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Why e-commerce companies are on expansion spree in India

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A report said the Indian e-commerce market is expected to grow to US $200 bn by 2026 from US $38.5 bn in 2017. The report revealed that India's e-commerce orders volume increased by 36% in the last quarter of 2020.

Why e-commerce companies are on expansion spree in India
Buoyed with increased online spending in India, e-commerce firms are aggressively ramping up operations to dominate the space. While several big conglomerates are investing in e-commerce startups, already established online shopping platforms are ramping up their presence pan-India. Besides, some foreign brands are also planning to enter the Indian e-commerce space.
According to a report by India Brand Equity Foundation, the Indian e-commerce market is expected to grow to US $200 billion by 2026 from US $38.5 billion in 2017. The report revealed that India's e-commerce orders volume increased by 36 percent in the last quarter of 2020, with the personal care, beauty and wellness segment being the largest beneficiary.
"The growth for the industry has been triggered by an increase in internet and smartphone penetration. As of September 2020, the number of internet connections in India significantly increased to 776.45 million, driven by the 'Digital India' programme," the report added.
E-commerce bigwig Amazon is in the process of setting up several delivery centres in India. The focus is on increasing presence in tier II and tier III cities. In April this year, Amazon announced it will have more than 43 million cubic feet of storage capacity across 15 states, supporting around 8,50,000 sellers across India.
Last month, Amazon India announced the expansion of its fulfilment network in Tamil Nadu by almost doubling the storage capacity this year.
Talking to CNBC, tech investor Gene Munster had predicted that India could potentially contribute between 15 percent and 20 percent to Amazon's growth over the next five years. The tech giant hopes to export $10 billion worth of India-made goods around the world by 2025.
Amazon's major rival Walmart-owned Flipkart is also expanding its grocery and last-mile delivery programmes. The group has decided to focus on accelerating growth for millions of small and medium Indian businesses, including kiranas.
Earlier this year, Flipkart Group raised $3.6 billion from investors, including SoftBank. Subsequently, the company announced to make "deeper investment in people, technologies, supply chains, and infrastructure to address the requirements of a rapidly growing consumer base in India".
The e-commerce platform, as of April 2021, was valued at $37.6 billion.
Mukesh Ambani-owned Reliance Industries Limited is also planning to take on other online retailers and e-commerce giants. The group is acquiring several local online retailers. In a BSE filing last month, Reliance Retail revealed that it has acquired a majority stake in online pharmacy Netmeds for approximately Rs 620 crore.
Significantly, Reliance Retail Ventures Limited is planning to convert its MyJio mobile application into a super app by including the offerings of Just Dial, an online classified and retail services provider. This super app is expected to be a 'one-stop window for every imaginable consumer need'.
In June this year, Grofers, the grocery delivery start-up, entered the unicorn club after raising US$ 120 million from Zomato, the food delivery platform. The eight-year-old company has 280 stores in 12 Indian cities. According to Grofers co-founder and chief executive officer Albinder Dhindsa, the company is planning to expand to 25 cities.
Meanwhile, Singapore-headquartered e-commerce firm Shopee has launched a recruitment campaign for vendors to sell on what it called "Shopee India".
The company is also ramping up hiring in India. Shopee posted a slew of India job ads in recent weeks for positions ranging from seller operations to compliance.
"Shopee is coming to India!" announced an official video on YouTube in August. In the video, the company promised free shipping and no commission fees for sellers and buyers. However, the firm's launch date in India has not been finalised yet.
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Disclosure: Network18, the parent company of CNBCTV18.com, is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.