E-Commerce industry risk review by Alea Consulting

New Delhi [India], August 19 (ANI-NewsVoir): In India, eCommerce accounts for 1.5 percent of India's GDP, and is likely to reach 2.5 percent by 2030. In 2016 the sector grew by 55 percent to USD 16 billion. With the increase in internet users, Indian e-Commerce industry is poised to surpass the United States and become second largest in the world, after China, by 2034.

In 2000, a limited number of online shopping firms existed, such as Rediff Shopping, Indiatimes, Sify Shopping, HomeShop18 and Bazee.com. India lacked the required infrastructure and people feared buying online. It was primarily a C2C market. In 2004 eBay came to India. In 2007 the sector gained pace with the entry of Flipkart, Amazon, Snapdeal, Paytm and others. Steps were taken to develop the three critical enablers for eCommerce firms viz. logistics and warehousing; IT infrastructure; and fintech. In 2014-15 several initiatives were taken by the Government; these include Make in India, Digital India, Skill India, Startup India and Bharat Innovation Fund (a public-private-academia partnership by CIIE; to fund innovation driven startups).

Key Drivers:

?Massive 4G deployment by telecom companies and declining broadband subscription prices

?Increasing penetration of internet and smartphones in rural areas

?Young demographic profile (nearly 2/3rd of Indians are under 35 years)

?Easy modes of payment and compelling commercials

?Growing economy, increase in disposable income and rising standards of living

?Increase in number of websites. In 2015 ASSOCHAM reports 106,686 new websites registered in India daily, of which 25percent are for niche and specialist online business

?Discounts combined with convenience, access to a large array of goods offered by online shopping

?Urban India?s changing lifestyle

Restrictions

In March 2016, Department of Industrial Policy & Promotion (DIPP) restricted e-Commerce firms from offering excessive promotional discounts and observing impartial business practices.

Challenges

These include cyber security issues due to increased use of online payment modes, high reliance on sellers and lack of a robust due diligence mechanism resulting in one of the major challenges encountered by e-Commerce players i.e. sale of counterfeits. An added concern is achieving profitability as several online firms have collapsed due to non-achievement of targets.

Key Statistics

?Internet users are expected to double from 350 million in 2015 to 600 million in 2020.

?69 million consumers purchased online in 2016. This will cross 100 million in 2017 and 175 million by 2020. Mobile accounted for 30-35percent of e-Commerce sales in 2016 and its share is likely to increase to 45-50percent in 2017.

?In 2016 online retail was 2.5percent of total retail and this is expected to be 5percent by 2020. Fashion and lifestyle is one of the fastest growing categories in e-Commerce market.

?In 2016 Bengaluru ranked first amongst Indian cities in preference for online shopping, followed by Mumbai and Delhi.

?In 2015, 20percent of all online shoppers in India were women, this is set to double to 42percent by 2020.

?Cash on Delivery (CoD) is the preferred mode of payment for e-Commerce in India which accounted for 45percent of the sales in 2015; credit cards (16percent), debit cards (21percent), cash card (10percent) and mobile wallets (7percent).

?The number of connected individuals in rural India is expected to grow from 120 million in 2015 to 315 million by 2020, an average increase of 30percent per year.

Foreign Domestic Investment (FDI)

B2B: 100percent FDI is permitted in companies engaged in B2B eCommerce.

B2C: 100percent FDI is allowed in online retail of multi-brand goods and services B2C under the marketplace model (technology platform to facilitate transaction between buyer and seller.) Any e-Commerce entity providing a marketplace cannot exercise ownership over inventory, and is not permitted to sell more than 25percent of total sales through its marketplace from one vendor, to their group companies.

Goods and Services Tax (GST)

GST has been effective since July 1, 2017. As GST is uniform across India, warehouses can be set up keeping in mind business objectives rather than for reduction of incidence of taxes.

Union Budget 2017-18

In Union Budget 2017-18, the Government had put a restriction on cash payments above Rs. 200,000 which will help the country move from cash driven to a digital economy, which in turn would boost e-Commerce.

Competitive Landscape

E-Commerce in India is a consolidated market with a handful of companies accounting for a significant share of the industry. eCommerce witnessed ~259 M&A deals in 2015.

Amazon, Flipkart and Snapdeal are seen as the dominant players. Indian Railways is working on a policy to become official logistics partner of e-retailing giants.

Other players in the industry (by category/predominant product) are:

Fashion-jabong.com, yepme.com, zovi.com, myntra.com, limeroad.com

Food and Groceries-grofers.com, foodpanda.com, bigbasket.com, tradeus.com, zomato.com

Travel-makemytrip.com, yatra.com, cleartrip.com, goibibo.com

Real Estate-magicbricks.com, housing.com, 99acres.com

Transport Service-ola.com, uber.com, meru.com

Furniture-fabfurnish.com, urbanladder.com, pepperfry.com

Baby care-firstcry.com, hopscotch.in

Books-bookadda.com, sapnaonline.com, infibeam.com

Amidst the favorable conditions for e-Commerce in India, the industry is projected to reach USD 120 billion by 2020. Online marketplace is available for items such as groceries, real estate, insurance and even automobiles. SMEs want to reach out to more customers and improve efficiencies by connecting through digital trade. B2B is emerging as an important vertical. Early mover advantage remains for investors seeking a pan-India market and even creating a global e-commerce ecosystem. (ANI-NewsVoir)

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(This article has not been edited by DNA's editorial team and is auto-generated from an agency feed.)