Unicommerce, India’s integrated SaaS platform for post-purchase experience management, and Wazir Advisors have launched the first edition of "India’s Retail and E-commerce Trends Report” covering FY22.
The report assesses the growth of India’s retail and e-commerce industry in FY22 and how consumer buying patterns have changed in the last two years. According to Wazir Advisors, India’s retail sector was estimated worth $836 bn in FY 2022, with an 81.5 percent contribution from traditional retail followed by Organised brick and mortar at 12 percent and online sales channels at 6.5 percent.
Wazir Advisors added that despite the impact of the pandemic on overall retail in FY 2021, the online retail market in India is expected to grow at 32 percent over the next few years with the potential to reach $225 billion. The D2C segment emerges as the key propeller of this growth; reflecting a robust CAGR of near 45 percent levels with the potential to reach $70 Billion over the next few years
E-commerce order volumes on rise driven by smaller cities:
According to Unicommerce data, the overall e-commerce order volume continues to rise with 69.4 percent YoY growth in FY 2022, while in FY21, the order volume reported 49.4 percent YoY growth.
In the last two years, the strong e-commerce growth of India is driven by consumers from Tier-II and-III cities. The young aspirational consumers from these markets are shopping across segments and changing India’s e-commerce landscape. The shoppers from Tier-II and-III cities accounted for over 61.3 percent of the overall market share in FY 2022, increasing from 53.8 percent in FY 2021. The order volume from Tier-II and-III cities grew at almost double the pace of Tier-I cities with 92.2 percent and 85.2 percent YoY growth in FY 2022. In contrast, Tier-I cities indicate a comparatively slower order volume growth rate of 47.2 percent.
Beauty & personal care grows fastest; FMCG, Health & Pharma segments accelerated in FY22:
Given the significant e-commerce growth over the last two years, various segments have become prominent with promising growth potential and consistent YoY growth. While Beauty & Personal care reported the maximum order volume growth of over 143 percent in FY 22, the FMCG & Agriculture and Health & Pharmaceuticals have also grown significantly over the last two years, with 61.7 percent and 62.4 percent order volume growth respectively. Fashion & Accessories and Electronics & Home appliances have been the biggest categories and they have reported an order volume growth of 59.7 percent and 34.7 percent respectively in FY 2022.
D2C brands post faster growth on websites at 80.4 percent; marketplace growth at a healthy 59.6 percent:
The report further draws out how D2C and digital-first brands continue to rise with consistent order growth of brand websites. Over the last two years, many digital-first brands have emerged and they are dressing the industry gap to offer new products at attractive price points catering to young online buyers. This has helped Brand websites report a strong YoY order volume growth of 80.4 percent in FY 22 while Marketplaces witnessed a 59.6 percent YoY growth. Beauty & Personal care products segments continue to lead here as well with 132.8 YoY growth on the brand website and 169.1 percent growth on marketplaces.
The other segments that have reported strong growth on the brand website are Health & Pharmaceutical with 84.8 percent YoY growth and 67.7 percent YoY growth for FMCG in FY 22. The rising phenomena of D2C has helped the fashion segment to continue its growth despite being the most mature segment. Fashion & Accessories have witnessed 89.5 percent YoY growth on brand websites in FY 2022, as opposed to a marketplace growth of 52.2 percent.
Return orders start to decline; a small but useful drop helps reduce costs for e-commerce
Every e-commerce business has to manage the complex process of returns and it constitutes a major part of operations costs. With rising order volume, online selling companies have invested in technology platforms and process enhancements to reduce return orders. Return orders are on a consistent YoY decline, as return orders for FY 2022 constitute 14.8 percent of the overall order volume, as compared to 16.10 percent in the previous year. While this may seem like a marginal dip, it significantly boosts the overall bottom line. Increasing focus on technology deployment for COD orders positively impacts e-commerce. Returns on COD orders show a decline from 22.1 percent in FY 2021 to 18.8 percent in FY 2022. While returns of prepaid orders remain constant YoY at 10.4 percent of the overall order volume.
On the occasion of the report unveiling, Kapil Makhija, CEO, Unicommerce said, “Over the last 2 years, India’s retail industry has seen a remarkable evolution with wider technology adoption, readiness to try new platforms, and changing mindsets of brands. We launched our report with a vision to showcase a holistic picture of how consumers shopped over the last two years. This will enable brands to reflect on their business and make better decisions. We believe in the power of data and our technology platform allows retail brands to analyze their business performance and plan future strategies accordingly.”
Speaking on the launch of the report Pakhi Saxena, Practice Head, retail, and consumer packaged goods, Wazir Advisors stated, “We have seen the retail industry bounce back from a severe impact of the pandemic in FY21. The overall retail sales are back at Pre-COVID levels with strong growth in the e-commerce industry. It will be interesting to see how the retail industry adapts to the rising e-commerce shoppers of Tier-II and-III cities and how it will impact traditional and organized retail.”