It will be crucial for e-commerce players to focus on the 3Vs — voice, vernacular and video, said Sankalp Mehrotra, MMA India Board Member and Senior Director of Monetization, Flipkart Ads.
Speaking at a webinar titled ‘India: The Evolution of E-Commerce in Mature Markets - India’s Next Growth Phase’, Mehrotra said, “Video consumption in tier 2 and smaller towns has grown 4X over the last year. It is expected that there are about 500 million vernacular speakers versus only about 200 million English speakers online. I expect a lot of regionalisation and content personalisation in the coming years.”
The other key trends will be social commerce and the rise of multiple D2C brands. “We will see them evolving their strategies in the next few years as they maintain a balance between setting up their own stores and working with large platforms. There will also be the rising trend of multiple digitally led ecosystems, where players like us will try to tap more and more into multiple customer purchase operations,” he added.
Before the pandemic began, it was estimated that the e-commerce market in India will grow to around $100 billion by 2025. But Covid has pulled this growth forward by nearly 12 months and the present estimates suggest it will grow to around $120-140 billion by 2025. The Indian e-commerce market has tremendous headroom for growth as it is currently only 5-6% of the total retail market, Mehrotra said.
“When it comes to internet penetration or online shopping, typically India trails China by seven to eight years. Today, we are where China was in 2011-12. In the last couple of years, e-commerce has been growing at a staggering 35-40%. This growth will also be accelerated by Covid largely driven by consumers' need for safety and convenience. Within the users online in China, the penetration is close to 45% and the overall market size is anywhere between $1.5and $1.8 trillion,” said Mehrotra.
A critical factor that has changed in the last few years is that small towns or tier 2 cities are taking e-commerce growth forward. “Till a few years ago, the metros dominated the space. There is a reversal now and at least 60% of the orders come from tier 2 and beyond,” he said.
Mehrotra expects the Indian e-commerce growth story to be inclusive- both for consumers and sellers. “Etail is also democratising the shopping landscape by providing access to more than 95% of India’s spend force and empowering a lot of small sellers,” he said.
Sharing various insights on the Indian e-commerce market, he said the core drivers for the growth will be access and affordability, apart from the growth of the middle class. The growing number of online users and rising incomes are accelerating this growth. The grocery category is likely to witness the highest amount of growth, he said.
There are three phases in the sector’s growth—Cautious early adoption, where people who have access and income start shopping online, followed by ‘Massification’, where factors such as increased internet connectivity, affordability, better infrastructure and better service come in, and lastly is the Growing Stickiness phase, which is marked by an increased number of transactions per customer. “India is currently in the massification phase, while China is in the third phase,” he added.
A key change has been observed across the three cohorts of customers. People who have already been shopping online are starting to spend more, the ones who only shopped for selected items online are now purchasing more items and then there are people who are coming to shop online for the first time.
There have been shifts within categories as well. Some categories have witnessed a one-time growth spurt. These could be driven by the new ways of working or due to the need for large home appliances. Some have seen a sustained kind of growth such as groceries, household products, personal care, etc. Some others have experienced a slowdown but are now witnessing a demand rebound, such as fashion.
At the webinar organised by the Mobile Marketing Association (MMA), Mudit Jaju, Global Head of E-commerce, Wavemaker, spoke of global trends in the sector. “The e-commerce sector witnessed a 30% growth globally last year. India’s growth as a percentage share of retail has also increased. The pandemic has led to a huge surge in e-commerce, more so in consumers who were previously not buying or in categories that people were earlier not buying. Consumers are not going back to their old habits, so they will stick to e-commerce,” he said.
Sandeep Raj, Head of Business Development, Partnerships & Affiliate Marketing, Southeast Asia, Alibaba Group, Lazada shared his insights on the growth of the sector in the South East Asian region.
The webinar was followed by a panel discussion that deep-dived into the comparative evolution of e-commerce across the US, Southeast Asia and India markets. It was moderated by Tushar Vyas, President, GroupM, South Asia.