August 18, 2021: India,one of the largest consumer economies globally, remains largely untapped, finds the annual study: How India shops online 2021, by market analysts, Bain & Co.
The postpandemic view of online shopping by Arpan Sheth, Shyam Unnikrishnan, Manan Bhasin and Abhishek Raj reports that the $810 billion Indian retail market is the fourth largest in the world and is quickly evolving to include a sizeable e-retail component. India is home to the third-largest online shopper base, of 140 million, only behind China and the US.
However, the market is still massively untapped and there is immediate potential to reach India’s large Internet user base of approximately 625–675 million people.
The fiscal year ending March 2021 was one of contrasts for India’s retail market. The overall retail market shrunk by 5%, along with a 7.3% contraction in GDP. However, the Indian e-retail market saw a 25% growth despite a two-month national lockdown and multiple prolonged disruptions in regional pockets over the year.
The pandemic was a watershed moment for India’s e-retail market, driving a 12-month acceleration in e-retail penetration, which was at 4.6% by end of FY21. This acceleration was even higher in the top eight metro cities, where online shopping is more common: One in three people shopped online at least once last year in the top eight metro cities.
This Covid-19 induced inflection in e-retail is a global phenomenon driven by an enhanced consumer need for safety and convenience, especially during elongated stay-at-home periods. This has also played out in India wherein e-retailers have been the lifeline for both consumers and sellers—enabling access to essential commodities and hygiene products to millions of households during the lockdown, and providing business avenues to thousands of sellers. We expect the surge in penetration to sustain post stabilisation, as a similar trend has been seen globally.
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For graphics from the Bain report and e-shopping
megatrends,see our Image of the Day feature
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E-retail categories have seen disparate growth and recovery patterns during and post the pandemic. First, select categories (e.g., mobiles, electronics, appliances) saw a massive one-time spurt that then cooled off due to longer replacement cycles and recovery of offline retail. These categories did not see as substantial a jump during the second wave over April–May 2021. Second, frequent-use categories (e.g., groceries, household, personal care) saw rapid growth and are likely to continue seeing accelerated growth postpandemic. These habit-forming categories, which have a high share of repeat purchases online, also benefited from a concerted push to accelerate digital sales by leading brands that were not as invested in this channel pre–Covid-19. Third, discretionary and out-of-home spending categories (e.g., fashion, travel products) saw relatively slower growth during the pandemic. We expect growth rates in e-retail spending for these categories to rebound to pre-pandemic levels soon and then follow long-term growth trajectories.
E-retail continues to benefit millions of shoppers across India, driving ubiquitous access and heightened convenience. It has democratised shopping by providing access to more than 95% of India’s pin codes. It has empowered Bharat’s small sellers and micro-entrepreneurs, broken go-to market barriers for incumbent and insurgent brands, and provided employment to millions. E-retail has particularly been a boon during the pandemic after the setbacks caused by widespread disruption (for consumers and small businesses) and loss of jobs.
In the future, the e-retail market is expected to grow to $120–140 billion by FY26, increasing at approximately 25% to 30% per annum over the next five years. The growth will be led by smaller towns, which account for four out of five new shoppers. In addition to small towns, women and older shoppers have gained prominence in the online shopper base over the last year, and this trend is expected to continue.
Full report here: bain_report_how_india_shops_online_2021.pdf