Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,895.4523.35
Stock Analysis, IPO, Mutual Funds, Bonds & More

Demonetisation hits ecommerce growth, Forrester slashes projections by over a third

US banks Morgan Stanley and Goldman Sachs had upgraded the market size to $70 billion in 2015 and $120 billion in 2016 and haven’t revised their projections.

, ET Bureau|
Updated: Feb 10, 2017, 12.37 PM IST
0Comments
US banks Morgan Stanley and Goldman Sachs had upgraded the market size to $70 billion in 2015 and $120 billion in 2016 and haven’t revised their projections.
US banks Morgan Stanley and Goldman Sachs had upgraded the market size to $70 billion in 2015 and $120 billion in 2016 and haven’t revised their projections.
BENGALURU: All is not well in the world’s fastest-growing online retail market. US research firm Forrester has slashed projections for online retailing in India by more than a third to $48 billion by 2020, from $75 billion estimated last year, citing demonetisation, ecommerce restrictions, dwindling funding and slow growth of buyers.

Forrester said India continues to be the fastest-growing online retail market, ahead of South Korea and China. US banks Morgan Stanley and Goldman Sachs had upgraded the market size to $70 billion in 2015 and $120 billion in 2016 and haven’t revised their projections.

“Government actions, a slowdown in venture capital funding, logistics challenges, and slow growth in the number of online buyers are holding back India’s online retail market,” Forrester analyst Satish Meena said in a report.

The move to demonetise high-value currency notes in November led to a slowdown in the sector where over 50% orders are driven by cash on delivery. The government’s guidelines for foreign direct investment in ecommerce in March 2016 curbed discounting by marketplaces and set limits for sellers.

A market survey of 2,000 respondents by Forrester revealed that after jumping 50% to Rs 29,006 in 2015, online spending per buyer slipped by 17% to Rs 24,092 in 2016. “There are two assumptions in terms of growth rates (which have not panned out). Verticals like grocery and furniture have not picked up significantly, and we expected that discounting will go on for at least one more year,” said Meena, adding that while the market was expected to expand 70-80% in 2016, it grew by about 30%.

According to investors and analysts, the online retail market stood at $14-16 billion at the end of 2016 from about $11billion in 2015. The slowing market is reflected in the gross value of merchandise sold on the online platforms of companies including Flipkart and Snapdeal, which are also finding it hard to raise fresh funding at existing valuations.

Flipkart, India’s largest online retailer, hasn’t been able to cross the $5-billion mark in gross merchandise value after surging from a $1-billion annual run rate in 2013-14 to $4 billion in 2014-15. Snapdeal’s GMV shrank from a peak in 2015 as the company switched to focussing on profitability.

Also Read

Aamir Khan to star in official adaptation of Tom Hanks's 'Forrest Gump'

Third-time lucky: Kareena Kapoor to star with Aamir Khan in remake of 'Forrest Gump'

'Forrest Gump' taught Abhishek Shah of Wellthy Therapeutics to not be afraid

Ecommerce growth fell 26% in 2017: Forrester Research

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service