Indian e-commerce is the gift that keeps on giving

The phenomenon of online shopping may have chronicled its growth during the pandemic, but experts speculate that the online obsession is here to stay due to growing numbers and projections. This is largely thanks to incessant development in tech; wider range of products coupled with fascinating consumer behaviour.

Let’s get digital! This seems to be the rousing cry as the space of e-commerce in India grows exponentially, driven by the pandemic and the subsequent national lockdown. There was the element of social distancing during the pandemic which played the crucial role in ensuring that people stayed in and took recourse to the online world.

Online shopping, by all accounts, may have seen its resurgence during the pandemic but experts believe that the phenomenon is now here to stay. For those who are seasoned online shoppers the playground got bigger and better – the best is yet to come.

Demand for commodities purchased online has touched record highs and customers are booking anything from potatoes to automobiles in a quest to satiate their desires which stems from daily necessities to luxuries.

This phenomenon forced companies; tech platforms and digital platforms to take a long hard look at the customer’s increasing preferences and tailor their products and services accordingly.

One thing is for sure, the sector is designed for lasting future growth. According to observations by the Indian Brand Equity Foundation (IBEF), the Indian E-commerce market is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. The Indian e-commerce sector is ranked 9th in cross-border growth in the world, according to the Payoneer report.

Much of the growth has also been triggered by a tandem increase in internet and smartphone penetration. As of August 2020, the number of internet connections in India significantly increased to ~760 million, driven by the ‘Digital India’ programme. Out of the total internet connections, ~61% connections were in urban areas, of which 97% connections were wireless.

Market size, according to the IBEF report, plays a huge role in determining the future of this platform and how it can be shaped, IBEF contends. Smartphones have been a suitable collaborator to this experience. The rising penetration rates of smartphones across the length and breadth of the country since the launch of the 4G network and increasing consumer wealth has resulted an expected growth of $200 billion by 2026 from US$ 38.5 billion in 2017 for the e-commerce market. Smartphone shipments in India increased by~8% y-o-y to reach 50.0 million units in the first quarter of 2020, driven by positive shipments of all smartphone vendors in the market. Samsung led the Indian smartphone market with 24% shipping share, followed by Xiaomi at 23%.

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Govt. responds with enthusiasm

The Indian government has recognised and responded with vigour. Policies and frameworks have been amended where most notably a 100% Foreign Direct Investment (FDI) in B2B E-commerce and 100% FDI under automatic route under the marketplace model of B2C E-commerce will augment further growth in the sector. According to the government’s FDI policy online entities through foreign investment cannot offer the products which are sold by retailers in which they hold equity stake.

It is no wonder that the e-commerce sector has witnessed a flurry of activity lately from acquisitions to business plans being rolled out by the titans of Indian industry from Reliance, the Tata Group and others of their ilk. Smaller cities and towns have joined the party and the curiosity brought about by online tech tools to fuel consumer behaviour.

Companies and consumers are now glued together in a win-win dance. There is a surfeit of options to consider when examining what technology can offer to the common man and corporations are not being shy of investing, or resorting to aggressive R&D. The IBEF has observed that tech led innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements will enhance growth in the sector. Progress will, in turn, develop employment, enhance revenues from export, swell tax collection by ex-chequers, and provide improve products and services to customers in the long-term.

Interesting consumer behaviour

The E-retail market, according to IBEF, is expected to continue its strong growth - it registered a CAGR of over 35% to reach Rs. 1.8 trillion (US$ 25.75 billion) in FY20. Over the next five years, the Indian e-retail industry is projected to exceed ~300-350 million shoppers, propelling the online Gross Merchandise Value (GMV) to US$ 100-120 billion by 2025.

The past one year has resulted in the uncovering of interesting consumer habits. One significant approval has been the element of trust in the world of online trade and this has spread across the length and breadth of the country specially the Tier II and Tier III cities and towns. Rural India is part of this significant shift in consumer habits and trends - from adoption of native languages to a rush in new-age forms of payments. The key focus in the approach for companies, and these range from the multinationals to the humble neighbourhood kirana store, is now simply to ensure ‘customer retention’. Throw in options like competition for faster delivery methods, zero shipping fees, ratings and review information and wider selection of products and suddenly the customer has graduated from the entire experience being one of a compulsive online habit to a daily routine which can be oechestrated from the safety of their homes.

Online giant Flipkart, for instance, witnessed new user growth of close to 50 per cent soon after the lockdown, with tier III regions and beyond registering the highest growth of 65 per cent during the 'Unlock' (July - September) phase last year.

Flipkart responded with new innovations to shepherd customers on their initial journey with the introduction of a voice assistant and vernacular interfaces in multiple languages. As Saurav Chachan, engagement manager of RedSeer argued, “Customer retention by online platforms has improved as these platforms have emerged as one of the lifelines for consumers during COVID.”

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According to information obtained by Reuters, Flipkart expanded online grocery sales to more than 50 Indian cities and intends to reach over 70 locations in the next six months. Reliance Industries-owned JioMart last year became the big entrant to India's e-grocery market, a sector that also includes Amazon.com Inc, BigBasket and several smaller players. Indian conglomerate Tata pitched for a majority stake in Alibaba-backed BigBasket. Most players are definitely in for the long-haul in a contest where no quarter is sought and none given.

The action is not just limited to the jostling between the bigger players. IBEF contends that the E-commerce industry has been directly impacting micro, small & medium enterprises (MSME) in India by providing means of financing, technology and training and has a positive cascading effect on other industries as well. The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest E-commerce market in the world by 2034.