How was 2016 for the Indian e-tailing industry?
2016- A stumbling block year?
2016 for e-tailing will be at best remembered as the speed-breaker year. The industry GMV, which was growing at an annualized triple digit rate from 2013 onwards, dropped down to ~15% in 2015. A lot of sceptics announced this as the doomsday for the Indian e-tailing market (and consumer internet in general)- with their views being further fuelled by the devaluation of Flipkart, the bellwether for the industry, by various funds.
At this point, it would be prudent to take a step back and answer certain pressing questions- How bad was the year 2016 in reality? What were the reasons for the challenges faced by the industry during the year? How would the market evolve going forward?
2016- Hampered by external factors
Considering that the e-tailing industry grew at 100+% for two consecutive years before 2016, most analysts have forecasted the 2020 numbers to be USD 65-120 Billion, with RedSeer estimates putting the figure at USD 80 Billion. For these numbers to be achieved, the industry would need to grow at 45% CAGR over the next four years, from the exit GMV run rate of 2016. The billion-dollar question – Is such a strong, sustained growth achievable for the industry?
This question can be split into two parts: One- What happened in 2016 which pulled the growth down, and were these levers fundamental in nature or one-off events?
Two – how do the fundamental drivers, which will determine the growth for the next few years, look like for the industry?
Let's attempt to answer the first part of the question in detail as a year-end review.
'Speed-Breakers' of 2016
Circular trading Correction: Due to heavy discounting by e-tailers throughout 2015, there was a significant percentage of GMV (varying estimate puts this numbers to be 20- 30%) which was being driven by retailers and wholesalers buying goods, and in-turn selling it to the end customers- with some e-tailers facing this issue more than others. However, post the completion of the festive season 2015, e-tailers started to clean this mess, resulting in an immediate fall in retailer orders and bringing in a much-needed correction for the market
This document is an article which answers how the year 2016 was for the e-tailing industry in India.