Reliance to disrupt e-commerce sector, Paytm Mall’s biz model unsustainable: Forrester

The size of India's online retail market is likely to touch $85 billion by 2023, Massachusetts-based market research company Forrester Research Inc. has projected in a report.

The report, The State of the Online Retail Market in India in 2019, was authored by Satish Meena, Reineke Reitsma and Sanjeev Kumar. It discusses the activities crucial to the online retail market in the past year and points out what marketplaces and brands can expect in the foreseeable future.

The report found that online spending took a hit in the first quarter of 2019 due to changes in the e-commerce policy last December with regard to foreign direct investment (FDI).

The report said that Reliance Industries Ltd’s impending entry into online retail will disrupt the Indian e-commerce landscape.

Reliance Industries' Reliance Retail Ltd unit is the largest brick-and-mortar retailer in India. With adequate access to capital and its chain of stores and sister telecom company Jio’s ecosystem, the Mukesh Ambani-led company has the kind of scale required to swiftly launch pan-India operations, the report said.

The report said that Reliance’s history of launching products with sizeable discounts will exacerbate the disruption its entry would cause in the e-commerce sector.
Forrester also said Amazon has been the most popular online retailer in metropolitan cities, but Flipkart remains the largest online retailer. Amazon ranked ahead of Flipkart in Forrester’s Customer Experience Index in 2016 and 2018.

The report also said that other players such as Snapdeal, ShopClues and Paytm Mall will find it difficult to raise funds to subsidise discounting. It said that Paytm Mall’s business model is no longer sustainable and that it will find it difficult to survive in the long term even if it raises a fresh round of funding.

Shedding light on the prospects of the online grocery market, the report said it is still a small category which still has unfulfilled potential. The report said that potential for business models like that of micro-delivery grocery startup Milkbasket to make money is low.

The report estimates the online grocery market will reach $3.9 billion by 2023, which will be 5% of the total online retail market. So, investment in this sector would require a horizon of more than five years, the report said.