Owing to increase in number of buyers and stable annual spends per consumer, India’s e-commerce sector is expected to reach $28 billion by FY 2020, says the report from Kotak Institutional Equities.
The e-commerce industry is estimated to grow at compound annual growth rate of 45 per cent over FY 2017-20, in line with the gradual improvements in household incomes and infrastructure development. However, this pace of growth would be slower compared to 116 per cent CAGR growth seen in China between 2009 and 2015.
“We believe Indian growth in e-commerce will be more gradual, in line with gradual improvements in household incomes and infrastructure development. Further, in order to be more profitable, e-commerce companies may still need to change buyer behaviour as far as high proportion of cash-on-delivery and product returns are concerned,” say analysts Kawaljeet Singh and Garima Mishra in the report.
The study recommends e-commerce players to diversify away from sales of mobile phones and electronics, where margins are thin and opportunities for product differentiation versus competitors are minimal, unless the e-tailer manages to get exclusive products to sell. “Customer loyalty would need to be cultivated on large and varied product assortment, quick delivery and after sales support (particularly for higher ticket items), and liberal returns and exchange policy, coupled with flexibility for the consumer to pay in cash,” it adds. (RKS)
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