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One-fifth of total retail sales will be online by 2021 in Asia Pacific: Forrester Data Report

21-February-2017
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One-fifth of total retail sales will be online by 2021 in Asia Pacific: Forrester Data Report

Asia Pacific is the largest region for online retail sales, containing both the largest market (China) and the fastest-growing market (India). Around one-fifth of total retail sales will take place online by 2021 in Asia Pacific, forecasts the Forrester Data Report: Online Retail Forecast, 2016 To 2021 (Asia Pacific). Furthermore, India is the fastest growing online retail market in the world, and is expected to reach USD 64 billion by 2021 (31.2 per cent CAGR growth).

Key takeaways from the report:

  1. China will become the first market to reach USD 1 trillion in online retail sales. It accounts for nearly 80 per cent of Asia Pacific online retail sales.
  2. Mobile commerce is driving online retail, especially with the increased adoption of smartphones and tablets as well as the development of 3G networks.
  3. Consumers are buying from more categories, with apparel being the largest category for online retail, followed by consumer electronics and computer hardware.

India remains the fastest-growing market in the world

The report predicts that India will reach USD 64 billion by 2021, growing at a five-year CAGR of 31.2 per cent. But government actions, a slowdown in venture capital funding, logistics challenges, and slow growth in the number of online buyers are holding back India’s online retail market.

In terms of government actions, two major developments have had an impact—the Indian government issuing new guidelines for foreign direct investment (FDI) in ecommerce in India, and the move of demonetization late last year.

Some of the key changes were defining eCommerce entities more clearly; not allowing FDI in inventory-led models of online retail; restricting eCommerce firms to gaining no more than 25 per cent of their marketplace sales from one seller; and most significantly, putting a curb on discounting by marketplaces. The curb on discounting led to the market slowing, with customers waiting for discounts before making a purchase. Meanwhile, the slowdown in venture capital funding made it difficult for online retailers to raise funds, leading to slower growth in online retail sales.

The report expects demonetization to continue to hold back online retail sales until at least March 2017, depending on how soon the government brings cash back into the system. The government and online retailers are pushing online payment methods during this period, but consumer adoption will take some time and buyers will wait to start spending like they did before.

Apparel is the largest category while grocery is growing the fastest

Apparel is the largest category, accounting for more than 29 per cent of total online retail sales in Asia Pacific; consumer electronics follows at 25 per cent; computer hardware takes the no. 3 spot with 11 per cent. The low penetration of organized retail in China and India as well as consumers in tier II and tier III cities opting for online channels are powering the online sales of apparel. The report expects other categories to grow rapidly as consumers become more confident shopping online.

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