The COVID-19 pandemic crisis has helped in doubling of penetration of e-commerce globally with categories such as consumer packaged goods driving as much as three years of penetration growth in three months.
It said, "We forecast India e-commerce will reach US$ 99 billion by 2024, growing at a 27 per cent CAGR over 2019-24, with grocery and fashion/apparel likely to be the key drivers of incremental growth in our view".
Online penetration of retail is expected to reach 10.7 per cent by 2024, versus 4.7 per cent in 2019.
"The biggest near term theme in India internet, in our view, is the foray of Reliance Industries (India's largest market-cap company with presence across sectors such as energy, telecom, and retail) into e-commerce, and the company's tie-up with WhatsApp for online grocery," it said.
In April 2020, Facebook acquired around 9.99 per cent stake in Jio Platforms, the subsidiary of RIL which is the country's youngest but biggest telecom company as well as has an array of apps in its portfolio. JioMart, RIL's e-commerce venture, plans to use Facebook's WhatsApp to connect local grocery stores with customers.
In 2019, more than 80 per cent of market in online grocery was captured by Bigbasket and Grofers, said Goldman Sachs.
Due to the outbreak of COVID-19, the shift to online is estimated to increase to 81 per cent CAGR during 2019-24 from around 50 per cent year-on-year growth the sector has been witnessing for the last couple of years.
"We believe RIL's partnership with Facebook could result in the company becoming a market leader in the online grocery space, with more than 50 per cent share by 2024," it said. "Having said that, we do see grocery as a large category for two or more players to co-exist over time."
The India's e-commerce sector is expected to see growth from better penetration into categories such as grocery/FMCG, improving payment ecosystem and ease of shopping through WhatsApp etc.
"We expect non-grocery e-commerce penetration to see a sharp increase of 500 basis points over the next two years to reach 16.1 per cent by 2021," Goldman Sachs said adding the last 500 basis points of the increase took four years.
In 2019, there was high online penetration in categories such as consumer electronics at about 40 per cent whereas in categories like apparel, appliances, health and personal care the online penetration in India remains materially lower when compared with peers such as China.
"As far as incremental growth in e-commerce is concerned, we expect grocery to be the biggest driver with 40 per cent contribution to incremental e-commerce GMV (gross merchandise volume) between 2019 and 2024," it said.
As of 2019, Grocery in India is a US$ 380 billion category, accounting for 60 per cent of the total retail market.
"However, online penetration currently stands at less than 0.5 per cent (absolute size US$ 2 billion), one of the least among categories," it said projecting the online grocery market in India to grow 20x over the next 5 years, to reach US$ 29 billion in value (5.1 per cent penetration) by 2024.
COVID-19 is one of the main drivers to boost the acceptance of online purchases among Indian consumers. While other drivers include RIL's foray into the space leveraging its large offline distribution capabilities and ability to order groceries through WhatsApp - a platform with more than 400 million users in India.
"Overall, we forecast online grocery orders to grow from 300,000 per day in 2019, to more than 5 million per day by 2024," it said.
E-commerce is one of the other countless technologies and consumer behaviours that has seen acceleration because of the coronavirus pandemic, said Goldman Sachs.
"What started at first with panic buying, hoarding and nest feathering out of necessity has turned into an array of adaptations that have driven e-commerce penetration from 16 per cent of retail spending in the US in 1Q19 to over 40 per cent in May driven by year- over-year growth of nearly 70 per cent," it said.
It further added that the e-commerce segment would grow 24 per cent globally.
No comments:
Post a Comment