Online shopping in India gets pandemic boost, e-retail market grows 25% in FY21

While the outbreak of the coronavirus pandemic and a strict lockdown to curb the spread of infections disrupted daily life in the country, online shopping emerged as the clear winner as people, forced to remain indoors, took to ordering daily necessities online.   The Indian e-retail market saw a 25 per cent growth in FY21 despite the two-month national lockdown and multiple prolonged disruptions in regional pockets over the year, as per a report titled ‘How India Shops Online 2021’ by consulting firm Bain and online retailer Flipkart. During the same period, India’s $810-billion retail market shrunk by 5 per cent, along with a 7.3 per cent contraction in GDP.   The pandemic led to a 12-month acceleration in e-retail penetration in India, taking its share to 4.6 per cent by end of FY21. “This acceleration was even higher in the top eight metro cities, where online shopping is more common: one in three people shopped online at least once last year in the top eight metro cities,” the report said.   While India has the third-largest online shopper base of 140 million, the market is still massively untapped and there is immediate potential to reach India’s large internet user base of approximately 625–675 million people. The e-retail market is expected to grow to $120–140 billion by FY26, increasing at approximately 25–30 per cent per annum over the next 5 years, the report said.   "The growth will be led by smaller towns that account for four out of five new shoppers. In addition to small towns, women and older shoppers have gained prominence in the online shopper base over the last year, and this trend is expected to continue," it said.  HOW INDIA SHOPS ONLINE   Among the categories which saw growth in online sales, the report said select categories, like mobiles, electronics, appliances, saw a massive one-time spurt that then cooled off due to longer replacement cycles and recovery of offline retail. These categories did not see as substantial a jump during the second wave over April–May 2021.   However, frequent-use categories, like groceries, household, personal care, saw rapid growth and are likely to continue seeing accelerated growth post-pandemic. “These habit-forming categories, which have a high share of repeat purchases online, also benefited from a concerted push to accelerate digital sales by leading brands that were not as invested in this channel pre–Covid-19.”   Meanwhile, discretionary and out-of-home spending categories, like fashion, travel products, saw relatively slower growth during the pandemic and it is expected that growth rates in e-retail spending for these categories will rebound to pre-pandemic levels soon and then follow long-term growth trajectories.   On the behaviour of shoppers, the report said an e-retail visitor spends fewer than 10 minutes per visit on a platform. Brands and sellers have to cut through the clutter and have limited time to tell their story and make an impression in the minds of the consumers.   Besides, one in 10 platform users adopt voice search, and one in three new e-retail users visit through a vernacular platform interface. These features will increasingly become mainstream going ahead.   Going ahead, content creators and influencers will play an important role in driving online sales as approximately 40 per cent of online shoppers made at least one purchase through social media channels, like Facebook, Instagram, WhatsApp, in 2020, the report said.  WHERE THE GROWTH IS COMING FROM   Small-town India continued to turbocharge growth in India's e-retail market, with Tier-2 and smaller towns' gross merchandise value (GMV) growing 2.5–3 times that of metro and Tier-1 cities in 2020. Besides, Tier-2 and small towns contributed 80 per cent of new customer growth in 2020.   "During the pandemic, reverse migration from metro cities further accelerated growth in smaller towns...Delivery across more than 95 per cent of India’s pin codes allowed consumers to shelter at home and prevent the spread of disease," the report said.   Among the major cities, Bengaluru led the way, with one in two people shopping online at least once last year and five in seven people aged 15–60 years shopping online at least once in 2020.   Gender-wise, the growth rate of women shoppers was 1.5-2 times higher than that of men in 2020, while older people also joined the party with the share of those above 45 years of age among online shoppers rising to 20 per cent in 2020 from 8 per cent in 2018.