Bengaluru: In 2014, India’s e-commerce market was considered to be the next big thing globally in the retail world and Flipkart, its leading light. In July of that year, when Flipkart raised what was then a milestone-setting $1 billion in capital, its co-founder and then-chief executive Sachin Bansal said, “We believe India can produce a $100 billion company in the next five years, and we want to be that. Whether it takes five or 10 years, we are here for the longer term."

Less than four years later, Flipkart is close to selling itself to Walmart Inc. at a valuation of $20-21 billion, a fraction of that $100 billion dream number.

While that will still yield windfall gains for Flipkart shareholders, it’s the starkest reminder of the lowered expectations that Bansal, his investors and indeed, the entire start-up ecosystem, have come to terms with. It is also proof that Flipkart has given up its ambition of becoming a $100 billion company and that the e-commerce market here has turned out to be far trickier than anyone expected.

Unlike in the US or China, the two biggest e-commerce markets in the world, online retail in India hasn’t enjoyed a consistent surge in the first decade after an initial spurt in 2013.

After two years of high growth, the e-commerce market in India barely expanded in 2016. Then, last year, it increased by 23% to $17.8 billion, according to RedSeer Consulting. That growth is far slower than what companies and investors had expected in 2014-15 when brokerages such as Goldman Sachs, Morgan Stanley and others estimated that the e-commerce market would soar to anywhere between $60 billion and $120 billion by 2020.

There are two broad reasons why analysts and investors got it wrong. One, the poor infrastructure makes it prohibitively expensive for e-commerce companies to reach customers in the hinterlands. Two, they overestimated the spending power of Indians. It’s now clear that the purchasing power of Indian consumers is limited and that it is unevenly distributed because of massive income inequality.

Still, there’s little doubt that e-commerce is a compelling retail option for shoppers in a country where organized offline retail is minuscule. The wide selection and low prices offered by e-commerce cannot be matched either by organized retailers or mom-and-pop stores.

And for American and Chinese companies such as Walmart and Alibaba, India is still the most attractive market outside their domestic territories.

What all of this means is that the e-commerce market here will continue to expand, just not at the breakneck speed that is required to create a $100 billion company anytime soon.

In an interview last week, Amazon India head Amit Agarwal said that Walmart’s entry will boost e-commerce in India.

“I would rather have two or three well-funded players going after (expanding the market) than us doing it alone. I feel vindicated when it happens because it shows we’re not alone in thinking it’s a big opportunity," Agarwal said.

“For (India) to get close to any of the credible (e-commerce) markets, it’s a long journey to come. So, as long as there are investments, it’s good for everyone," he added.

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