E-Commerce

Introduction

E-commerce has transformed the way business is done in India. The Indian E-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much of the growth for the industry has been triggered by an increase in internet and smartphone penetration. The ongoing digital transformation in the country is expected to increase India’s total internet user base to 829 million by 2021 from 636.73 million in FY19. India’s internet economy is expected to double from US$ 125 billion as of April 2017 to US$ 250 billion by 2020, backed primarily by E-commerce. India’s E-commerce revenue is expected to jump from US$ 39 billion in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.

Investments/ Developments

Some of the major developments in the Indian e-commerce sector are as follows:

  • In August 2020, Reliance Industries (RIL) acquired 60% stake in Netmeds, an online pharmacy, for Rs 620 crore (US$ 84.61 million). This acquisition gives RIL’s retail unit, Reliance Retail, entry into a vertical e-commerce space.
  • In January 2020, Divine Solitaires launched its E-commerce platform.
  • In February 2020, Flipkart set up a ‘Furniture Experience Center’ in Kolkata, its first offline presence in eastern India.
  • In April 2020, Reliance Industries (RIL) started home delivery of essentials in partnership with local kirana stores in Navi Mumbai, Thane and Kalyan.
  • In April 2020, Swiggy received an additional US$ 43 million funding as part of its ongoing Series I round.
  • In May 2020, PepsiCo India partnered with Dunzo for its snack food brands that include Lay’s, Kurkure, Doritos and Quaker.
  • In May 2020, chocolate maker Hershey India partnered with Swiggy and Dunzo to launch their flagship online store in order to increase reach.
  • In Union Budget 2020–21, Government has allocated Rs 8,000 crore (US$ 1.24 billion) to BharatNet Project to provide broadband services to 150,000-gram panchayats.
  • In August 2019, Amazon acquired 49% stake in a unit of Future Group.
  • Reliance will invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to expand its broadband and E-commerce presence and to offer 5G services.
  • In September 2019, PhonePe launched super-app platform ‘Switch’ to provide a one stop solution for customers integrating several other merchants apps.
  • In November 2019, Nykaa opened its 55th offline store marking success in tier II and tier III cities.

Government initiatives

Since 2014, the Government of India has announced various initiatives, namely Digital India, Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective implementation of such programs will likely support growth of E-commerce in the country. Some of the major initiatives taken by the Government to promote E-commerce in India are as follows:

  • Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with Union Bank of India to facilitate a cashless, paperless and transparent payment system for an array of services in October 2019.
  • In February 2019, the Government of India released the Draft National e-Commerce Policy which encourages FDI in the marketplace model of E-commerce
  • In order to increase the participation of foreign players in E-commerce, Indian Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in B2B models).
  • Heavy investment made by the Government in rolling out fiber network for 5G will help boost E-commerce in India.
  • In Union Budget of 2018–19, Government allocated Rs 8,000 crore (US$ 1.24 billion) to BharatNet Project to provide broadband services to 150,000-gram panchayats
  • As of August 2018, the Government has been working on the second draft of E-commerce policy, incorporating inputs from various industry stakeholders.

Achievements

Following are the achievements of the Government in the past four years:

  • Internet subscribers reached 718.74 million by the end of 2019.
  • In the festive sale (September 29–October 4, 2019), E-tailers in India achieved US$ 3 billion of Gross Merchandise Value (GMV).
  • Unified Payments Interface (UPI) recorded 1.25 billion transactions in March 2020, valued at Rs 2.06 lakh crore (US$ 29.22 billion).
  • Internet Saathi project benefitted over 26 million women in India which reached 2.6 lakh villages and 20 states.
  • Under Digital India movement, Government launched various initiatives like Udaan, Umang, Start-up India Portal etc.
  • Udaan, a B2B online trade platform that connects small and medium size manufacturers and wholesalers with online retailers and provide them logistics, payments and technology support, has sellers in over 80 Indian cities and delivers to over 500 cities.
  • The Government introduced Bharat Interface for Money (BHIM), a simple mobile based platform for digital payments.

Road Ahead

The E-commerce industry has been directly impacting micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a favourable cascading effect on other industries as well. Indian E-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034. Technology enabled innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements will likely support the growth in the sector. The growth in E-commerce sector will also boost employment, increase revenues from export, increase tax collection by ex-chequers, and provide better products and services to customers in the long-term. Rise in smartphone usage is expected to rise 84% to reach 859 million by 2022.

E-retail market is expected to continue its strong growth – it registered a CAGR of over 35% to reach Rs 1.8 trillion (US$ 25.75 billion) in FY20.

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123