News & Analysis

Small Cities Ordering Big via eCommerce

India's eCommerce landscape is changing and fast as tier-2 and tier-3 cities are accounting for a majority of digital buying, says a new report

India is witnessing a digital transformation of sorts as more and more people from tier-2 and tier-3 companies are ordering online. This despite the fact that shoppers have returned to the physical store experience during 2022 amidst receding fears of Covid-19, says a new study by eCommerce enabler Unicommerce. 

The report uses data based on analyzing more than 500 million transactions, minus those from the high volume segment of smartphones and feature phones. It says the eCommerce transactions in 2022 grew by 36.8% year-on-year in spite of the clear shift towards physical stores that had gotten limited during 2020 and 2021. 

 

Tier-2, Tier-3 markets see robust growth

It said tier-3 markets such as Roorkee, Rohtak and Udaipur saw digital transactions grow by as much as 64.7% during the year while tier-2 markets such as Bhubaneswar, Amritsar and Bhopal grew by more than 50%. It goes on to add that even order volumes from tier-1 cities went up by 10.3% though this needs to be seen in the context of a higher base of previous years. 

“Ecommerce growth in India has well and truly moved beyond the large cities to hundreds of tier-2, 3 and smaller cities across the length and breadth of the country,” the report said. “The promise of easy access to large assortments at attractive prices has unlocked large cohorts of buyers in under-penetrated markets,” the company said in the report. 

Not only did the tier-2 and tier-3 markets account for a majority of the total orders placed by users via eCommerce websites, the actual growth of users was also much faster than what the tier-1 markets led by the metro cities could achieve during 2022. 

 

Beauty, personal care and eyewear grow big

The Unicommerce survey listed out beauty and personal care and eyewear as the two fastest growing segments during the year with apparel continuing to lead in terms of sheer order volumes. While beauty and personal care showed an year-on-year growth of 76%, those in the eyewear category saw a 55% growth. 

“The growth in the beauty and personal care segment was also fuelled on account of aggressive spends by multiple digital-first players striving to gain market share and consumer mindshare,” the report said, adding that “This has helped the segment consistently outperform over the last two years” with the focus being on lenses, transparent eyeglasses and sunglasses. 

 

D2C brands seeking omnichannel approach

Another visible trend that the report highlighted was the impact of direct-to-consumer brands such as Boat and The Man Company. Their shift away from marketplaces such as Amazon and Flipkart on to their own websites was a major change and saw robust growth. For these brands, the sales from their own portals grew by 48.3% while from marketplaces it was 21.5%, thus indicating the shift in their priorities. 

In fact, industry experts say that several internet brands found marketplaces to be an easier-to-scale option due to the presence of a large number of users. However, in recent times  there have been reports of how these marketplaces are becoming expensive to sell on with rising advertisement costs amidst growing competition making it unviable due to diminishing margins on the product itself. 

The report said, many such direct to consumer brands had spent the last two years investing in digital transformation to build a strong supply chain ecosystem that could drive traffic to their brand websites. And this was probably reflected in the numbers coming from the Unicommerce survey and report. 

This year once again saw a higher level of adoption of the omnichannel model among retail brands with companies leveraging their own stores to fulfill orders. The ship-from-store segment saw a 55% growth in order volumes with more and more brands moving that way. The arrival of the government’s ONDC initiative could witness a further shift in this space. 

However, the report also pointed out that the omnichannel adoption was more pronounced in some segments such as footwear, fashion and eyewear while others such as beauty and personal care, electronics and home appliances saw much slower adoption. However, with the ONDC coming into play, these omnichannel opportunities are likely to grow substantially. 

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