E-commerce can attract $25-bn investment in 6 years, says study

Sanjeev Sharma

Tribune News Service

New Delhi, May 21

The e-commerce sector, which has been the bright spot in an otherwise bleak economy, is witnessing a flurry of start-up ventures and set to become a value creator.

According to a report by Bank of America Merrill Lynch, the internet sector in India is at an inflexion point and will achieve hyper growth in the coming years led by improving smartphone penetration, evolving consumer behaviour and online companies’ value proposition.

With expected improvement in telecom infrastructure, declining smartphone prices and improving trust, the transacting market of 35 million users is expected to increase to 200 million in next two years.

According to the note, the winners in the space have already been decided and will be difficult to displace them. “In our view, in most categories in the e-commerce space, the winners have already been decided. While we may see some new competition entering the space, we believe it will be difficult to displace the winners unless there are material execution risks.”

In addition, the report notes that most of these companies are well-funded and remain well-positioned to meet any new funding needs as well. “Most VCs believe India will be a market where winner takes all, making it difficult for smaller players to survive with a “me-too” strategy.”

The Economic Survey had also noted the growth in start-up ventures. It said that in 2013-14, there was hyper growth in the technology start-up and software product landscape with India ranking as the fourth largest start-up hub in the world with over 3,100 start-ups in the country.

India Opportunity Advisors has released a report on the sustainability and growth of e-commerce in the country. The report has projected that if the sector is liberalised it will attract $25 billion into the industry. It has indicated that e-commerce could reach $60 billion in sales by year 2020 but e-commerce operators will have to invest close to $25 billion in the industry over the next 6 years for this to materialise and projected that it would also create close to 7 lakh jobs directly and indirectly. The report points out that $25 billion of FDI through e-commerce would equal the total FDI received by India in 2013-14. However, government would need to allow FDI in B2C e-commerce for this to happen.

Manish Sharma, Managing Partner, India Opportunity Advisors, said, “Indian e-commerce has been one bright spot of the Indian economy in the otherwise bleak past five years of business. The sector has been witnessing a growth of almost 100% year- on-year”.