Disruptions often act as catalysts for business transformation, a case in point is the COVID-19 pandemic brought in an exponential rise in digital adoption and e-commerce across Indian retail.
The India Retail and E-commerce Trends Report 2022 says, this discontinuity experienced by both buyers and brands has accelerated the adoption and growth of e-commerce and disrupted both traditional retail as well as organized brick-and-mortar business models, making e-commerce the modern retail industry’s backbone.
According to a Unicommerce and Wazir Advisors report, e-commerce players, retail brands, and digital-first companies have been quick to meet new consumer demands using online shopping technology advances, as well as supply chain optimization. Their success on these fronts is corroborated by the 69.4 percent year-on-year growth in e-commerce order volumes during FY 2022.
Today, the need to ensure optimal customer buying experiences equates directly to an increase in revenue growth and profitability. For digital-first brands, this means the creation of an offline presence via exclusive stores and traditional distribution channels, while for traditional, retail favors the creation of a holistic online presence.
Organized Brick-and-Mortar, Online Comprises 18.5 percent of Overall Retail
India’s retail sector witnessed a market size decline of 8.5 percent post-pandemic in FY 2021. Organized and traditional retail segments witnessed a major hit, while online retail sustained its growth momentum.
India’s retail sector is worth $836 billion in FY 2022, with an 81.5 percent contribution from traditional retail, organised brick-and-mortar retail makes up 12 percent of the overall retail market, followed by online sales channels at 6.5 percent.
Online Retail Continues to Outperform
Despite the pandemic, the online retail market in India is expected to grow by 32 percent (approx.) over the next few years with the potential to reach $225 billion (approx.). The D2C will be the key propeller of this growth; reflecting a CAGR of near 45 percent levels.
With D2C and digital-first companies investing heavily in technology, they will combine to lend a growth of 38 percent to the D2C channel segment helping D2C to grow from 18 percent to 30 percent contribution share to a significant $70 billion opportunity.
BPC Outperforms, Emerging Segments Continue Robust Growth
Sustained growth across digital shopping platforms continues to be a defining trait of the beauty and personal care segment. Further growth potential is possible, as online sales constitute 9.4 percent of the overall segment. It reports strong growth of 143 percent in terms of order volumes, and over 132 percent in order values respectively.
Brand Websites Establish Loyalty Among Digital Shoppers
As consumers continue to shop online, brands across segments focus on stronger online presence and direct sales. The rise in technology investments seems to yield results; evident from the 80.4 percent year-on-year growth on brand websites, while dropship volume on marketplaces reports a 59.6 percent growth during the same period.
Brand websites ensure strong growth for the Health & Pharmaceuticals segment (84.8 percent) as well as Fashion (89.5 percent).
Hinterland Consumers Boost Next E-commerce Growth Phase
Shoppers from Tier II and Tier III cities account for over 61 percent of the overall market share in FY 2022. Much higher than 53.8 percent in FY 2021. These cities report a growth of 92.2 percent and 85.2 percent respectively, whereas Tier I cities indicate a slower e-commerce growth rate at 47.2 percent.