Ecommerce market to grow 30% to $200 bn by 2026
MUMBAI: India’s e-commerce market will grow 30% CAGR (compounded annual growth rate) for gross merchandise value to be worth $200 billion by calendar year 2026, according to investment bank Morgan Stanley. In a report titled “India’s Digital Leap – The Multi Trillion Dollar Opportunity”, Morgan Stanley said this growth in e-commerce will help grow market penetration to 12% in the next nine years, versus 2% today.
Rising number of internet users, all new to e-commerce, will help lead this growth, according to the report.
“Our analysis of some global e-commerce companies highlights that twothirds of the growth in their e-commerce sales happened due to new users coming online and shopping, while the balance was driven by existing online shoppers buying more frequently and/or driving up order values,” the report said. India had 60 mil- lion online shoppers in calendar year 2016, which is 14% of the internet user base of the country. This will rise to over 50% by 2026, the report said.
“What we have seen through proprietary consumer surveys in the past is that it takes time for consumers to get comfortable with a channel,” Parag Gupta, executive director, Morgan Stanley India, said in an interview. “Generally, people who have been on the internet for less than 2 years, don’t transact on the internet (including mobile banking). So generally they are engaging in basic activities like messaging, social media, and search, things that don’t involve a monetary transaction.”
However, once a consumer has been online for more than five years, they are more likely to buy online. Right now, that’s only 30% of India’s 432 million internet users.
“The reason for that is very simple, because a bulk of the addition in the internet base has happened in the last 3 years,” Gupta said. “That’s when smartphone penetration started ballooning. So a large base of the internet population has been on the internet for not as many years as required to get comfortable with the medium. When does that maturity come through? Most likely 2019,” he said, adding that the year can be an inflection point for India’s e-commerce market.
With this comfort, e-commerce customers are also moving to digital payments.
“I think a couple of years back, cash on delivery was over 60% of e-commerce sales which has now come down to maybe 55-60%. Secondly, if you look at UPI and digital wallets, their share has increased to 4-7%. A couple of years back, that number used to be just about a percent or two,” Gupta said.
Right now, only 30% of India’s 432 million internet users shop online