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Online retail market in India to become more than USD 100 billion industry by 2024

The next phase of growth for e-commerce companies is expected to come from smaller cities.

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At a time when a two-month-long nationwide lockdown created a massive dip in e-commerce sales, there seem to be a silver lining of hope for the sector after all.

A white paper jointly prepared by global professional services firm Alvarez & Marsal (A&M) India and CII Institute of Logistics, said online retail market is expected to reach over USD 100 billion by 2024.

It said the e-tail sector has leapfrogged manifold in the last decade. According to the white paper, online retail market reached USD 30 billion in 2019 from less than a billion US dollar in 2010. One of the main reasons for sector’s growth was attributed to internet penetration, availability of cheaper smartphones, and category expansion such as grocery, furniture, toys, cosmetics, pharmaceuticals, among others.

Some of the key evolving models for e-commerce include online sales of apparels, deliveries of FMCG products, grocery, meat, and pharmaceuticals, and omnichannel presence of retailers.

Talking about specific sectors, it said the rise in demand for online order in grocery and the growing numbers of online food deliveries could propel category growth by five times in the next five years.”E-commerce retail (B2C) market to be more than a USD 100 billion opportunity by 2024,” the white paper said.

It added that there is a significant headroom for the growth of e-commerce as the the offline retail market continues to be fragmented. The total retail market in India is estimated to reach USD 1.1 to 1.3 trillion by 2025, from USD 0.7 trillion in 2019. Another report by BCG Consultants released earlier this year in January, said that while e-commerce has significantly affected categories like electronics, apparel, and footwear, demand in online grocery is yet to take off.

Online orders for grocery and FMCG products saw an upsurge during the lockdown, which is expected to continue as people are still wary of physically going to grocery stores. On the other hand, Flipkart and Amazon are expecting their sales to peak during the festive season sale which begins in September.

“Even if the [coronavirus] cases go down in the next couple of months, a lot of purchases are going to shift online. So, whenever people start spending again, e-commerce will be the first to benefit from it,” Satish Meena, senior forecast analyst at Forrester, told KrASIA in a recent interview.

Earlier this month, Doug McMillon, President and CEO of Walmart, which acquired Indian e-commerce major Flipkart in 2018, said the e-tailer’s gross merchandise value surpassed pre-COIVD-19 levels.

The next phase of growth for e-commerce companies is expected to come from smaller cities. Currently, a bulk of online orders are placed from tier 1 and 2 cities, which is expected to change as increasing number of people are trying out online purchases due to COVID-19.

“While the bulk of e-commerce volumes come from top-30 cities, over 60 percent of e-commerce volumes are likely to come from tier-II and tier-III cities in the next five years, It is an imperative for e-commerce businesses to build their seller base and delivery reach in smaller towns,” said A&M India Managing Director Manish Saigal.