On the growth path. Gross merchandise value of online marketplaces to touch $350 billion by 2027: report

The online marketplaces sector in India is expected to more than triple to achieve a Gross Merchandise Value (GMV) of $350 billion in the next five years, a new report by Bain & Company and Accel, has said.

Titled ‘The Rise of Digital Bazaars in India’, the report highlights that these marketplaces will create $400–$500 billion in enterprise value, contribute more than 5 per cent to India’s GDP, enable more than 15 million micro, small, and medium enterprises (MSMEs) to grow online, and create 7 million jobs by 2027.

Arpan Sheth, Partner at Bain & Company and co-author of the report, said: “Marketplaces have contributed to India’s growth story by offering greater access to capital and innovative financing solutions for traditionally underserved segments; enabled MSMEs to transact online, with increased pan-India reach; and have provided employment opportunities to more than 3 million gig workers in India.”

B2C e-commerce marketplace

Currently, online marketplaces in India contribute more than $100 billion in GMV, with B2C e-commerce marketplaces being the single largest segment, contributing $50 billion. 

Anand Daniel, Partner at Accel and co-author of the report said, “Our report on the country’s digital bazaars reveals the extent to which marketplaces have grown in this market, across both business-to-consumer and business-to-business segments. More than 1/3rd of large outcomes in our start-up ecosystem have been marketplaces and contribute more than $100 billion in GMV”.

The report highlights that the next wave of scale marketplaces has the potential to emerge in two additional major categories — (1)‘Bharat-first’ models driven by participation from tier-3+ cities, and (2) global cross-border models addressing India’s export potential.

Gaming, caregiver services nascent

Gaming, caregiver services, creative content, Web 3.0 have large-scale marketplaces in mature markets, but are currently nascent in India. They represent future trends in the Indian marketplace landscape, and are a precursor for these segments to grow large in India, given proof of scale in the US and China that have multiple unicorns in these areas, according to the report.

India has cultivated a vibrant and successful marketplace landscape, demonstrated by the sheer breadth of more than 300 funded marketplaces across multiple categories such as retail, education, healthcare, travel and financial services. Almost 20 marketplaces have achieved a GMV of more than $1 billion and many players are turning profitable.

While online marketplaces will continue to be dominated by B2C e-commerce, with 40 per cent of the total GMV in 2027, the GMV of B2B e-commerce marketplaces is slated to grow by five times its current size to reach $55 billion, followed closely by online food delivery, which will almost triple in size to nearly $22 billion.

Funding

Not just for buyers and sellers, marketplaces have also seen significant traction with investors in recent years, having received cumulative funding of $30 billion between 2018 and October 2022. 

B2C e-commerce, B2B e-commerce, and online food delivery were among the highest funded marketplaces sectors, together accounting for close to 60 per cent of total funding received in the last five years. From B2C e-commerce marketplaces leading the share of deal volumes in 2018, B2B e-commerce marketplaces have emerged as the frontrunner in 2022, with deal volumes growing to 31 per cent of total deals in the year so far.

Prabhav Kashyap, Partner at Bain and Company and co-author of the report said, “Deal-making in the short to medium term is likely to be more measured and valuation multiples will see some degree of rationalisation. The future of marketplaces, on the other hand, is robust and with strong growth in their GMV and continued interest from investors, we expect the segment to see ample opportunities and a strong pick-up”.

2021 was a landmark year, which saw funding in marketplaces reaching $16 billion, growing four times compared to 2018, and deal volumes doubling in the same period. However, in 2022 year-to-date (YTD) marketplace funding activity has been moderate at $4.5 billion, given the tempering of 2021 highs, valuation corrections, and muted sentiment in global public markets.

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