E-commerce bucks slowdown in India, set to clock 35% CAGR

08 Sep '15

3 min read

A demand slowdown is hitting shopping malls in India badly. But a study by ASSOCHAM- PricewaterhouseCoopers (PWC) has found that the Indian e-commerce industry appears to be unaffected by the demand slowdown and is likely to clock a compounded annual growth rate (CAGR) of 35 per cent and cross the $100-billion mark in value over the next five years. It valued the e-commerce industry in India presently at $17 billion.

Slowdown in consumer demand, coupled with online shopping that provides convenience of delivery at door steps, have led to troubles for the shopping malls which have suffered 20-25 per cent vacancy rates and 30 per cent drop in rentals in the last one year, according to the study.

The latest findings reveal that the Indian trend is in line with the declining number of foot falls in retail space in over 200 shopping malls across the US, UK and other countries. In the US, the malls are facing 46 per cent vacancy rates while the figure is 32 per cent for malls in the UK.

Continuing on the strong growth momentum of 2015, the e-commerce industry is estimated to see a 72 per cent increase in the average annual spending on online purchases per individual in 2016 from the current level of 65 per cent, the study said.

The online shopping mainly focusses on purchasing electronics, books, music, apparel, sporting, outdoor goods etc.

“It is true that the online shopping has shown handsome growth while the brick and mortar malls are witnessing slowdown. It looks that the growth in e-commerce looks impressive because of quite a low base and increasing penetration of internet", ASSOCHAM Secretary General D S Rawat said while releasing the report.

In the US and UK, internet retailing has taken 48 per cent and 39 per cent of industry growth since 2005 which is mainly driven by the different structural market factors such as high population density, high rental costs and long working hours, the report said.

The brick and mortar outlets on high streets and inside malls are trying to hold on through lower prices and deals. “In India, sales in shopping malls have dipped by 25-30 per cent and footfalls by 15 to 20 per cent compared to the same period last year”, reveals the study.

There were around 50 operational malls in 2005, a number that rose to 610 in 2015 in top ten cities. Additionally, with improvement in infrastructure such as logistics, broadband and internet-ready devices, there is likely to be a significant increase in the number of consumers making purchases online, the study said. It estimates around 65 million consumers in India to buy online in 2015, as against around 40 million in 2014.

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