In the last decade, the Indian e-commerce market has seen massive growth. E-tailers growth have increased with every passing year and so have their cash-burn rate.
However, in the coming five years, the cash-burn rate is expected to shrink by one-third of its current rate, according to a recent study by RedSeer.
Among several other reasons, it will be driven by changes in product category mix including a falling share of lower margin mobiles and electronics and rise in the share of higher margin Apparel and Home.
For every $100 of GMV, RedSeer expects this to shrink to $12 in 2019 and $5 in 2023. Last year, the e-tailing sector loss figure was $15 for every $100 of GMV.
The unit economics will get better with e-tailers housing more fashion, FMCG, and home furnishing products, which garner up to 25-35 per cent margins on average, instead of mobiles and electronics, which give only single-digit margin with higher cash burn rate.
In coming years, discount offered by e-tailers will also come down, the study added. Though, it won’t affect online shopping. In fact, customer maturity and trust in the internet ecosystem will drive sales.
Besides, the study further added that the recently announced e-commerce FDI norms would lead to an expansion of the seller base of e-tailers. Like their Chinese counterparts, Indian retailers may soon start providing value-added services.
In upcoming years, new streams of revenue like digital ad and financing solution are expected to contribute significantly in e-tailers topline.
By 2023, the e-tailing segment is expected to touch $90 billion marks.