India to reach 10% e-commerce penetration by 2023

A sign bodes well for e-commerce players like Amazon and Flipkart.

Photo via Shutterstock

Driven by multiple factors including mobile proliferation, ballooning middle-class, and a sizeable young population, India’s e-commerce penetration is expected to reach 9.5% by 2023 from the current around 5%, boding well for e-commerce players in one of the world’s fastest-growing retail markets, according to an RBC Capital Market report cited by local media.

Globally, e-commerce penetration stands at 24% for China, 17% in the UK, 14% US, 11% Germany, and 9% in Japan.

The banker’s report expects Indian e-commerce sales to be the “second-fastest growing among the top 10 APAC countries,” and believes the growth will be driven by “rising rate of smartphone adoption, rapidly growing middle class, influence of its young population and growing penetration of e-commerce players like Amazon and Flipkart.”

The research highlights the importance of India to global e-commerce players like Amazon, who are looking at international growth to keep its momentum. Germany is the largest international market for Amazon as of now.

RBC Capital also estimates that India will contribute more than 13% and 4% to Amazon’s international sales and overall sales, respectively, in the next four years. Amazon is expected to generate USD 18 billion through marketplace commission from gross sales as well as direct sales. The figure will almost double to USD 32 billion by 2023.

A rosy prospect explains well Amazon’s increasing investment in the world’s second-most populous country.

The Seattle-based company has already invested over $6 billion in India since entering the market in 2013, in spite of regulatory headwinds now and then. The e-tailer just acquired a minority stake in India’s second-largest retail chain to get into the new retail business model, as brick-and-mortar retailers still make up a big chunk of the country’s huge retail market.