Demonetisation impact: Indian e-commerce growth projection cut to 55.5% for 2016

Market researcher eMarketer has cut its growth projection for Indian e-commerce from 75% to 55.5% for the calendar year 2016


Typically, about 70% of the overall e-commerce orders are paid for in cash, according to research and advisory firm Redseer Management.
Typically, about 70% of the overall e-commerce orders are paid for in cash, according to research and advisory firm Redseer Management.

New Delhi: Four months after forecasting a 75% increase in Indian e-commerce in calendar year 2016, eMarketer, a US-based market research firm, on Tuesday cut its projection to 55.5%, or around $16 billion, citing the impact of demonetisation on order volumes.

While orders will recover in the long run from increased adoption of cashless payment methods, e-tailers including Amazon India, Flipkart and Snapdeal are expected to miss targets in the current financial year, eMarketer said in a report on Tuesday.

“This new system will lead more people to use traditional banking services like credit cards, which is a key factor in allowing consumers to buy online but it will take time for this kind societal change to take effect, so our forecast numbers for the out years are still lower than previous estimates,” eMarketer director Monica Peart said in the report.

Like many other sectors, the ongoing cash crunch has impacted online shopping. To tackle growing cancellations, leading e-commerce companies had to limit or suspend payments through cash-on-delivery, the most preferred choice of payment, Mint reported on 10 November.

Typically, about 70% of the overall e-commerce orders are paid for in cash, according to research and advisory firm Redseer Management. This has changed drastically after demonetisation, and will impact the e-commerce business in India where a large portion of the population is still un-banked, said eMarketer.

The researcher also trimmed its 2020 forecast to $47.45 billion from $79.41 billion it estimated in August.

E-commerce companies are already dealing with a decline in growth and intense competition in key markets and segments.

The predicted fall in volumes may also worry Flipkart which, Mint reported in October, plans to raise funds.

ALSO READ | Flipkart plans to raise up to $1 billion fresh funds

According to eMarketer, Amazon India is expected to take the lead primarily because of its higher spending power.

“Amazon India appears poised to win share from other players, in part because it has the deep pockets to support strong discounting and the cost of merchandise returns, which are a common feature of developing e-commerce markets,” said Peart.

Flipkart faced two valuation markdowns: first from a mutual fund managed by Morgan Stanley and later by US-based investment firm Vanguard Group, Mint reported on 29 November and 2 December.

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