Investment Strategies

Taking A Closer Look At India's E-Commerce Sector

Jack Ehlers 19 December 2018

Taking A Closer Look At India's E-Commerce Sector

The author of this news item examines the growing e-commerce market in India, arguing that mainly focusing on countries such as China may be obscuring important opportunities elsewhere.

The author of this article argues that India, one of the world’s largest emerging market economies, deserves more attention than it sometimes receives from wealth management asset allocators. A sector that investors should study is India’s e-commerce field, argues Jack Ehlers, director of payment partnerships at PPRO Group, a payments and technology firm. We hope readers find this subject interesting and invite responses (email tom.burroughes@wealthbriefing.com). The editors of this news service do not necessarily endorse all views of guest contributors. 


Are you in India yet? If you aren’t, you should be. 

When we think of e-commerce opportunity in Asia, the mind instantly goes to China. With an online market worth over £1 billion (2) - representing 42 per cent of global e-commerce (2) - it’s hardly surprising that China is on everyone’s thoughts. 

But China is not the whole story. The e-commerce market in South East Asia, for instance, is worth $10 billion and is growing at an astonishing 41 per cent a year (3). Hong Kong, the Philippines, South Korea and Singapore are just a few of the booming Asian markets, outside China, to which the e-commerce industry needs to start paying more attention.

But the market with the most untapped potential is, without a doubt, India. With over 400 million Internet users and e-commerce sales worth $38 billion, the country is already bigger than most European markets. 

Where is the opportunity?
Even today, on some forecasts, India’s e-commerce market is growing by 40-50 per cent a year (4). And this is based on today’s infrastructure. In August 2018, analysts at Nokia predicted that broadband coverage in India would outpace that in other world markets (5). 

In September, the Indian government approved new policies designed to attract $100 billion in telecoms investments (6). As more consumers come online, the growth of the e-commerce market will accelerate further. 

Right now, cross-border sales are significant but still modest for a market of India’s size. The best estimate is that 18 per cent of all online sales, just under $7 billion (around the same size as the Argentinian e-commerce market in its entirety) are cross-border (7). 

This need not be an insurmountable barrier to entry for non-Indian merchants. By law, Indian e-commerce platforms can only operate as marketplaces — giving access to a wide range of brands and merchants (8). 

Since 2004, the Indian middle class has more than doubled in size to over 600 million people (9). With growing prosperity comes opportunity, for those companies ready and equipped to rise to the occasion. 

Risks, strategies and next steps
To prosper in India now, most merchants should not rely solely on cross-border sales. A local partner, in most cases a marketplace, is a must. According to the analyst Coresight Research, the five largest Indian e-commerce marketplaces, by net revenues, are Flipkart ($3 billion), Myntra ($298 million), Bigbasket ($183 million), Snapdeal ($134 million) and Paytm ($120 million) (10). 

A local partner that understands Indian sales and other relevant taxes is also important. India’s Goods and Services Tax (GST) is applied to different goods at rates varying from 5 per cent right up to 28 per cent. Most e-commerce items fall into the 28 per cent bracket, but this is not always the case. 

With a highly varied payment market (cards only account for 32 per cent of payments today and that number may fall, as more and more less affluent consumers come online) (11), local payment partners are also vital to success in the Indian market. 

The most popular categories in the Indian e-commerce market are travel (16 per cent), clothing (10 per cent) and electrical goods (10 per cent) (12). Merchants already serving these sectors in other markets, should look for local partners who can help them reach and gain traction with their target demographics. 

India is a rapidly growing e-commerce market in a country where online coverage is expanding by the day. With access to the right marketplaces and the right mix of payment methods - in the first instance, cards, bank transfers and cash-based local payment platforms - merchants have every chance of finding a ready and lucrative market for their goods and services. 

  1, Original PPRO research
  2, https://www.weforum.org/agenda/2018/04/42-of-global-e-commerce-is-happening-in-china-heres-why/
  3, Matteo Sutto. “The State of eCommerce in Southeast Asia in 2017”, 9 February 2018, Medium.
  4, Chitrangana.com press release on 8 August 2018
  5, Danish Khan. “Nokia expects India to outpace world in wired broadband”, 18 August 2018, The Economic Times.
  6, Press Trust of India. “Cabinet clears new telecom policy to attract $100 billion investments: Report”, 26 September 2018, The Hindustan Times.
  7, DLocal Industry Report, 2018, page 26
  8, John Koetsier. “Report: Amazon India Worth $16B With 30% Market Share, Will Hit $70B GMV In 2027”, 18 May 2018, Forbes.
  9, “India’s Growing Middle Class – Ryan Andreas, Quantified Commerce”, 3 May 2018, The Free Press Journal.
  10, “Deep Dive: Indian E-Commerce Platforms Update”, 11 September 2018, Coresight Research.
  11, Original PPRO research
  12, Original PPRO research

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