Year in Review: How was 2016 for the Indian Ecommerce industry?
The Indian ecommerce industry has been looked at as one of the most exciting and fastest growing industries operating in the Indian economy. In the year 2016, the Indian ecommerce market was projected to reach $38 billion – a stunning 67% rise from 2015’s $23 billion figure. Assocham projects that at this rate, the market will easily touch the $100 billion figure by 2020. The fast growing internet penetration rate within the country and the recent move towards cashless transactions are only positive signs for the further growth of the industry.
At the same time, it would be reductive to only describe this vibrant industry in terms of just the numbers. 2016 has witnessed the Indian ecommerce industry showing signs of maturity and horizontal growth, moving from a frenzied numbers game towards a more sustainable market eco-system. The various logistics companies, finance and credit rating organisations, analytics and data solutions companies and other secondary industries that have grown along with the major B2C players have strengthened the industry and spread out its roots. Ecommerce as a service industry has also grown in leaps and bounds this year, with companies like Ola and Uber for taxi services, UrbanClap as a local service provider, Practo for medical services, etc. are constantly discovering new markets within the demography. The government has also played a major role in the past year’s e-commerce trends, with a few major decisions that deeply affected the industry. Let us look at how the past year played out for ecommerce in a little more detail.
Indian Ecommerce Industry in 2016
1. Many Industries within One
It would be wrong to think of the Indian ecommerce industry as a complete whole. Rather, it must be seen as a collection of various markets that utilise the internet as a platform for operations. 2016 saw many of these markets mature and grow to new heights.
While the B2C or the consumer market saw the battle of the three online retail giants, namely Flipkart, Amazon and Snapdeal, it also saw the growth of various niche and specialised ventures based on geography, demography or product category. Each of the three big players saw massive cash injections from their investors and parent companies and were tied in a constant tussle for acquiring the highest market share.
Service Oriented Ecommerce
At the same time, we cannot ignore the steep rise of the ecommerce service industry, which has now made it mark everywhere from the food and beverage to travel industries. Apart from taxi providers like Ola and Uber, 2016 saw a rise in popularity of the more unconventional travel sharing, rental and carpooling service providers like ZoomCar and BlaBlaCar. Not to mention the online grocery providers and domestic service providers. It is clear that the Indian urban diaspora has warmed up to the idea of ecommerce and online retail transactions, not only for consumer products but also for various services.
B2B ecommerce is another category that isn’t talked about as much as compared to the Big 3. The truth is that the B2B ecommerce industry was valued at $300 billion in 2014 and is expected to reach $700 billion in 2020. The major players in this industry include moglix.com, amazonbusiness.com and Alibaba.com. Although the current situation in terms of the interstate taxation policy, especially the VAT rules, can be a headache, the industry is eyeing the upcoming GST reforms in the year 2017 as a major step forward in solving these problems.
2. Internet Penetration and Widening of the Market
The year 2016 saw the internet penetration in India rise from 25% to 35% – its biggest leap yet. Since the beginning of the year, heated discussions about Facebook’s freebasics and net neutrality dominated the Indian web, which led to a rise in awareness towards the internet. Internet penetration is also the result of affordable smartphones and comprehensive data plans introduced by mobile carriers. Reliance Jio made waves towards the end of 2016 with unbelievable data tariff plans, which put pressure on the industry to maintain competition. Interestingly, this widening of the market is taking place in the tier II and III cities of India, which means that these emerging ecommerce markets are also bringing with them a need to establish logistics and analytics centres, further widening the scope of the industry.
3. Government Policy and Ecommerce
2016 has been an important year for the e-commerce industry in terms of government policy. The major decision to approve 100% Foreign Direct Investment (FDI) to ecommerce marketplaces that was taken early on in 2016 has opened doors for various foreign players to enter the Indian market. Especially to watch out for are Chinese giant Alibaba.com and Japanese Rakuten, both of whom have expressed keen interest in the Indian market. This is no surprise since the India is now officially the fastest growing ecommerce market in the world, and the government seems to be doing what it can to boost it.
4. Demonetization: Towards Cashless Ecommerce
In November 2016, the Indian Government took a radical decision to demonetize around 86% of the liquid currency operating within India. While there have been conflicting reports in the past two months about the immediate effects of this move, it can be said with a certain amount of confidence that in the long term, the ecommerce industry would benefit from it. Traditionally, cash-on-delivery (COD) has been the favoured method of the Indian online retail consumer, accounting for around 60% of transactions.
At the same time, COD has long been considered a necessary evil – an intermediate system that must be replaced by something better. With the demonetization move and the scarcity of cash, online transactions have received an unprecedented push, with the government itself advocating a move towards a digital, cashless economy. Taking this into account, the year 2017 will surely be an interesting one for the Indian e-commerce industry.
The year 2016 was in many ways a trendsetter for important policy changes in the Indian ecommerce industry. The new year will surely bring some exciting times in the market, where the full effects of these changes will finally be observed. To know more about anything related to ecommerce, get in touch with Browntape. We are India’s leading ecommerce experts, and we are always happy to help!