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Forrester trims India e-tail market estimate on note ban, regulatory woes
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US-based market research company Forrester Research has cut the size of India's online retail market by 36%, saying it will touch $48 billion by 2020. Last year, the firm estimated the sector to reach $75 billion by 2020.
The retail market shrunk due to demonetisation, restrictions on e-commerce, slowdown in investments and fewer buyers, a report by Forrester stated.
Demonetisation affected online retail sales for November; however, cash on delivery, which is the preferred mode of payment in the sector, was still the top choice for e-commerce consumers.
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Verticals like grocery and furniture did not pick up pace and discounting is expected to continue for at least one more year, Satish Meena, a forecast analyst at Forrester added.
Asia Pacific continues to be the largest region for online retail sales, containing both the largest market (China) and the fastest-growing market (India), the report mentioned. Online retail sales in India is expected to touch $64 billion by 2021, growing at a five-year compounded annual growth rate (CAGR) of 31.2%.
Apparel is the largest category for online retail in the Asia Pacific region, followed by consumer electronics and computer hardware.
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However, grocery, beauty and cosmetics, and homeware and furniture are the fastest-growing categories, reflecting the increasing maturity of online shopping in the region.
Approximately one-fifth of total retail sales will take place online by 2021 in Asia Pacific, with 78% of that coming from mobile. Online retail via mobile is expected to grow at CAGR of 15.6% to reach $1 trillion in 2020, up from $539 billion in 2016.
In India, the e-commerce market is dominated by Amazon, Flipkart, and Snapdeal. Amazon has committed to invest $5 billion in India. Homegrown e-tailers Flipkart and Snapdeal have been trying to raise fresh funds for the past few months, but have also suffered a string of valuation markdowns.
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Amazon.com Inc.'s India unit more than doubled its losses to Rs 2,960 crore (around $436 million) in the financial year ended 31 March 2016.
Flipkart posted a net loss of Rs 5,768.8 crore for the year through March 2016, up 86% from a year earlier, while Snapdeal more than doubled its losses to Rs 2,960 crore (around $436 million) in the financial year ended 31 March 2016.