Indian ConsumerTech has $250 billion+ in valuation and 40+ unicorns: BCG-Matrix Partners India report

The Indian ConsumerTech space has seen large value creation with $250 billion+ in valuation and 40+ unicorns as of December 2022, as per a new report by Boston Consulting Group (BCG) and Matrix Partners India.

It states that the pandemic accelerated digital penetration by 12–24 months across different sectors, thereby boosting the adoption of e-commerce and reaching a total of 350-400 million online shoppers by 2025. The Indian economy continues to show sustained growth, with increasing affluence and discretionary spending, according to the new report.

BCG’s Centre for Consumer Insight conducted a proprietary consumer research, along with discussions with 25+ start-up founders and CXOs. The report has revealed a set of key trends which are shaping the Indian ConsumerTech landscape. While there is relatively high penetration and maturity of ConsumerTech in categories such as electronics, appliances, fashion and apparel, the next wave of growth is likely to be driven by beauty and personal care, food and beverages, FMCG, and furniture and décor.

• Democratisation of online commerce with a large proportion of new shoppers being 35+ years old, women and from tier 2+ cities.
• Increasing relevance of omni-channel with 6–8X growth in digitally influenced retail spending, reaching $207 million in 2021 from Rs 2 billion six years ago.
• ~1.8x increase in time spent online by consumers on social media and photo/video apps in the last 3 years, leading to these channels becoming important for e-commerce with the emergence of discovery led shopping and social commerce.
• Marketplaces are overtaking search engines as new search sites with 35–40% consumers choosing marketplaces for searches in select user categories, such as electronics, fashion, mobile, food and FMCG and beauty and personal care.
• Consumers are seeking quicker gratification with shorter delivery options, leading to the emergence of Q-commerce, which has rapidly increased to 25–30% of the overall online grocery market.
• New commerce models such as assisted and conversational commerce, influencer commerce, live/video commerce and group buying could provide an impetus to existing and new shoppers.
• Shift in consumer preferences towards healthier lifestyle choices, sustainability and re-commerce.
• Rise of emerging technologies such as generative AI could have multiple potential applications in e-commerce (e.g., automating product descriptions, personalised marketing content, assortment planning etc.); ONDC could provide a further fillip to e-commerce penetration.

“In the next 5-10 years, India's economy is projected to grow by $3.5 trillion, which is equivalent to the amount added since its independence 75 years ago. This growth is expected to result in a remarkable surge in per-capita income, leading to an increase in discretionary spending that has not been witnessed in the past. India's ConsumerTech sector has already demonstrated early successes, with over 40 unicorns creating a value of more than $250 billion. This presents a unique opportunity for entrepreneurs to tap into a rapidly growing market and contribute to the country's economic growth while solving real-world problems,” shared Siddharth Agarwal, Principal, Matrix Partners India.

“The last 5 years have seen 4,351 ConsumerTech deals and $54 billion in deal flows in India. This is enabled by a continuously deepening market with almost 98 million digital natives in the country in 2022. We see the same fundamentals holding strong and expect 350-400 million online shoppers by 2025, spending $150 billion. New online shoppers are not the same as existing ones – they are older, more women, lower income and from smaller towns. This is both an opportunity and a challenge as entrepreneurs and leaders innovate on business models to serve the new consumer,” shared Parul Bajaj, Managing Director and Partner, Boston Consulting Group.

The report provides a ready reckoner for founders and CXOs of new and existing ConsumerTech companies, investors as well as legacy consumer companies targeting the new Indian consumer on what it will take to successfully navigate the 0–10 journey and then scale from 10–100.

Scaling startups from 0–to–10

• Identifying unmet customer need, pain-points or friction in existing offerings to create a disruptive consumer proposition.
• Making the right choices across pricing, optimising unit economics and customer acquisition costs.
• Building the supply side as a potential competitive moat through deep partnerships and capability build.
• Internalising the test and learn philosophy for quicker iterations and faster route to product market fit.

Driving sustainable growth in 10–100 phase

1. Sources of next wave of growth

• Maximising customer lifetime value by expanding offerings, driving loyalty through customer retention, and focusing on cross-sell/up-sell.
• Expanding distribution across channels and geographies to target new customer archetypes.
• Evaluating international markets for entry.

2. Optimising profitability

Driving path to profitability in key levers, e.g., customer acquisition costs.

3. Capability building for scale

• Unlocking founder bandwidth to focus on strategic goals via organisational build-up.
• Harnessing the power of AI and analytics across the value chain.

The complete report can be accessed by clicking here: https://www.bcg.com/publications/2023/digitizing-consumers-in-india#events

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