This massive e-commerce penetration and preference for online payment methods have been driven by an enhanced customer need for safety and convenience, especially during prolonged stay-at-home periods.
The $900 billion Indian Retail market is undergoing massive disruption on multiple fronts – especially over the last 2 years, with the onset of the pandemic in early 2020. The most significant disruption can be seen in the shopping preferences of Indian consumers.
India has the third-largest online shopper base globally, with 140 million e-retail shoppers in 2020, right behind China and the US. The Indian e-retail market is expected to grow at 25%-30% annually over the next five years to reach $120–140 billion by FY26.
At the same time, e-retail categories have witnessed significant growth and recovery patterns through the past 12–18 months of the pandemic. Though, fashion and electronics categories have seen a post-pandemic stabilized demand stabilization; frequent-use categories such as grocery, household, and personal care have clocked a continued acceleration.
The pandemic has inadvertently helped in redefining the shopping preferences of Indian customers. This transformative effect is definitely more pronounced in Tier 2+ towns across the country, be it Guwahati, Patiala or Asansol. Let’s look at a couple of use cases to gauge the impact of the pandemic on India’s retail sector.
Rimi is a homemaker in Guwahati – a bustling Tier 2 city in North-East India. Before the pandemic struck, most of her household purchases including groceries, fresh vegetables and fruits, and home and kitchen items were made at the local kirana store and wholesale market. Fast forward in 2021, Rimi along with her neighborhood friends prefer procuring everything online. Factors like “best prices” and “convenience” have ensured that online commerce is here to stay. No wonder, Rimi and all her friends like to increasingly buy goods online.
Satyajit, a young working professional in a small town in West Bengal, also chooses to buy online – be it electronics or household groceries for his family. He also prefers making online payments through his UPI app, rather than using cash which proves to be a rather seamless and efficient method.
This massive e-commerce penetration and preference for online payment methods have been driven by an enhanced customer need for safety and convenience, especially during prolonged stay-at-home periods. We have observed similar trends across global markets where customers are altering their shopping behavior. This ubiquitous penetration and adoption of e-commerce are poised to increase significantly even in the post-pandemic period.
A recent report by Bain & Company purported that the pandemic was a watershed moment for India’s e-retail market as it fast-forwarded a year’s worth of innovation with regard to e-retail penetration, which was at 4.6% by the end of FY21. Intriguingly, a recent Shopify Future of Commerce 2021 (for India) report stated that a whopping 84% of customers have shopped online since the emergence of the pandemic. Also, 85% of younger consumers in the 18-34 age bracket have shifted much of their spending to the online platforms.
One of the categories, where this change appears most pronounced, is groceries and daily essentials. In pre-pandemic times, more than 90% of our observed shoppers were habituated to buy groceries from offline brick and mortar stores. However, in a recent global survey conducted by YouGov, consumers said that their grocery shopping habits have changed over the course of the coronavirus crisis. In India, 81% of respondents admitted that their shopping dispositions have changed now. Due to several benefits such as convenience, attractive prices, and digital payment methods, Customers are likely to continue online procurement, even after initiating a full-fledged recovery from the pandemic.
The continued rise of social commerce:
During the pandemic, one of the most noteworthy trends has been the boom of social e-commerce. With people staying at home, they had a chance to reconnect with friends and loved ones like never before. This inadvertently led to the concept of social commerce as people are more comfortable and open to living in a “shared economy”. This further enables them to unlock great deals for home utility products by buying as a collective or through social networks.
Needless to say, Social commerce is much more prominent across small towns as people there are more socially connected with their communities, families and friends. They also prefer great deals and discounts and have an intrinsic trust deficit with the current model of e-commerce in the country. Therefore, Social communities will keep fostering and empowering more shared purchases for added benefits, be it better prices or convenience. Therefore, it is estimated that Indian social commerce is poised to reach a valuation of $70B-$100B by 2030 from just $2B in 2020.
In a series of pivotal developments, online retail is right on the verge of becoming democratized and more accessible to the next 500M customers residing across small towns in India, thereby, ushering in a social commerce revolution. Amid this boom, it is anticipated that over 60% of social shoppers will come from tier-2+ towns.
According to a recent BCG report from 2021 “The Consumer Sentiment Series”, 76% of users were buying from social networks/chat groups as compared to before the pandemic. As e-retail accessibility continues to expand, a new wave of shoppers will surface online. The majority of these future online shoppers are already a part of the digital funnel—watching videos and using chat and social media apps. However, the challenge for e-retailers is shifting this digital footprint towards social commerce.
The future of commerce in India is a massive opportunity – and we can’t be more excited to see this transition!
Source: Business World