How the pivot to digital retail will unlock new business opportunities for SMBs

Ecommerce, which is presently pegged at $30 billion, still comprises a small share of India’s total retail sector. Going forward, this number is slated to grow significantly and provide numerous opportunities to the SMB sector.

How the pivot to digital retail will unlock new business opportunities for SMBs

Thursday December 09, 2021,

4 min Read

The Indian retail market is worth over $900 billion. Ecommerce or e-retail, which is presently pegged at $30 billion, still forms a small share of the total retail landscape of the country. 

However, the market is growing at lightning speed. The two iterations of the lockdown have resulted in a major facelift to India’s rising digital consumerism. It made millions of Indians comfortable with placing an order online or on smartphones and enjoying the perks of home delivery.

Meanwhile, the industry will continue to grow. India’s attractive demographic dividend, rising 4G smartphone penetration, and growing digital footprint in rural and semi-urban regions will continue to drive the market.

Opportunities for grocery, SMB producers 

Grocery comprises more than 60 percent of the overall retail consumption in India. It will continue to play a pivotal role in the retail business. Apart from horizontal players such as Amazon and Flipkart, there are upcoming verticals such as Grofers and Bigbasket. There is plenty of space for niche players such as MilkBasket, Licious, etc. Existing offline players such as Reliance retail are also aggressively foraying into the digital retail segment.

India’s internet grocery companies are investing in warehousing, private label brands, etc. However, simultaneously they are also actively building their supplier network and partnering with other retail units and community centres. This will ensure that business opportunities for food producers, food suppliers, and fruits and vegetable supplier will continue to emerge. This will also ensure that SMBs reach bigger and larger markets.

Tapping the e-pharma value chain

Amongst the various categories, e-pharma is a sunrise category. The current market size is $490 million, still a small size in India’s retail pharma market that is pegged at $25 billion. However, e-pharma has grown at a CAGR of 79 percent in the past three years. Presently the market has few small businesses such as 1MG, Pharmeasy, Netmeds, Medlife, etc.

However, as the market is set to grow at a rampant speed, there is enough headspace for new SMBs to emerge, both in Tier I as well as smaller towns. India’s growing e-pharma and healthtech business can also ensure new business opportunities for smaller pharma manufacturers, nutrition companies, superfood producers, etc.

online pharmacy app

Cloud kitchens are booming

India’s food delivery ecommerce is primarily duopolistic, with Zomato and Swiggy owning the lion’s share in the business. Initially, these businesses worked as aggregator platforms, which has its disadvantages. The model meant that there was little control over food delivery timings, service uniformity, hygiene, unit economics. 

Consequently, these incumbent players are transforming into full-stack players, which is creating new opportunities for cloud kitchens and other food entrepreneurs. Already, there are successful cloud kitchen players such as Rebel Foods, Bin Chef, Box8, etc. Others will follow soon.

Rising demand for furniture 

India’s furniture e-retail is sized between $850-950 million. In the wake of the pandemic, the furniture trade suffered from muted demand and supply chain disruptions. However, due to the growing WFH culture, specific categories such as home office furniture, desks, bean bags, gaming stations, etc witnessed a surge. Producers of such categories will increasingly look into digital media to extend their reach.

Ancillary opportunities

India’s consumer internet is set to grow at an exorbitant pace. A large market size, evolving consumer preferences, expansive mobile payment, and the digital payment ecosystem will continue to push the market in an upward growth trajectory. 

As the industry surges, players will invest heavily in backward and forward integration, including warehousing and service centres, software and apps, analytics, digital marketing, delivery network. Alongside large companies, this will also translate into increased business opportunities for India’s growing SMBs, tech entrepreneurs, logistic companies, etc.

Believing that ecommerce will soon outmaneuver offline retail might still be farfetched, as physical stores once again come back with the restoration of normalcy. Yet consumer internet is set to rise and become large.

Retailers and consumer goods companies are now increasingly racking up investments in the digital medium.

This will also unlock new opportunities for Indian SMBs. Besides retailers and manufacturers, there will be

ample opportunities for technology solution providers, logistic enterprises, marketing agencies, etc. As digital is generally a low CAPEX and OPEX-based model, MSMEs will further get a level-playing field in the

segment to prove their capabilities.

Edited by Teja Lele