The Indian e-commerce bubble, driven by hundreds of millions in investments in companies with no profits on the horizon, just got another reality check.
Only 39 million Indians — or 3 percent of the population — shop online, according to a study by management consultancy AT Kearney. India doesn't figure in the top 30 nations in the 2015 Global Retail E-commerce index. With a market size of $3.8 billion, online sales in India are not even a third of Brazil's $13 billion. Countries like Venezuela, Saudi Arabia, Chile and Ireland are way ahead in the list.
The United States is first, with a market worth a whopping $238 billion, followed by China, the UK, Japan and Germany. The study says that India remains constrained by lack of broadband and fast mobile access, with only 69 percent of the country's population having connections that are fast enough for them to open an e-commerce website. The average internet speed in India is 2 mbps, the lowest in Asia-Pacific, and ranked 115th globally.
The sector is supposed to grow at 21 percent in the next five years. Despite the relatively low number of shoppers, India has seen one of the largest investments by global private equity firms, in companies such as Flipkart ($1.75 billion), Snapdeal ($1 billion), Ola Cabs, Urban Ladder and Commonfloor among 200 others that raised atleast $1 million as investors hope to find the next Alibaba. None of the companies are profitable or showing any signs of cutting losses. Global players such as Amazon announced investments worth $2 billion in the Indian market, as they hope the market grows with the same sizzling speed as China, which was ranked first last year.
But investors will have to wait until transport infrastructure improves significantly, and more people have access to broadband and credit cards. The Indian market will continue to grow, but the government needs to do more to help the e-commerce sector rival global leaders in the index.