Indian e-tailing market could reach $28 billion by 2019-20, registering a compounded annual growth rate of 45% over the next four years, says a report.
According to domestic brokerage firm Kotak Institutional equities, this growth will largely be driven by an increase in number of buyers and annual average online spend. Other factors like steady increase in household incomes and shift in consumption towards discretionary spends could also boost India's retail demand.
"We estimate that the Indian e-tail market size could reach $28 billion by FY2020, led by an increase in number of buyers to 110 million (assuming one person per urban household to shop online), and stable annual spends of around $260 per consumer," Kotak Institutional Equities said in a research note.
According to the report, though the growth of e-tail market in India is often compared to that of China, given the broad similarities in population and mobile internet penetration, in the near-term in India may not mirror China completely due to various economic and other differences between the two countries.
The report noted that the e-commerce sector is expected to see steady growth and is likely to register a 45% annual growth over financial year 2017-2020. While China witnessed a CAGR of 116% during 2009-15.
India's present internet user base of around 330 million was similar to that of China in 2009, when B2C e-commerce took off. However, the online buyer base in India has remained relatively stagnant over the past 2-3 years, and online buyer penetration at 16% is already lower than that of China in 2009.
Though mobiles have led internet penetration in both countries, it is essential to differentiate between the quality of users based on: the quality of handsets and data speeds.
Of the total 330 million internet users in India, only around 142 million have a broadband connection. This is in sharp contrast to China, which has around 86% of its internet users on broadband (defined as 3G/4G networks), the report said, adding that the scenario in India may certainly change as data prices reduce and new broadband services are launched.
As per technology research firm Gartner, Indian smartphone shipments will remain skewed in favour of feature phones, implying that India may well be 5-6 years behind of China in smartphone quality which will eventually determine easier access to online shopping.
Another factor that may impact the Indian e-tail story is the low female participation in the labour force, the report added.