40 million reasons for India’s online sales boom?

SNAP ANALYSIS
40 million reasons for India’s online sales boom?
An IndiGo Airlines aircraft flies above an advertisement of online marketplace Snapdeal featuring Bollywood actor Aamir Khan, in Mumbai. India’s e-commerce industry is estimated to rake in 40 million new online shoppers, while the number of online shoppers for the year is pegged at 190 million.Courtesy: Reuters

Sector estimated to rake in more than $55 billion in sales during 2021 with the addition of 40 million new online shoppers.

A major surge in demand for products and services through online channels and digital wallets during the Covid-19 pandemic has led to an unprecedented boom for India’s e-commerce industry, according to a series of surveys released this week. The uptick in online shopping comes despite the perception that the regulatory environment in India is getting stricter, analysts said.

India’s e-commerce industry is estimated to rake in more than $55 billion in sales during 2021 with the addition of 40 million new online shoppers, while the number of online shoppers for the year is pegged at 190 million – compared to 150 million last year, according to Mrigank Gutgutia, Director of consumer Internet at Redseer.

Jump in shopper base

According to the online retail consultancy, India’s online shoppers base is likely to jump to 300 million in next five years with 90 per cent of the consumers from tier II cities and beyond. Last year, during the festival period alone, e-commerce giants Amazon, Flipkart and other vertical players clocked nearly $9 billion in sales despite the pandemic, Gutgutia said.

Rising consumer preference for online shopping, proliferation of e-retailers and emergence of new payment methods will continue to drive e-commerce growth in India.
- Ravi Sharma, GlobalData

The booming digital economy in India which has invited the attention of global leaders is expected to touch $800 billion market value by 2030, contributing to 25 per cent of the country’s GDP, as per a report released by the Redseer based on quarterly consumer sentiment surveys. The digital economy includes 60 per cent of travel, 40 per cent of non-grocery retail, 30 per cent of education, 25 per cent of food and beverages services and 6 per cent of Pharma/Grocery going through digital channels by CY30, the report stated.

Last year, during the festival period alone, e-commerce giants Amazon, Flipkart and other vertical players clocked nearly $9 billion in sales despite the pandemic.
Last year, during the festival period alone, e-commerce giants Amazon, Flipkart and other vertical players clocked nearly $9 billion in sales despite the pandemic.Courtesy: Reuters

E-commerce survey

The upbeat assessment aligns with a similar survey by GlobalData.

With the e-commerce market in India witnessing high growth during the past few years, it has continued to grow even during the COVID-19 pandemic as wary consumers preferred online channel for purchases. Against this backdrop, e-commerce sales are forecast to rise at a compound annual growth rate (CAGR) of 18.2% between 2021 and 2025, to reach $120.1 billion in 2025, according to GlobalData.

According to GlobalData’s analytics, e-commerce payments in India grew by 12.2% in 2020 and is estimated to register a growth of 16.8% to reach $61.5 billion in 2021.

“The COVID-19 pandemic has fast-tracked consumers’ transition to digital payments in most markets, a trend also seen in India,” said Ravi Sharma, banking and payments lead analyst at GlobalData.

“With social distancing rules and closure of many brick and mortar stores, shoppers embraced online channels even for their day-to-day purchases,” he said.

Transformed experience

Indeed, e-commerce has transformed the way consumers shop in India, supported by increase in Internet and smartphone penetration, rise in digital literacy among consumers and government’s digital push. Over the past year, despite a decline in consumer spending, economic slowdown and uncertainty caused by COVID-19, e-commerce sales have continued to surge across the country – offering retail giants and start-ups an equally lucrative sales matrix.

While sectors such as travel and accommodation were affected due to lockdown and travel restrictions, a strong growth was seen in online purchases of retail goods such as grocery, electronics, and healthcare products.

Employees arrange tomatoes before weighing them at a Big Basket warehouse. E-tailers like Bigbasket.com and Localbanya.com turn in profits while supermarkets are struggling.
Employees arrange tomatoes before weighing them at a Big Basket warehouse. E-tailers like Bigbasket.com and Localbanya.com turn in profits while supermarkets are struggling.Courtesy: Reuters

Innovation in retail

Leading e-commerce retailers Flipkart, Amazon and BigBasket have seen an increase in orders each month since the outbreak of the virus. To support non-cash payments, e-commerce companies are offering multiple digital payment options. For instance, in June 2021, Flipkart introduced quick response (QR) code-based payment for pay-on-delivery shipments, enabling consumers to switch from cash on delivery to UPI-enabled digital payment.

Buy now, pay later (BNPL) solutions are also gaining popularity in India amid COVID-19. In April 2020, global e-commerce giant Amazon launched Amazon Pay Later, enabling consumers to purchase in three to 12 monthly installments. A growing number of companies such as LazyPay, Simpl, and ePayLater are also offering similar payment services. Customers can register their preferred payment tool with buy now, pay later solution and the amount gets debited automatically on due date.

“The COVID-19 crisis has accelerated the digital payments shift in India and opened e-commerce to a whole new set of consumers and merchants who were not using online channels earlier. Rising consumer preference for online shopping, proliferation of e-retailers and emergence of new payment methods will continue to drive e-commerce growth in India,” Sharma said.

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