While Demonetisation shook the nation with the massive cash crunch, it also gave way to positive change in the e-commerce sector including increase in users and revenue. In this article, our co-founder Swati speaks about how e-commerce faired in 2016 and the challenges faced by the industry in India.
The growth rate of Indian e-commerce has been exemplary in the past 3-4 years. The annual expansion rate of Indian e-commerce is now an impressive 51%, a number that is well ahead of China and Japan. With exponential growth in this sector, India’s e-commerce revenue is expected to go from $30 billion in 2016 to $120 billion in 2020. Although with a few ups and downs, 2016 was a year of both growth and opportunity.
Increased penetration of e-commerce can be attributed to advancements in technology and awareness. While the introduction of 4G services gave people access to high-speed internet, an increase of social media usage on digital devices has also raised awareness regarding online shopping amongst users. A decline in prices of subscription based services is also a factor that has caused e-commerce to flourish. Today, Indians are using the internet to order everything from apparel to groceries, something that no one could fathom even a decade ago. E-commerce players have slowly and steadily removed the skepticism that plagued online shopping from the minds of consumers and this has made a world of difference. Furthermore, the growth in smartphone users also sky-rocketed, making m-commerce an arena of growth for e-commerce players. It is projected that 70% of e-commerce transactions will soon be carried out through smartphones and tablets.
Online travel portals saw colossal growth in 2016, including railway tickets, car rentals, hotel bookings and flight tickets. Herein, around 70% revenue has been generated through domestic ticket booking. Users are more likely to visit online sites such as the Indian Railway website to acquire information and get discounts. Good discount options have attracted consumers to a number of online shopping categories, apparel being the fastest growing sector overall. Apart from apparel and accessories, consumer electronics and computer electronics have been a fast growing sub-category in 2016.
Online shopping portals, old and new, have fared well in 2016. While Amazon.in, Flipkart and Snapdeal continued to enjoy their majority sales in the electronics and mobile phones category; fashion & lifestyle as a category gained a lot of momentum. E-commerce sites like Limeroad, Voonik and Wooplr enjoyed a growing customer base whereas pioneers such as Myntra and Jabong continued to make hay consistently. We also saw a surge in the daily consumables and groceries category in 2016.
The most rapid winds of change blew towards the end of the year when a massive cash crunch, caused by the sudden demonetisation announcement, shook the nation. Up until then, about 70% of e-commerce orders were paid through Cash on Delivery (CoD), making it the most preferred payment method. While CoD suffered a major hit, online shopping giants such as Amazon.in, Flipkart, Shopclues, and Snapdeal saw an onslaught of order cancellations. Further, e-commerce players recorded a 30% decline in CoD orders post the ban on Rs 500 and 1000 notes on November 8. Demonetisation also brought a lot of value consciousness amongst shoppers. Shopping via Cashback sites became the most effective way to Save & Earn because of a cash crunch. At CashKaro we saw a 50%+ increase in the GMV driven to partner retailers and a number of online shoppers earning Cashback via CashKaro in December vs. November.
All said and done, the e-commerce industry is likely to gain increased momentum in 2017, albeit demonetisation. The multiple payments options, engaging content, attractive discounts, and excellent customer service will continue to drive e-commerce in India towards newer horizons of massive reach and revenue.