Indian online retail displayed mere 12% growth in 2016 compared to previous year’s 180%: Report

Turns out 2016 was the speed breaker year for Indian online retail, stated a Redseer report on the growth of Indian ecommerce. Everyone agrees that 2016 was a dull year for ecommerce. This is in spite of online consumer spends increasing up to $750 billion in and internet penetration reaching 40% growth in 2016.

According to what Redseer uncovered in its report, Indian ecommerce witnessed only a 12% spike in growth last year. This is nothing compared to the growth the industry showed in 2015 which was 180%. This means from a $13 billion sector it is now only a $14.5 billion sector. This has investors quite worried about their investments in ecommerce companies.

The damage caused by 2016

Online retail did exceedingly well in 2015 from the GMV point of view because of deep discounting supported by online marketplaces. However, once the etailers learned they were creating a mess they took on corrective actions to curb their spending. This brought down the number of orders they were receiving.

The report put together by Redseer claims that the performance of Indian etailers like Snapdeal and Flipkart plummeted in 2016.

The CEO of Redseer Consulting, Anil Kumar, mentioned that Snapdeal’s growth figures reduced drastically which pushed it out of its number two spot and made way for Amazon to take the lead.

He also said that the new interest in restricting careless cash burn and focus on revenue instead of GMV contributed to the present growth situation.

For Flipkart, he said the etailer spent 3-4 months in defining its leadership structure and filling the gap. As a result, nothing significant came about from the growth point of view.

The next blow to the ecommerce industry was the implementation of 100% FDI. This restricted discounting by ecommerce entities with foreign direct investments and prevented a single seller from making more than 25% sales of the total sales on a platform.

The final punch came from the demonetization drive announced by the Prime Minister in November, states the Redseer report – ‘The Indian E-tailing Market in 2017’. The damage caused by demonetization was in the COD department. COD orders were the preferred payment option online. With limited cash at their disposal consumers stopped buying online. This brought down sales by 30% in online retail.

A new year with new expectations

With the advent of the new year better fortunes are expected for the Indian online retail market. And, by 2020 the country’s ecommerce market is expected to be worth $80 billion.

Redseer Consulting’s Anil Kumar said, “… this sector is expected to grow 4x-5x times in the next 4 years. 2017 will be a hotly-contested year, and will differentiate the best from the rest, and also shape the Indian e-commerce industry for the many years to follow.”

Given the dissatisfactory performance of home grown ecommerce players, 2017 is expected to bring new hope for them. A lot is riding on etailers to grow their consumer base for this. Flipkart and Snapdeal are changing their strategies to counter competition and offering consumer loyalty programs to increase the number of shoppers on their platforms.

The report forecasted that even though mobile and other electronic categories bring in the big bucks, growth will come with more focus on categories like online fashion and grocery categories.

Have online marketplaces recovered from the calamities of 2016? And are they ready to pick up grow in 2017? Only time will tell.