The already booming e-commerce sector in India is showing signs of entering into ‘massification’ — the second phase of the growth trajectory that global e-retail has followed, according to a report by Bain & Company and Flipkart. The report predicts that the Indian e-retail market is primed to reach nearly 300 to 350 million shoppers over the next five years—propelling the online Gross Merchandise Value (GMV) to $100 to 120 billion by 2025. (Read the full report here)
The $850 billion Indian retail market is currently the fourth largest in the world and is largely unorganized. But led by the online revolution and its growing influence on Indian shoppers, it is on the cusp of a transformation.
The report found that growing internet population coupled with cheap data and online penetration in mobiles and electronics was already changing the online commerce landscape in recent years. Even though Covid-19 caused an inflection in e-commerce penetration globally driven by consumers’ need for safety and convenience, the study noted that India’s online retail growth story will continue to be an exciting one.
E-tailers to enter a new growth phase
The study claims that while the sector saw a surge in the last five years, there is “significant headroom for further growth”. While the current e-retail industry in India currently only constitutes 3.4% of the overall market, the report said the sector will “reach massive scale” and will be driven by access to cheap mobile data for nearly one billion consumers by 2030.
It added that this will lead to growing online spending by digital natives, and innovations such as vernacular-based interfaces, as well as voice and visual searches.
“We expect fashion categories to play a critical role in acquiring online customers, similar to the mature markets of the US and China,” said the report.
In fact, the report pointed out that India is showing similar levels of shopper penetration that China had eight years ago.
Changing consumer trends
The authors expect India’s e-commerce growth story to be inclusive—one that empowers the sellers and consumers both. For the consumers, it will provide convenient access to a wide assortment of products across all geographies and income segments. For sellers including SMEs and MSMEs, it will provide an unprecedented impetus, by creating an easy access to a large base of customers across the country and keeping their stores running 24/7.
The report highlighted that over the past year, consumer engagement with online platforms has increased, but a visitor spends less than nine minutes per visit on an e-retail platform.
Also, one in two visitors browses the image gallery and only one in 15 click the detailed product description, indicating that brands and sellers should invest in high quality product images and high impact summary product descriptions.
Interestingly, online shoppers browse more than 20 product pages before making a purchase. For categories like mobiles and women’s ethnic wear, consumers browse about 50-60 product pages before purchasing one.
The road to success for E-tailers
The report noted that out of 100 existing online shoppers, 30% increased their spending in categories they had already shopped for during the pandemic. However, with the lockdown and struggle for getting non-essential online delivery, sales fell as online retail firms were restricted from shipping non-essential products.
Nonetheless, the report noted that majority of shoppers will come from Tier 2 and small towns and drive the next phase of ecommerce growth. The growth will be fueled by a major drop in internet data rates, increasing share of Millennials and Gen Z among the population and high online reach of categories such as mobile phones and electronics.
Hence, going forward, the study states that e-retailers are likely to invest across four key areas to win the next wave of Indian shoppers:
– Voice and Vernacular: By 2021, 500 million vernacular speakers are expected to be online, versus 200 million English speakers. At the same time, the number of voice searches on Google has almost tripled in the last year.
– Visual and Video: Video consumption in tier-2 and smaller towns in India grew 4 times in the last year.
– Social Shopping: 50+ private equity and venture capital investments in social commerce were closed in the last five years. In China, e-retailers are trying to win women shoppers in tier-3 and tier-4 towns through social shopping.
– Ecosystems: Multiple digitally-led ecosystems are emerging in India as online retailers try to tap into more customer purchase occasions and win a higher share of their time and spending.
“Ecosystems attract a huge customer base, which in turn attracts retailers who want easy access to a critical mass of consumers. And customers gain a one-stop shop for all their needs,” said Arpan Sheth, partner and leader of Bain & Company’s Asia-Pacific Technology, Vector and Advanced Analytics Practices.
To conclude, the above projections clearly paint a rosy picture for all the existing eCommerce players in India. Clearly, the country’s e-tail growth hasn’t emerged in isolation. This growth is majorly attributed to cheap mobile data plans that made the internet accessible to a large segment of the population, alongside accessibility of e-tail giants like Flipkart and Amazon catering to customers from all city tiers.
Despite suffering an approximate loss of $1 billion due to the COVID-19 outbreak, it seems that there’s no stopping this sector. In the next few years, as the number of online shoppers in India increases, there would also be a huge window of opportunity for individual brands to have set up their own eStore and rely less on marketplaces such as Flipkart and Amazon. And that’s going to be yet another interesting space to watch.