Last week, two news items captured the front-page headlines of the Indian financial newspapers. The first was an announcement by Flipkart on July 29 that it has raised fresh capital of $1 billion in one of the largest funding rounds. The second was an announcement by Amazon on July 30 that it will invest another $2 billion in India. These numbers appeared large to us when seen in the context of overall online retail sales in India. As per the Forrester Asia Pacific online retail forecast published in early October 2013, India’s online retail spending was expected to reach $2 billion by the end of 2013. We believe that the pace of eCommerce in India picked up faster than our expectations during the past 12 months and these companies would have witnessed very strong growth. According to Amazon, at current scale and growth rates, India is on track to become the fastest country ever to reach $1 billion in gross sales. It is important to note that Amazon launched India operations in June 2013 only.
These events raised many interesting research questions for us. We will try to address them as we work toward updating our APAC online retail forecast for the years 2014 to 2019. The two most important questions relate to the number of online buyers in India and the mobile commerce opportunity in India.
The Indian online retail market is still nascent, yet it is growing rapidly. Despite all of the existing challenges — underdeveloped logistics and supply chain operations, poor last-mile connectivity, delivery rejections at the doorstep when cash-on-delivery payments are used, and low conversion rates — online retail in India grew by 67% in 2013. Forrester expects India’s online retail spending to grow at a compound annual growth rate (CAGR) of more than 50% over the next five years as more Indian consumers start purchasing online. Our recently published report India Online Retail Forecast, 2013 To 2018 discusses our online retail forecast and the growth drivers for India.
On the demand side, Forrester sees a lot of room for growth in the number of Indian online buyers.
India had a total population of 1.28 billion in 2013, nearly 16% (or one in six) of whom are online. While higher PC penetration rates have driven Internet adoption in the developed economies over the past two decades, faster mobile penetration is helping boost the Indian Internet population, thanks to “mobile-only” Internet users.
Of all Indian online users, just 14% currently purchase online. Forrester expects the online buyer population in India to grow to 128 million by 2018.