Consumer demand, capital flows to push e-tail growth in new year 2015
The year witnessed a flurry of activity with online majors like Flipkart acquiring online portal Myntra and raising fund over $2 billion. Japan’s SoftBank invested $627 million in Snapdeal and Ola, which offers car rentals through its mobile platform along with website and call centres.
Not to be left behind, US-based Amazon announced that it will invest $2 billion in the e-retail segment in India. Exclusive partnerships with online players for launch of brands like Xiaomi and Motorola reflected the growing popularity of the segment.
With a sharp increase in the participation of consumers from non-metro cities and the huge investment that was pumped into the sector, e-commerce came of age in 2014, when people ordered exotic products like Newby Flowering tea with as much enthusiasm as traditional goods including consumer electronics and books.
Last year, almost 50 per cent of orders, Amazon India claims, came from non-metro cities with demand for musical instruments like Gopichand (Ektar) coming from places like Rajahmundry Rural (Andhra Pradesh), and Bokaro (Jharkhand) or food products for turtles and guinea pigs from Nadiad (Gujarat) and Visakhapatnam.
Amit Agarwal, country head and vice-president, Amazon India, says that while the e-commerce space in India is still at a very nascent stage, “we believe growth is at an inflection point and there is a tremendous opportunity… there is room for multiple formats, players and, most importantly, for innovation… there is a sharp increase in customers as well as quantum of shopping on our apps… This is only expected to grow northwards in 2015.”
A study by consulting firm Technopak says that though online retail contributed only 0.4 per cent to the overall retail market in 2014, it is expected to reach 3 per cent of the total retail at $32 billion by 2020.
Arvind Singhal, chairman and managing director, Technopak, said that driven by greater penetration of smart phones in the country and increase in Internet users, Indian consumers are now more prepared for e-commerce. “2015 can be safely called the year of e-commerce. Last year the demand exceeded the expectation and companies could not keep up with the logistics and delivery challenges. This year we will see some improvement on all these parameters,” Singhal said. While consumer electronics and fashion including clothing and footwear were the most exciting sectors in 2014, food and grocery is going to take the lead in 2015, he added.
India is estimated to have over 243 million Internet users and 185 million users accessing the Internet using their mobile devices. Mobile data traffic in India is projected to grow 24-fold between 2013 and 2018 at a CAGR of 88 per cent, indicative of the growth potential that lies ahead.
All the same, this has not gone down well with offline giants and traders union like the CAIT. While raising alarm over the aggressive pricing by the online players, the CAIT has sought government intervention for regulating e-commerce and approached the Competition Commission of India to look into the alleged predatory pricing by them. The CCI is examining the information alleging anti-competitive conduct by online retailers including Flipkart India, Jasper Infotech, Xerion Retails, Amazon Seller Services and Vector e-commerce.
Further, the sector faces several challenges including lack of clarity in taxation and a ban on foreign direct investment (FDI), which the online players claim, can be a game changer for Indian consumers and infrastructure.