India's ecommerce segment to increase fivefold by 2020: ASSOCHAM

Aided by growing number of smartphone owners and investments by retailers in the country, India's ecommerce industry is witnessing a boom which has not been experienced by any other segment in the country in the recent past.

Online transactions in India totalled around $23 billion in 2015, and are expected to reach $120 billion by the turn of decade, according to a research paper released by the Associated Chambers of Commerce of India (ASSOCHAM) last week. This was mainly on account of introducing the cash-on-delivery system and the option of returning goods within 30 days.

"India's ecommerce market was worth about $3.8 billion in 2009 and went up to $17 billion in 2014. It was around $23 billion in 2015 and is expected to touch the $38 billion mark in 2016," ASSOCHAM's Secretary General D S Rawat said.

The sector is also offering employment to thousands of people, both directly and indirectly, with some 250,000 jobs including temporary employees, supply chain, logistics, and ancillary units likely to be generated in the online retail businesses in 2016.

Rawat also said that hiring activities were expected to grow by over 60-65 percent in this sector and may help create between 500,000 to 800,000 job opportunities in the next two to three years.

Mobile commerce (m-commerce) is also growing rapidly as a stable and secure supplement to the ecommerce industry. Shopping online through smartphones is proving to be a game changer, and industry leaders believe that m-commerce could contribute up to 70 percent of their total revenue.

"Increasing internet and mobile penetration, growing acceptability of online payments, and favourable demographics has provided the ecommerce sector in India the unique opportunity to companies to connect with their customers," Rawat said.

Dinesh Agarwal, founder and CEO of IndiaMART, the country's largest online marketplace connecting buyers with suppliers, said the industry recorded stupendous growth in the last four to five years mainly because of options in payment methods.

Dismissing fears that online marketplaces were impacting the traditional shopping, he said that they formed only around 1.5 percent to 2 percent of total retail business in the country. "Even if ecommerce grows to 10 percent by 2020, it will be around $120 billion; as studies show, India's retail market is expected to be around $1 trillion in 2018 and would grow to $1.3 trillion by 2020," Agarwal said.

But the industry will have to cross hurdles, according to Agarwal.

One major challenge has been that many states in the country were not realising the potential of the industry, as although interstate consumerism was growing, there was no proper legislative support from those in power. Human resource is another issue that is bothering the industry which needs to be addressed, Agarwal said.

Padam Singvi, co-founder of Bengaluru-based ecommerce B2B website StoreRoom.in, said that the industry was still in a nascent stage and has a long way to go before achieving its full potential. "We will see a lot of specialised online stores in each category and I believe by 2020, similar to millions of offline shops, we can see whole new bunch of online shops sprouting all over the country," he said.

Singvi also said that lack of internet connectivity, different tax rates in the states, and acceptance of its failure by society are some other challenges faced by the industry.

Another major issue that is bogging down ecommerce companies is financial losses incurred. The majority of companies like Amazon India, Snapdeal, Paytm, and Myntra have been bleeding, going by their financial statements for the year 2014-15, and they are changing policies to solve this.

Amazon.in updated its returns policy page last week, the company saying that mobile phones are no longer eligible for a refund should the customer no longer need them. This means that users can now only return a phone to Amazon if the item is defective or damaged, and only then within 10 days.

"The industry has huge potential but not every company will make profits right from day one and each one has a gestation period," said Brijesh Agrawal, founder and CEO of Tolexo, a B2B initiative, launched a year ago. "For Tolexo, we have set a goal to achieve breakeven within two to four years."

Referring to Amazon India's returns policy modifications, Agrawal said that it was not an anti-consumer policy but to help grow their business. "I will not be surprised if other companies follow suit and take steps such as collecting charges on delivery of items in the near future," he said.

He also predicted that mergers will take place in the industry as party market consolidation efforts, which would be important for survival.