India's online retail space grew by 23% in 2017, pace to accelerate in 2018

In 2017, online retail grew to $17.8 billion in gross merchandise value from $14.5 billion last year

India's e-commerce firms had a reason to cheer in 2017 as online retail grew sharply over the previous year and is projected to accelerate its growth trajectory in 2018. 

In 2017, online retail grew to $17.8 billion in gross merchandise value (GMV) from $14.5 billion last year, a 23 per cent increase, Livemint reported on Thursday while citing RedSeer Management Consulting, a market research and consulting firm. According to the financial daily, the country's e-commerce market picked up sharply in the second half of 2017 after a period of nearly 18 months. 

The report added that the pickup was driven by Flipkart Ltd and Amazon India, which both saw strong growth, and Paytm E-Commerce, the new entrant in the space. While Flipkart and Amazon drove the growth in e-commerce in 2017, Snapdeal's sales collapsed after it cut costs as the proposed sale to Flipkart failed to come through, the financial daily reported. Further, according to the report, Flipkart and Amazon's sales events and Paytm E-Commerce's heavy discounting also boosted growth in the space.

Further, citing RedSeer's estimates, the report said that growth in online retail was likely to accelerate in 2018. In fact, according to the estimates, the e-commerce market is projected to grow by up to 60 per cent to $28-30 billion in GMV. Citing expectations from company executives and analysts, the report added that faster internet speeds, improving comfort levels with using the internet, discounts offered by the players, and advertising by e-commerce firms would lead to a sharp acceleration in the market in 2018. Further, RedSeer estimates that after two years of stagnation, the number of new online shoppers will rise substantially.     

The financial daily added that both Flipkart and Amazon were likely to push deeper into smaller cities and towns next year.  

As reported earlier, Indians spent around $3.2 billion (approx Rs 19,000 crore) buying products online during this year's month-long festive sales period that ended mid-October, a growth of 45 per cent over sales during the same period last year.

According to data from RedSeer Consulting, the bulk of the sales happened in the first five days, with e-tailers clocking sales of $1.5 billion on hand of offering massive discounts and deals. The rest of the sales were staggered over the remainder of the month. 

While e-commerce marketplaces Flipkart and Amazon both claimed between 4.5-5 times growth in sales during the festive period over a non-sale period, RedSeer suggests that online shopping industry in India grew by over six times between September 20 and October 19.

As reported in November this year, US online retail giant Amazon has invested Rs 6,200 crore (about $1 billion) in its e-commerce business in India since the beginning of this calendar year as it competes with cash-flush rival Flipkart. 

Amazon Seller Services, largest arm of the US company here, has seen three rounds of capital infusion this year. The largest, of Rs 2,900 crore, was at end-September, according to official filings.

This brings the total pumped into this arm to Rs 17,839 crore ($2.7 billion). The figure shows how quickly Amazon has ramped up its investment in Indian e-commerce, with $1 billion of that being invested in 2017. The firm has also seen its authorised capital rise from Rs 16,000 crore to Rs 31,000 crore, which could signal the coming in of a lot more investment. Amazon aims to overtake Flipkart, which claims to have a cash reserve of $4 billion.

In July this year, the Parliament was informed that the e-commerce segment in India was growing and was likely to touch $33 billion this financial year. 

In the 2016-17 financial year, the online market had grown by 19 per cent, Minister of State for Consumer Affairs C R Chaudhary said in a written reply to the Rajya Sabha. "India's e-commerce market is estimated to be $33 billion in the financial year 2017," he said, quoting industry body NASSCOM's latest estimates.