What Drives India's E-com To Grow 15x By 2030?

by Sohini Bagchi    May 07, 2015

ecommerce

The e-commerce sector in India will account for 2.5 percent of the country’s GDP by 2030, growing 15 times and reaching $300 billion, according to a report by Goldman Sachs.

The current market size of e-commerce is $20 billion, as the report cited “India’s attractive demographics - the youngest population in the world - should lead to over 300 million new online shoppers in the next 15 years, making e-tailing the largest online segment.”

There are several reasons that can be attributed to the potential e-commerce growth, leading to an increase in GDP.

Hyper growth of ‘mobile’ customers

The report identified e-retailing, online travel, digital advertising market and electronic payments as segments that could “potentially catalyse domestic companies into multi-billion dollar businesses”.

According to a report by IAMAI and IMRB International, the e-commerce industry in India reached a value of US$13.5 billion in 2014. The report cited smartphone growth, rise of classified, and customer convenience as the primary reasons for the whopping growth.

With the huge market potential offered by smartphones, companies such as Snapdeal, Flipkart, Myntra, among others, have already launched mobile applications. Increase in the use of Mobile wallets and with more online retail stores are opening up, making way for more employment.

Read on: Why Everyone Wants An E-Commerce Pie?

“The growth in internet usage in India, largely on mobile devices, is the key driver for e-commerce growth. Specifically for fashion, the non-availability of the latest brands in Tier-II and Tier-III cities has led to high interest in online shopping,” Myntra Chief Revenue Officer Prasad Kompalli said in a recent interview.

Rise in e-commerce hiring

The $12 billion plus Indian e-commerce market is witnessing a rush of hiring and may need one lakh people over the next six months, according to industry experts.

“Support service sectors such as recruitment consulting firms are witnessing a rush of hiring in the e-commerce space,” Prasanth Nair, global head-hunting firm InHelm Leadership Solutions’ Country head told PTI. 

Currently, over 25,000 people are employed in e-retailing warehousing and logistics alone. It is estimated that there will be an additional employment of close to 1,00,000 people in these two functions alone by 2017-20.

“As more people are logging on to ecommerce portals, companies are hiring aggressively and are also offering lucrative salaries to attract the right technology talents, in the areas of cloud, analytics and data mining,” Jigsaw Academy CEO Gaurav Vohra says.

Attracting investors

In recent times, the sector attracted the attention of investors, including top global firms and leading Indian industry leaders like Azim Premji and Ratan Tata and brands such as Flipkart and Snapdeal are growing over global players like Amazon and e-bay. Even smaller ones such as Olacabs, Quickr and Myntra among others have strengthened their foothold.

Indian e-commerce market has been a land of opportunities for VC/PE investors from Tiger Global, Sequoia, DST Global, Soft Bank and Sofina to name a few. It has been predicted that this year alone, the sector has secured over $3.9 billion investment from VC/PE and internal funding in the country.

The government too is bullish about e-commerce growth. PM Narendra Modi’s Digital India initiatives is further expected to boost e-commerce in India. The introduction of low pricedsmartphones and 2G/3G/4G networks is enabling internet access to even the remotest corners of the country. Investments in the smart city concepts are expected to improve infrastructure of the rural areas and tier II and III cities.

India will have the second-largest digital population in the world with one billion users by 2030, powered by online mobile penetration. The country also has enough spectrum and telecom infrastructure to provide 3G data coverage to 25-30 per cent of the population, believe experts.

Payment evolving

The payment landscape is also evolving fast with the launch of digital wallets and payment banks, despite 60 per cent of e-commerce transactions in cash-on-delivery mode, a PwC report pointed out.

“The increase in e-payments will provide a boost because collecting payments is a problem across multiple domains and demographics. Most e-tail sites are forced to offer a Cash-on-Delivery (COD) option because nearly 40% of online transactions are preferred by users to be on a COD basis. The growing trend of e-payments will provide a big relief to the industry and help prune costs,” said Satyen Kothari, Chairman, Founder at Citrus Pay, who believes, one would see a lot of innovations around online payment in the coming years.