03/06/2016 3:21 PM IST | Updated 15/07/2016 8:27 AM IST

In India, E-Commerce Sales Stall Even As The Country Overtakes The US In Number Of Internet Users

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India featured prominently in the annual internet trends report by Mary Meeker, becoming the only country to have a higher rate of growth of new internet users than the previous year and with an internet user base that is now larger than the US. But, the Meeker report apart, sales trends at Indian e-commerce companies tell a different story, prompting questions as to whether the Indian e-commerce space is in fact a bubble.

The annual report by Meeker, now a partner with US venture capital firm Kleiner Perkins Caufield Byers, is an exhaustive study of worldwide internet trends. It throws some impressive numbers for India: the country’s internet user base is now 277 million up about 40 percent year-on-year.

However, despite the rapid growth in Internet use and a huge potential for further growth, many e-commerce companies in India have recently hit a valuation wall and are struggling to raise fresh capital from investors amid slowing sales.

According to Mint report that cited sources at top e-commerce firms, for the first time in years, online retail sales in April were lower than sales in December.

“It seems like investors and analysts have overestimated the growth of e-commerce,” Rutvik Doshi, Director, Inventus (India) Advisors, a venture capital firm, told Mint. “There’s no doubt that e-commerce is going to grow very fast, but at this point, it looks unlikely to grow at the pace investors expected last year,” he said.

India’s online marketplace has become a battleground among major rivals such as Amazon and private equity-backed Flipkart and Snapdeal, as they try to capture a slice of the Indian consumer's growing appetite for online shopping. But Flipkart saw its valuation revised down to $11 billion at the end of February and Snapdeal has struggled to raise additional funding at its

desired valuation of $6.5 billion.

In the Mary Meeker report, however, India features as one of the hottest markets for global internet companies.

And mobile remains a compelling story, as more Indians use mobile phones to access the internet than the rest of the world.

Not surprisingly, Indian e-commerce companies also have a bigger mobile reach compared to other markets.

Globally, the internet user base increased by 9 percent in 2015 over the previous year’s growth, according to the report. It added that about 39 percent of the world population now uses the Internet.

Contact HuffPost India

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