E-commerce needs to grow at 45% CAGR to achieve $80 billion by 2020

The Dollar Business Bureau

The Indian e-commerce industry will have to grow at a CAGR of 45% to reach a size of $80 billion by 2020, an industry study said.

The industry registered a staggering growth of 180% in 2015 but slumped to a mere 12% in 2016 due to a host of internal and external factors. Currently, the industry is valued at $14.5 billion, and there were previous estimates of the sector touching $100 billion by 2020, according to a study by RedSeeer Consulting.

India’s major retailers such as Flipkart and Snapdeal felt the prolong impacts of these unfavourable market condition, limiting their 2016 growth.

However, Amazon succeeded in assessing the market conditions altered its market share strategy to capture a big chunk of this competitive industry.

According to RedSeer, retailers and wholesalers drove a significant percentage of the Gross Merchandise Value (GMV), and in turn sold it to the end customers. These factors also raised unexpected challenges, which forced major players like Flipkart and Snapdeal to deal with the leadership challenges, which was one of the reasons why Snapdeal ceded its second position to Amazon.

The domestic e-commerce giants such as Flipkart and Snapdeal found it difficult to raise the funds to drive their expansion plans, while their rival Amazon has already set aside $5 billion for its India operations.

Last year, the government also introduced new frameworks, prohibiting deep discounting and limiting the contribution of a single seller on these marketplaces to 25%. The demonetisation scheme has further dent the industry’s sales, as buyers who were dependent on cash for making transactions had to either contend with making online transactions or wait for the demonetisation norms to ease out.

“The Indian E-tailing players might have faced a lot of challenges in 2016, but fundamentally this sector is expected to grow 4x-5x times in the next four years. 2017 will be a hotly-contested year, and will differentiate the best from the rest, and also shape the Indian e-commerce industry for the many years to follow,” said RedSeer CEO Anil Kumar.