Health crisis accelerates India's e-com adoption by 3 yrs: eMarketer

02 Jul '21

4 min read

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India’s struggle with the COVID-19 pandemic will lead to a second consecutive difficult year for brick-and-mortar retail sales, said eMarketer, which anticipates an extended boom for e-commerce in India, including a 27 per cent growth this year, with $66.76 billion in sales. E-commerce’s share of overall retail in India will reach 7 per cent this year.

The company said the public health anxieties constraining overall retail will continue to push consumers in India towards digital solutions.

Prior to the pandemic, it did not project India’s digital sales claiming this much share until 2024 at the earliest.

India's overall retail market contracted by 18 per cent last year, one of the worst performances in the world and by far the worst among major economies.

The company initially anticipated a strong rebound for retail in 2021—a 10 per cent growth rate—but as the pandemic worsened, it lowered its projection to 5 per cent for this year.

Given such a poor rebound off a very poor 2020, it now forecast in a press release that total retail sales in India will not reach pre-pandemic levels until 2023, a year later than previously expected.

Digital sales have been the beneficiary as many consumers have been reluctant to spend time shopping outside during long stretches of two consecutive calendar years.

In 2020, India’s e-commerce sales increased by 30 per cent, and this year India will have the fastest growing e-commerce market in the world. The company earlier forecast 22 per cent growth for 2021, but as the public health disaster deepened, we increased our estimate to 27 per cent.

Even as India struggles with unemployment, social unrest and a stunted economic recovery, its emergence as a digital shopping powerhouse continues unabated.

Although India trails China by a wide margin in terms of the per cent of its consumers online and active e-commerce participants, India will still be second in the world in digital buyers this year with a projected 289.1 million. The United States will be a distant third, with 209.6 million buyers. China will have 824.5 million.

Only 28.4 per cent of India’s billion possible consumers will be digital buyers, however. This is by far the lowest rate of any country the company tracks.

India has numerous challenges constraining its e-commerce potential, according to the company. The country’s national logistics industries are underdeveloped, supply chains are unstable, regulatory regimes are burdensome and its e-commerce providers are still evolving. And, of course, a huge swath of its population still has limited purchasing power because of widespread poverty.

But the biggest constraint is that only 45 per cent of India’s population is online at all, according to the company’s latest estimates. In China, 70.4 per cent of the population is online, and in advanced economies this number often reaches into the 80s or low 90s.

The metric to watch in India, as in many emerging economies, is the speed with which the population acquires smartphones and mobile internet access and thus gains access to mobile commerce opportunities. In India, as in most of its peer economies, the vast majority of e-commerce is mobile commerce (80.8 per cent this year, as per the company’s projections).

In India, 474.3 million people will be smartphone users this year, or 35.4 per cent of the population. In China, the smartphone user rate is nearly double that, and affordable access to those devices enabled the massive e-commerce explosion seen in that country over the past five years.

eMarketer projects India’s smartphone user base will increase by 10.1 per cent this year, by 6.2 per cent next year and by 5.8 per cent in 2023. If these numbers outpace the company’s expectations, India’s mobile commerce, and therefore e-commerce, will accelerate more quickly as well, it added.

Fibre2Fashion News Desk (DS)

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