For­rester Sees Re­tail Los­ing Way in On­line Jungle

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Ben­galuru: All is not well in the world’s fastest-grow­ing on­line re­tail market.

US re­search firm For­rester has slashed pro­jec­tions for on­line re­tail­ing in In­dia by more than a third to $48 bil­lion by 2020, from $75 bil­lion es­ti­mated last year, cit­ing de­mon­eti­sa­tion, ecom­merce re­stric­tions, dwin­dling fund­ing and slow growth of buy­ers. For­rester said In­dia con­tin­ues to be the fastest-grow­ing on­line re­tail market, ahead of South Korea and China. US banks Mor­gan Stan­ley and Gold­man Sachs had up­graded the market size to $70 bil­lion in 2015 and $120 bil­lion in 2016 and haven’t re­vised their pro­jec­tions.

“Gov­ern­ment ac­tions, a slow- down in ven­ture capital fund­ing, lo­gis­tics chal­lenges, and slow growth in the num­ber of on­line buy­ers are hold­ing back In­dia’s on­line re­tail market,” For­rester an­a­lyst Satish Meena said in a re­port.

The move to de­mon­e­tise high-value cur­rency notes in Novem­ber led to a slow­down in the sec­tor where over 50% or­ders are driven by cash on de­liv­ery. The gov­ern­ment’s guide­lines for for­eign di­rect investment in ecom­merce in March 2016 curbed dis­count­ing by mar­ket­places and set lim­its for sell­ers. A market sur­vey of 2,000 re­spon­dents by For­rester re­vealed that af­ter jump­ing 50% to .₹ 29,006 in 2015, on­line spend­ing per buyer slipped by 17% to .₹ 24,092 in 2016. “There are two as­sump­tions in terms of growth rates (which have not panned out). Verti- cals like gro­cery and fur­ni­ture have not picked up sig­nif­i­cantly, and we ex­pected that dis­count­ing will go on for at least one more year,” sa- id Meena, adding that while the market was ex­pected to ex­pand 7080% in 2016, it grew by about 30%.

Ac­cord­ing to in­vestors and ana- lysts, the on­line re­tail market stood at $14-16 bil­lion at the end of 2016 from about $11 bil­lion in 2015.

The slow­ing market is re­flected in the gross value of mer­chan­dise sold on the on­line plat­forms of com­pa­nies in­clud­ing Flip­kart and Snapdeal, which are also find­ing it hard to raise fresh fund­ing at ex­ist­ing val­u­a­tions. Flip­kart, In­dia’s largest on­line re­tailer, hasn’t been able to cross the $5-bil­lion mark in gross mer­chan­dise value af­ter surg­ing from a $1-bil­lion an­nual run rate in 2013-14 to $4 bil­lion in 2014-15. Snapdeal’s GMV shrank from a peak in 2015 as the com­pany switched to fo­cussing on prof­itabil­ity. On the other hand, Ama­zon In­dia has been in­vest­ing ag­gres­sively, af­ter its US par­ent in­creased com­mit­ments to the lo­cal market from $2 bil­lion to $5 bil­lion in June 2016. While Ama­zon In­dia’s ship­ments more than tripled in 2015, the pace of growth slowed to over 100% in 2016.

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