In the ever-evolving landscape of online shopping, the traditional dominance of metros and Tier I cities is undergoing a transformation. While comprising only 14 percent of the total population, these urban centers command a significant 43 percent share of online shoppers, according to a recent report by Alliance Bernstein. However, as the aftermath of the COVID-19 pandemic continues to unfold, growth patterns are experiencing a notable shift.
As we navigate the post-COVID era, the dynamics of online shopping are undergoing a profound transformation. The expansion into Tier II and beyond, the normalization of growth patterns, and the influence of seasonal trends underscore the resilience and adaptability of the online market. The evolving landscape presents both challenges and opportunities, making it imperative for internet companies to stay agile and responsive to ever-changing consumer behaviors.
The overall monthly shopper base (MTUs) has surged, constituting 31 percent of Active User Base (ATUs), a considerable leap from the pre-COVID figure of 23 percent. This signals a maturation of the online user base, with an evident rise in the frequency of online shopping activities. Concurrently, internet companies are strategically expanding their supply chains into Tier II and beyond, capitalizing on improving consumer bases and ordering metrics in these cities.
Across various internet sub-segments, user growth is gradually normalizing after the initial COVID-induced traction. Particularly, in severely under-penetrated markets like grocery delivery, which accounted for less than 1 percent of total grocery retail spend, there was a remarkable surge in active user base, peaking at an impressive 228 percent YoY growth in July 2022. Meanwhile, slightly mature sectors such as E-Commerce and Fashion continue to witness sustained growth rates, fueled by increased competition from a plethora of Direct-to-Consumer (D2C) platforms.
The Over-The-Top (OTT) segment experienced an uptick towards the end of the year, showcasing a 10 percent increase in Monthly Active Users (MAUs) in July-23, which escalated to an impressive 55 percent increase in MAUs by November-23. This surge was attributed to the broadcast of World Cup screenings, especially in cricket (ICC World Cup, T20) and football (FIFA World Cup). Noteworthy gainers in this arena were Jio Cinema and Disney+Hotstar, boasting exclusive broadcasting rights.
Three sectors have emerged as notable examples of strong seasonality trends. Firstly, in the realm of E-Commerce, the festive season in October drives the highest uptick in active user base, culminating in end-of-year sales across various categories. Secondly, Fashion Commerce, particularly apparel-led firms, experiences two festive seasons each year, with Q1 and Q3 being the strongest quarters, propelling user growth through end-of-season sales. Lastly, Digital OTT's key growth driver lies in sports content viewership, primarily cricket and football, with platforms like Jio Cinema and Disney+Hotstar securing exclusive broadcasting rights.