Mumbai: Online retail in the country that is growing at a faster pace, is expected to be USD 170 billion by FY30, growing at a CAGR of 23 per cent, according to a Jefferies report. The online retail segment, which is currently around 25 per cent of total organised retail market in India, can potentially increase to around 37 per cent of the total organised retail market during this period, the report said. Currently, the total online retail in the country is pegged at USD 18 billion.

Spends per online shopper, which is estimated at Rs 12,800 is expected to increase to Rs 25,138 by FY30, with consumers shopping online for other segments, beyond electronics and apparel. It noted that electronics, including mobile phones, has grabbed the market share from physical retailers, largely due to heavy discounting and cashback online in electronics.

"Apparel and electronics have been present as categories in online retail space quite some time now in India, but online grocery is increasingly witnessing new consumers as companies such as Bigbasket and Amazon Pantry are heavily advertising there discounting days, which takes place at the start of every month.

We believe that new customers will continue to enter the online grocery, given low differentiation in grocery and convenience for consumers. However, penetration of online retail in grocery will continue to remain lower," it said. Personal care, including make-up, too is gaining its market share online.

Jefferies noted that the increase in online penetration has been a function of both discounting and convenience, however, over the medium term, discounting in the system should rationalise and convenience will be the key driver.

However, it observed that product quality remains a key concern for most of the consumers shopping online and there have been a lot of instances in the country where consumers have got a counterfeit or a fake product, especially in categories such as perfumes and cosmetics.

"Quality remains a key issue for consumers while shopping online. Though online retailers are taking steps to address this issue, it will take some time and hence some consumers will continue to stay away from online shopping, especially for big-ticket, branded items.

The adoption of online retail should continue at a fast pace, as convenience seems even more important. Apart from quality, breach of data and data security are also key issues hampering adoption of online retailing," it added.