India had an internet user base of about 354 million as of June 2015 and is expected to cross 500 million in 2016. Despite being the second-largest userbase in world, only behind China (650 million, 48% of population), the penetration of e-commerce is low compared to markets like the United States (266 million, 84%), or France (54 M, 81%), but is growing at an unprecedented rate, adding around 6 million new entrants every month. The industry consensus is that growth is at an inflection point.
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In India, cash on delivery is the most preferred payment method, accumulating 75% of the e-retail activities. Demand for international consumer products (including long-tail items) is growing much faster than in-country supply from authorised distributors and e-commerce offerings.
In 2015, the largest e-commerce companies in India were Flipkart, Snapdeal, Amazon India, and Paytm.
Market size and growth
India's e-commerce market was worth about $3.9 billion in 2009, it went up to $12.6 billion in 2013. In 2013, the e-retail segment was worth US$2.3 billion. About 70% of India's e-commerce market is travel related. According to Google India, there were 35 million online shoppers in India in 2014 Q1 and is expected to cross 100 million mark by end of year 2016. CAGR vis-à-vis a global growth rate of 8–10%. Electronics and Apparel are the biggest categories in terms of sales.
According to a study conducted by the Internet and Mobile Association of India, the e-commerce sector is estimated to reach Rs. 211,005 crore by December 2016. The study also stated that online travel accounts for 61% of the e-commerce market.
By 2020, India is expected to generate $100 billion online retail revenue out of which $35 billion will be through fashion e-commerce. Online apparel sales are set to grow four times in coming years.
India's retail market is estimated at $470 billion in 2011 and is expected to grow to $675 Bn by 2016 and $850 billion by 2020, – estimated CAGR of 10%.. According to Forrester, the e-commerce market in India is set to grow the fastest within the Asia-Pacific Region at a CAGR of over 57% between 2012–16.
As per "India Goes Digital", a report by Avendus Capital, the Indian e-commerce market is estimated at Rs 28,500 Crore ($6.3 billion) for the year 2011. Online travel constitutes a sizable portion (87%) of this market today. Online travel market in India had a growth rate of 22% over the next 4 years and reach Rs 54,800 crore ($12.2 billion) in size by 2015. Indian e-tailing industry is estimated at Rs 3,600 crore (US$800 million) in 2011 and estimated to grow to Rs 53,000 crore ($11.8 billion) in 2015.
Overall e-commerce market had reached Rs 1,07,800 crores (US$24 billion) by the year 2015 with both online travel and e-tailing contributing equally. Another big segment in e-commerce is mobile/DTH recharge with nearly 1 million transactions daily by operator websites.
A new sector in e-commerce is online medicine, selling complementary and alternative medicine or prescription medicine online. There are no dedicated online pharmacy laws in India and it is permissible to sell prescription medicine online with a legitimate license.
Online sales of luxury products like jewellery also increased over the years. Most of the retail brands have also started entering into the market and they expect at least 20% sales through online in next 2–3 years.
Closures
Though the sector has witnessed tremendous growth and is expected to grow, many e-commerce ventures have faced tremendous pressure to ensure cash flows. But it has not worked out for all the e-commerce websites. Many of them like Dhingana, Rock.in, Seventy MM amongst others had to close down or change their business models to survive.
Infrastructure
There are many hosting companies working in India but most of them are not suitable for eCommerce hosting purpose, because they are providing much less secure and threat protected shared hosting. eCommerce demand highly secure, stable and protected hosting. Trends are changing with some of eCommerce companies starting to offer SaaS for hosting web stores with minimal one time costs.
India has got its own version of Cyber Monday known as Great Online Shopping Festival which started in December 2012, when Google India partnered with e-commerce companies including Flipkart, HomeShop18, Snapdeal, Indiatimes shopping and Makemytrip. "Cyber Monday" is a term coined in the USA for the Monday coming after Black Friday, which is the Friday after Thanksgiving Day. Most recent GOSF Great Online Shopping Festival was held during Dec 10 to 12, 2014.
In early June 2013, Amazon.com launched their Amazon India marketplace without any marketing campaigns. In July 2014, Amazon had said it will invest $2 billion (Rs 12,000 crore) in India to expand business, after its largest Indian rival Flipkart announced $1 billion in funding. In June 2016, Amazon agreed to invest another $3 billion to further pressure rivals Flipkart & Snapdeal Amazon has also entered grocery segment with its Kirana now in bangalore and is also planning to enter in various other cities like Delhi, Mumbai and Chennai and faces stiff competition with Indian startups. A large proportion of traffic towards e-commerce sites is driven by coupon sites. In July 2014, CouponChaska.com, a coupon and offers site partnered with some of the largest Indian e-commerce sites including Amazon and Flipkart. It provides a listing of deals from various Indian online stores for free. Alternatively, the site offers mobile recharges to users on each purchase.
Funding
Examples of venture capital firms having invested in e-commerce companies in India are as follows: Flipkart.com raised about USD 2.3 billion. On 10 July 2013, Flipkart announced it had received $200 million from existing investors Tiger Global, Naspers, Accel Partners, and ICONIQ Capital, and an additional $160 million from Dragoneer Investment Group, Morgan Stanley Wealth Management, Sofina, Vulcan Inc. and more from Tiger Global.
In February 2014, online fashion retailer Myntra.com raised $50 million from a group of investors led by Premji Invest, the investment company floated by Azim Premji, Chairman of Wipro. May 2014 also witnessed an acquisition of Myntra by Flipkart reportedly for ₹2,000 crores.
In September 2015, PepperTap raised $36 million from Snapdeal and others.
Niche retailers
The spread of e-commerce has led to the rise of several niche players who largely specialize their products around a specific theme. As many as 1,06,086 websites are registered daily and more than 25% are for niche businesses.
During 2014, Royal Enfield sold 200 bikes of special series Online.
Online apparel is one of the more popular verticals, which along with computers and consumer electronics make up 42% of the total retail e-commerce sales. Niche online merchandising brands like Headbanger's Merch, Redwolf and No Nasties partner with and even help sustain independent musicians. Some established brands like Arvind are now creating clothing lines just for the e-commerce markets. Some of the bigger online retailer like VoxPop Clothing have secured multiple rounds of funding, the last round raising $1 million from Blume Ventures in 2014.
As these niche businesses get popular, they are slowly getting acquired by the big players. BabyOye was acquired by Mahindra Retail, part of the $17 billion Mahindra Group. Ekstop was acquired by the Godrej Group to complement their offline chain of Nature's Basket stores.