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Wed 28 Nov 2018 10:57 AM

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Consumer electronics tops India's retail sector

E-commerce in India still accounts for only 2 percent of total sales, according to a recently released report

Consumer electronics tops India's retail sector
At a total of $20 billion spending online, e-commerce retail in India still accounts for just about 2 percent of the total retail sales in India.

Consumer electronics topped India’s online shopping list last year, accounting for 17 percent ($4.5 billion) of the total $29 billion consumer electronics retail sales in the country.

This was followed by apparel and footwear at 9 percent ($5 billion) of the segment’s total retail sales amounting to $60 billion, beauty and fashion products, consumer appliances and consumer health products, each accounting for about 1 percent each of the total retail sales in their respective segments in 2017, according to a recent report by international management consultancy Bain & Company.

Notably, despite the proliferation of fast food chains and online food aggregators, Indians’ online spending on food and groceries together accounted for a paltry 0.1 percent ($0.7 billion) of the total $529 billion retail sales of the two segments last year, the report, prepared in collaboration with Google and philanthropic investment firm Omidyar Network, has revealed.

At a total of $20 billion spending online, e-commerce retail in India still accounts for just about 2 percent of the total retail sales in India, despite a number ‘Big Sales’ and ‘Mega Offers’ by e-commerce majors such as Flipkart and Amazon India from time to time, according to the report “Unlocking digital for Bharat: $50 billion opportunity.

The report also noted that with average per user online spending of $224, India lags way behind the US ($2,337), China ($1,862) and Japan ($1,099) in online retail spending. Brazil, with per user spending of $374, is also ahead of India, according to the report.

“When we say retail e-commerce in India accounts for just 2 percent of the total retail sales, it actually means it accounts for 2 percent of the organised retail in the country. We will get the right perspective on the growing retail e-commerce when we consider the fact that more than two-thirds of its retail sector in India is in the unorganized sector,” Harminder Sahni, founder and managing director of leading retail sector consultancy Wazir Advisors, told Arabian Business.

Online spending on food in India accounts for a significant percentage of the sales in the organized food sector in the country, he said.

Sahni, however, said India has a long way to go in promoting e-commerce, with the first and foremost challenge being to get the majority of the market into the organised sector.

“Only after this, consumers will be able to choose which channel to use for their shopping – whether online or offline,’ Sahni said, adding that “currently the money spent on acquiring companies in the retail e-commerce segment is many-fold higher than the total value of goods sold on ecommerce platforms of all companies operating in India put together". 

According to the Bain & Company report, while India has the second highest number of active internet users at 390 million, only about 40 percent of them transact online. A large number of those who transacted online once drop out after their first use, the report added. 

The report, however, has projected that India has a potential to generate $50 billion additional e-commerce transactions, provided there is an effective government-private sector partnership to create access, awareness and literacy in this field.

China has the highest active users of about 733 million, while the US occupied the third spot with 285 million at the end of 2017.

India, however, was ahead of China in terms of velocity of user addition, with average 40 million users added in a year.

Internet penetration in India was at 22 percent at the end of 2017, compared to a whopping 88 percent in the US and 53 percent in China.

India also had a wide gender gap when it comes to net users, with males accounting for 33 percent and females 22 percent. The US, in comparison, had gender parity in net user profiles with both males and females accounting for 64 percent each. In China, the gap was very marginal, with males at 54 percent and females at 52 percent, according to the report.

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