Mar, 2015     

The e-tailing revolution in India – the road to $100 billion-2015

The $4.5 billion e-tailing market in India is split into horizontal and vertical players; horizontal players have captured ~80% share of the market

Split of e-tailing market by nature of player

2014 sales figures

Indian e-tailing market

Key insights

  • Horizontal players i.e. players selling products across verticals, dominate the e-tailing market
  • The major horizontal players Amazon, Snapdeal and Flipkart contribute ~75-80% of sales to the e-tailing market
  • Major verticals which vertical players operate in includes fashion, furniture and home furnishings, eye care products, healthcare products etc.
  • These niche players constitute a small share of the market currently, but are growing rapidly

The marketplace model contributes ~80-85% share of Indian e-tailing market; company fulfilled marketplace models are popular with horizontal players

Split of e-tailing market by business model

Market Size based on 2014 sales figures

Total Market

horizontal players

vertical players

~75% of overall online retail sales are generated from Metros and Tier 1 cities; Tier 2+ cities generate significantly high % sales for Jabong

Split of e-tailing market and e-tailer's GMV by city tiers

Player comparison

Overall e-tailing market

Points of Discussion

  • Metros and Tier 1 cities still contributed the major chunk of e-tailer's sales at 73-75%
  • Jabong and Snapdeal have a large share of GMV coming from Tier 2 and beyond cities
  • In Jabong's case this is attributed to low availability of latest fashion in smaller cities, which drives online demand for the same
  • Snapdeal's strong presence in fashion and general merchandise has helped it generated high sales from Tier 2+ cities

The e-tailing market growth is expected to be driven by greater internet and smartphone penetration and continued discounting

Drivers and challenges to e-tailing growth

Growing mobile internet penetration

  • Mobile internet users in India are expected to jump from ~800 million in 2013 to 1.1 billion by 2020
  • As mobile apps get more optimized, this is expected to be a strong driver of online sales

Growing smartphone penetration

  • Smartphone users in India are expected to nearly quadruple from the ~120 million in 2014 to 450 million by 2020

Increased urbanization leading to less leisure time

  • It is estimated that around 60-70% of time of an individual in urban India is taken up by sleep, time spent at work, and commuting to work
  • Paucity of time for shopping at regular stores and convenience of online shopping is expected to continue driving sales, especially as urbanization increases

Growing purchasing power and product variety needs of small town customers

  • Growing purchasing power is driving strong demand from smaller cities
  • The convenience of obtaining products online, which are unavailable in physical stores in smaller towns, is further fuelling demand
  • This has led players like Jabong to generate 60+% sales from smaller towns

Continued (but gradually reducing) discounting

  • The growth of e-tailing has been fuelled by heavy average discounts in the range of 30-40%
  • Even as players pare down discounts, average discounts are expected to still remain over the 15-20% mark and thus remain a key driver of sales

Regulatory issues

  • Leading players in the Indian e-tailing space including Amazon and Flipkart have been bogged down by issues related to tax compliances and FEMA rules
  • Slow evolution of the framework for managing e-tailers is expected to continue to bog down players and investors alike, thus posing a challenge to the growth of the sector

The Indian e-tailing industry is still in its initial stages; going forward, players who stay ahead of the curve are likely to emerge as winners

Expected long term megatrends

Key points

  1. Gradual 'verticalization' of the market and sharp growth in size and importance of vertical players across grocery, furniture, babycare, jewellery etc.
  2. Mobile platform to be the next battleground with 80+% of orders placed over mobile 2 over the next few years, thus driving innovation in mobile apps and advertising
  3. Reduced discounting and increase in bottom-line growth initiatives like 1) Exclusive 3 launches 2) Private Labels and 3) Subscription based services (e.g. Flipkart first)
  4. Increase in delivery innovations like hyper-local delivery, customer pick up facilities, 4 instant returns and same day delivery to provide a superior customer experience
  5. Increased focused on seller satisfaction for marketplace players and growth in range 5 of services offered to sellers including warehousing, training and financing


This document covers the journey of e-tailing in India covering the market segments key player GMV run rates, cash burn and discounts, category wise trends, supply chain strategies, customer and seller strategies.