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Last updated: 21 Aug, 2017  

E-Commerce Industry Risk Review by Alea Consulting

NewsVoir | 21 Aug, 2017
In India, eCommerce accounts for ~1.5% of India's GDP, and is likely to reach 2.5% by 2030. In 2016 the sector grew by 55% to US$16 billion. With the increase in internet users, Indian eCommerce industry is poised to surpass the United States and become second largest in the world, after China, by 2034.

Evolution of eCommerce in India

In 2000, a limited number of online shopping  firms existed viz. Rediff Shopping, Indiatimes, Sify Shopping, HomeShop18 and India lacked the required infrastructure and people feared buying online. It was primarily a C2C market. In 2004 eBay came to India. In 2007 the sector gained pace with the entry of Flipkart, Amazon, Snapdeal, Paytm and others. Steps were taken to develop the three critical enablers for eCommerce firms viz. logistics and warehousing; IT infrastructure; and fintech. In 2014-15 several initiatives were taken by the Government; these include Make in India, Digital India, Skill India, Startup India and Bharat Innovation Fund (a public-private-academia partnership by CIIE; to fund innovation driven startups).


Key Drivers

Massive 4G deployment by telecom companies and declining broadband subscription prices

Increasing penetration of internet and smartphones in rural areas

Young demographic profile (nearly 2/3rd  of Indians are under 35 years)

Easy modes of payment and compelling commercials

Growing economy, increase in disposable income and rising standards of living

Increase in number of websites.In 2015 ASSOCHAM reports ~106,686 new websites registered in India daily, of which 25% are for niche and specialist online business

Discounts combined with convenience, access to a large array of goods offered by online shopping

Urban India’s changing lifestyle



In March 2016, Department of Industrial Policy & Promotion (DIPP) restricted eCommerce firms from offering excessive promotional discounts and observing impartial business practices.



These include cybersecurity issues due to increased use of online payment modes, high reliance on sellers and lack of a robust due diligence mechanism resulting in one of the major challenges encountered by eCommerce players i.e. sale of counterfeits.  An added concern is achieving profitability as several online firms have collapsed due to non-achievement of targets.


Key Statistics

    Internet users are expected to double from 350 million in 2015 to 600 million in 2020.

    69 million consumers purchased online in 2016. This will cross 100 million in 2017 and 175 million by 2020. Mobile accounted for 30-35% of eCommerce sales in 2016 and its share is likely to increase to 45-50% in 2017.

    In 2016 online retail was 2.5% of total retail and this is expected to be 5% by 2020. Fashion and lifestyle is one of the fastest growing categories in eCommerce market.

    In 2016 Bengaluru ranked 1st  amongst Indian cities in preference  for online shopping, followed by Mumbai and Delhi.

    In 2015, 20% of all online shoppers in India were women, this is set to double to ~42% by 2020.

    Cash on Delivery (CoD) is the preferred mode of payment for eCommerce in India which accounted for 45% of the sales in 2015; credit cards (16%), debit cards (21%), cash card (10%) and mobile wallets (7%).

    The number of connected individuals in rural India is expected to grow from 120 million in 2015 to 315 million by 2020, an average increase of 30% per year.


Foreign Domestic Investment (FDI)

B2B: 100% FDI is permitted in companies engaged in B2B eCommerce.


B2C: 100% FDI is allowed in online retail of multi-brand goods and services B2C under the marketplace  model (technology platform to facilitate transaction between buyer and seller.) Any eCommerce entity providing a marketplace cannot exercise ownership over inventory, and is not permitted to sell more than 25% of total sales through its marketplace  from one vendor, to their group companies.


Goods and Services Tax (GST)

GST has been effective since July 1, 2017. As GST is uniform across India, warehouses can be set up keeping in mind business objectives rather than for reduction of incidence of taxes.


Union Budget 2017-18

In Union Budget 2017-18, the Government had put a restriction on cash payments above INR 200,000 which will help the country move from a cash driven to a digital economy, which in turn would boost eCommerce.


Competitive Landscape

eCommerce in India is a consolidated market with a handful of companies accounting for a significant share of the industry. eCommerce witnessed ~259 M&A deals in 2015.


Amazon, Flipkart and Snapdeal are seen as the dominant players. Indian Railways is working on a policy to become official logistics partner of e-retailing giants.


Other players in the industry (by category/predominant product) are:

Food and Groceries,,,,
Real Estate,,
Transport Service,,
Baby care Products,


Industry Opportunity

Amidst the favorable conditions for eCommerce in India, the industry is projected  to reach US$120 billion by 2020. Online marketplace  is available for items such as groceries, real estate, insurance and even automobiles. SMEs want to reach out to more customers and improve efficiencies by connecting through digital trade. B2B is emerging as an important vertical. Early mover advantage remains for investors seeking a pan-India market and even creating a global eCommerce ecosystem.


About Alea

Alea is a global risk mitigation and investigative consulting firm, which helps organizations reduce reputation and operational concerns. The firm has conducted significant assignments for international organizations and industries including insurance, banking, financial services, telecom, manufacturing, healthcare, pharmaceutical, mining, real estate, retail, EPC, renewable energy, hotels, education, logistics, and diagnostics, power and infrastructure.


Alea's risk mitigation services include: senior employee background checks, KYC/AML checks, corporate intelligence, asset searches, intellectual property protection, crisis management response, insurance & fraud investigations, litigation support and due diligence of business partners.


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