product. Counterfeiting damages the reputation of e-commerce platforms.

Supply Chain Infrastructure

Lack of robust and well-connected road networks across the country make the e-commerce companies opt for air services for inter-state movements which increases the operation cost of the companies.

Cyber Security Threats

Data breach is one of the major challenges faced by the e-commerce industry. As more customers are engaged in online shopping, their personal and payment details are exposed in the absence of a strict firewall. These data breaches can severely damage the company’s operation and brand reputation.

High Competition

Indian’s e-commerce sector is occupied by both foreign and domestic players. With fierce competition among overall profitability decreases due to heavy discounts & offers, low pricing strategies and high commission to vendors.

Impact of Covid-19 on Indian E-Commerce Industry

The global spread of the coronavirus pandemic has altered the buying behaviour of consumers as well as their perception about e-commerce. The nation-wide lockdown restrictions and hesitancy towards physical shop visits due to hygiene factors made consumers turn towards e-commerce platforms to buy things they require. Though e-commerce companies faced supply shortages and restrictions from the government to deliver only essential products, e-commerce industry quickly recovered once the restrictions were lifted. E-commerce sector saw significant growth from first-time online-shoppers buying food, groceries and other things. Due to the pandemic, e-commerce companies are able to assess consumer’s buying preferences so that they can reiterate their product offerings. Companies have improved their supply chain to make sure they have enough stock available to meet the demand. The outbreak of the coronavirus turned out to be a boom for the E-commerce industry in India.

Future Outlook

The E-commerce industry in India has had massive growth over the last couple of years and India is expected to become the second largest market for e-commerce next to China by 2034. Further improvements in electronic payment methods, drop-shipping business model, data analytics driven customer engagements, and increasing smartphone usage are likely to accelerate the demand for e-commerce in the country. The industry is poised for growth as the players are diversifying their business verticals and will be one of the major economic drivers in the upcoming years.


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