India’s Retail Market Set To Reach $38B In 2016

Although India's use of the Internet is comparatively lower than in many other poorer countries, the country's appetite for eCommerce seems to be growing rapidly, despite that substantial barrier. The retail sector in the region grew by 209 percent from $4.4 billion in 2010 to $13.6 billion in 2014, more than tripling in fewer than five years.

As the online economy booms, many are rushing to make predictions about continued growth, The Economic Times reports. According to recent data from the Associated Chambers of Commerce & Industry of India, the country’s eCommerce economy will reach $38 billion in annual sales by the end of 2016. Others, including the Confederation of Indian Industry and reporting firm Deloitte, predict the online retail sector in India will reach $1 trillion by 2020.

Despite this runaway online retail growth, Internet penetration in the country remains low, with less than 19 percent of Indians going online in 2014, according to IndiaSpend. Compare this with Australia (90 percent), the U.S. (87 percent), Japan (86 percent), Brazil (53 percent) and China (46 percent), and it’s obvious that there is room for growth. Only 18 of 100 Indians used the Internet in 2014, compared to other developing countries like China (49.3 out of 100) and Vietnam (48.3).

But Internet use is on the rise, with as many as 354 million users in India reported as of Sept. 2015. Mobile Internet spend has also increased from 54 percent to 64 percent from 2014 to 2015, with some of the lowest prices in the world for mobile Internet connections. With all of this connectivity, ET notes, online shoppers in India have increased from 20 million in 2013 to 39 million in 2015; that’s an increase of 95 percent in just three years.

The speed for all of these broadband and mobile Internet users remains a major constraint. The average broadband speed in India is 2 megabits per second (mbps), ranking 115 globally, ET reports, placing India behind Thailand, China, Hong Kong and Singapore in Internet speed.

With all of this growth also comes more competition, and India-based startups, like eCommerce marketplace Flipkart and on-demand transportation service Ola, are facing steep competition from the likes of Amazon and Uber, respectively.

As India Value Fund Advisors Partner Haresh Chawla commented to ET: "Consumer Internet startups find it difficult to navigate slowdowns. Traditional companies usually recover from these cycles. But technology-led companies simply go bust. They have very little consumer loyalty to start with. Most bribe consumers to grow rapidly and cut back [on profits], causing them to implode."

India-based startups are hoping that this is not the case and that they can navigate the waters of change successfully to rise with the country’s eCommerce tide.



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