Indian e-tail market to grow to $100 billion by 2020, RedSeer Consulting

Growing at a steady rate of 50-60 percent year on year, the Indian etailing market is expected to reach $80-100 billion in gross merchandise value (GMV) by 2020, RedSeer Consulting, a research and advisory firm that works closely with startups, said in a study.

There have been varying estimates which have been made by various firms and agencies on the size of the ecommerce sector in India by 2020. Earlier this year, a report released by Google and AT Kearney titled Digital Retail 2020 consumer, stated that with a base of around 175 million, Indian e-commerce could reach $60 billion in GMV by 2020.

The estimates were less than that projected by US investment bank Goldman Sachs last year in October, which pegged the e-tail segment to be valued at $69 billion. The global investment banking, investment management, securities, and other financial services major had said that India's overall e-commerce market was expected to breach the $100-billion mark by 2020. It had said the overall online market in the country including travel, payments and retail could reach $103 billion, of which the e-tail segment would be valued at $69 billion.

According to RedSeer, the growth would be driven by expansion into tier 2 and tier 3 cities. The focus area according to consultancy would be on items such as fashion, furniture, and babycare and move from just concentrating on sale of mobile phones and big ticket electronics. Also revenue would be generated from areas such as advertising and logistics.

According to RedSeer, more than 230 million new people will come online between 2015 and 2020. "E-tailers need to have a clear strategy to induce this population to shop online. They need to increase comfort of tier-II city shoppers, promote use of assisted shopping in a bigger way, deploying try and buy and opening offline stores," said Anil Kumar is the Founder and CEO of RedSeer Consulting.

The study also said that increasing robustness of payment platforms and promoting wallet use will boost consumer comfort with online shopping which would help in achieving the $100 billion target.

"Deepening the understanding of customers with respect to their actual shopping needs- Smaller city customer needs are highly localized and varying across cities. E-tailers need to tailor their product offerings to each micro-market an customer segment separately by trying to replicate the offline sales mix into the online channel as much as possible," said Mrigank Gutgutia, engagement manager at RedSeer.

RedSeer said that online fashion market has a very low penetration in India, whereas for mature markets like China and US the penetration of Fashion to the overall industry is as high as 30-35 percent.

"Going forward, we expect fashion to be a pre-eminent category in e-com, and especially strongly purchased by customers in Tier 2+ cities who come online to avail the greater selection in this category," added Kumar.

The study also said that to bring on-board the next wave of online shoppers, tailoring marketing campaigns to regional sensibilities and languages would be the key. It also stressed on continuing to invest in reliable and fast delivery.