©2015 Redseer Consulting

E-commerce India – 5 future trends for the next 5 years

1. Focus areas – Certain categories and segments such as fashion, wellness, retail, furniture and

baby care are envisaged to be focus areas for ecommerce players moving forward. Given that

nearly 70-80% of online users are in the age group of 15-30 years of age and the fact that internet

penetration is highest among metros and tier 1 cities, Fashion as a category will be a major driver for

e-commerce traffic and conversions.

2. Niche Verticals – India has already witnessing the emergence of niche verticals in the online

space. Players such as Lenskart (eye wear), Urban Ladder (furniture), First Cry (infant care),

Caratlane (jewellery) have already captured a unique place for themselves in the market. Most niche

players are also vertically integrating to reap maximum benefits from their supply chain.

3. Reducing discounts & bottom line focus – Funded by some of the major global PE/VC firms,

e-commerce players in India today are in a stage of accelerated growth. The growth of the industry

between 2009 to 2014 was phenomenal and recorded a growth rate of 72%. This can largely be

attributed to the sudden market spurt and stiff competition, leading to deep discounts being offered.

While the discounts helped garner market share, growth and customer loyalty, profitability took a

strong beating. The market is expected to equalise and aim more towards profitability than growth in

the future, with the projected growth rate dipping to 47% for the next 8 years.

4. Rapidly growing M&A activity - Mergers and acquisitions in the e-commerce space is fuelled by

a multitude of reasons from buying out competition, shifts in market forces to having the same

investor/investor group promoting the merger. The M&A value in India for 2014 alone stood at

$50billion, the highest recorded so far. From the landmark Flipkart-Myntra merger to the more recent

acquisition of FreeCharge by Snapdeal, India is likely to witness heavy M&A activity for the next

decade.

5. Growth in ancillary services - Ancillary services from last mile/logistics enablers, digital

marketing & analytics to payment solutions are likely to see a huge market demand. Logistics

companies such as Delhivery and Ecom Express have been backed by leading PE firms, Multiples

Alternate Asset Management and Peepul Capital. These enablers are thus turning out to be big

pieces of the jigsaw by attracting strong investor funding while positively contributing to the

ecommerce market.