India ecommerce market grew 25 pc to touch $38B in FY21

A report by Bain & Company and Flipkart noted that India ecommerce market is expected to grow 25-30 percent annually over the next five years to reach a size of $120-140 billion by FY26.
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The India ecommerce or e-tail market grew by 25 percent during the 2020-21 financial year to touch $38 billion in size. This despite the COVID-19 related lockdowns, and even as the overall retail market shrunk by 5 percent, according to a report.

A report by Bain & Company and Flipkart titled - How India Shops Online 2021 - noted, “The fiscal year ending March 2021 was one of contrasts for India’s retail market. The overall retail market shrunk by 5 percent, along with a 7.3 percent contraction in GDP. However, the Indian e-retail market saw a 25 percent growth despite a 2-month national lockdown and multiple prolonged disruptions in regional pockets over the year.”

Given that the COVID-19 pandemic is still ongoing, with some sense of stability returning, the report noted that in the future, the e-retail market is expected to grow to $120–140 billion by FY26, increasing at approximately 25 percent – 30 percent per annum over the next five years.

This confidence stems from the fact that India is home to the third-largest online shopper base of 140 million, behind only China and the US. Added to this, the internet user base is around 625–675 million.

According to the report, the e-retail penetration in India was at 4.6 percent by the end of FY21 with COVID-19 environment of safety and convenience driving the growth. It added, “We expect the surge in penetration to sustain post stabilisation, as a similar trend has been seen globally.”

The growth of e-tail in India was largely driven by top eight metro cities where the report noted that one in three people shopped online at least once in the last financial year.

However, the future growth of the e-tail segment in India is expected to be driven by the smaller towns, that 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, the report stated.

During the first and second wave of the pandemic, the categories within e-tail also played out very differently. Select categories like mobiles, electronics, appliances saw a massive one-time spurt that then cooled off due to longer replacement cycles and recovery of offline retail.

On the other hand, frequent-use categories such as groceries, household, personal care saw rapid growth, and are likely to continue seeing accelerated growth post-pandemic. Lastly, discretionary and out-of-home spending categories like fashion and travel products saw relatively slower growth during the pandemic.

At the same time, the increased penetration of e-tail in the country has also thrown up some very distinct trends. The report noted that brands and sellers have limited time to tell their story and make an impression, and it is important to make a strong impact through images.

Given the diversity in India, the report noted that voice and vernacular are no longer niche where one in 10 platform users adopt voice search, and one in three new e-retail users visit through a vernacular platform interface. Voice and vernacular searches will increasingly become mainstream, it said.

The report further said that around 40 percent of online shoppers made at least one purchase through social media channels so content creators and influencers will play an increasingly critical role in the future of commerce.

Edited by Anju Narayanan

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