Forrester sees $75-bn e-commerce biz by 2020

Forrester projects e-commerce in India will grow from $12 bn in 2015 to $75 bn in 2020, at a compounded annual rate of 44 %

Forrester projects e-commerce in India will grow from $12 billion in 2015 to $75 billion in 2020, at a compounded annual rate of 44 per cent.

Lily Varon, analyst, Forrester, and author of a report on e-commerce in the Asia-Pacific, says India's online buyer population will grow at a 28 per cent compounded annual rate over the next five years.

Total online retail revenues in China, Japan, South Korea, India and Australia will nearly double from $733 billion in 2015 to $1.4 trillion in 2020 with China and India being the two largest and the fastest growing markets.

The total online retail revenues in just five markets in Asia Pacific surpass the combined figure for online retail in the US and all of western Europe.

"These countries in the Asia-Pacific will be some of the biggest drivers of global e-commerce," Varon says. "The Asia Pacific region encompasses online retail markets that span varying sizes, maturity levels, and industry dynamics. Yet despite these differences, a series of trends is evident in every market in the Asia-Pacific," she adds.

Mobile commerce already represents nearly 50 per cent of online retail sales in India, compared with around 48 per cent in China and 34 per cent in the US. Forrester expects mobile sales in India will overtake PC-based sales in 2016 and reach $51 billion by 2020.

The other unique component of India's e-commerce market, says the report, is how quickly it expanded to tier 2 and tier 3 cities across the country. Only 8 per cent of the 1.3 billion populace lives in the top eight tier 1 cities where e-commerce penetration is high.

"Today, leading online retailers Jabong, Myntra and Amazon report half their revenues from tier 2 and tier 3 cities. While the tier 2 and 3 cities have low PC and broadband penetration, they also have fewer brick-and-mortar stores, giving e-commerce a chance to fill the gap," says the report.

In addition to underdeveloped logistics and challenging last-mile connectivity, India's cash-based culture still poses a huge challenge for e-commerce firms.

While cash on delivery assuages consumer concerns, it has significant implications for online retailers: costlier order fulfillment, greater chance of return, and the risk of fraud by cash collection agents.

Forrester anticipates online shoppers in India will eventually rely less on cash as the e-commerce market matures and credit card penetration improves, but for now, cash on delivery remains a must-have for online retailers.

Varon also cautions global players wanting to enter Asian markets, especially India and China. Investors serious about the Asia-Pacific must be ready to invest at a level that reflects the market potential and be ready to commit to markets for many years, she says.

Brands must also tailor their approaches to each market. Although most brands today have wisely moved well beyond the one-region, one-strategy approach, many still tend to use a similar approach to markets in the Asia-Pacific.

"Knowing that mobile is a huge force in India and a rapidly growing one in other markets, they will move up mobile initiatives in their launch strategies. At a high level, these approaches are not misguided - problems only arise when assumptions about one market are blindly applied to others," says the report.