E-commerce GMV grows 5% in Q1 amidst offline retail surge; new categories adoption to slow down

In the first quarter of the fiscal year 2024, e-commerce Gross Merchandise Volume (GMV) grew 5 per cent compared to the same period in the previous year even as offline retail witnessed a more rapid expansion. The offline retail growth is attributed to increased Fast-Moving Consumer Goods (FMCG) volume and a decrease in prices, according to a new report by Redseer Strategy Consultants. Higher rural demand, particularly FMCG, and a steady uptick in urban demand too helped offline growth.

The disposable income available to consumers for non-essential expenditures has demonstrated a quarterly growth of approximately 4 per cent and a yearly growth of 1 percent. This growth can be attributed to the alleviation of inflationary pressures and an ascending Gross National Income (GNI), the report said.

However, as the e-commerce industry reaches a state of maturity, the adoption of new categories is expected to be muted. As per the study, most non-users of ecommerce are likely to keep preferring physical stores. This means that the interest in trying online shopping in the next six months will remain low.

At an Ecommerce Consumer Confidence Index (ECCI) score of 131, consumer sentiment on spending in the second quarter of the fiscal year remains positive, the survey conducted by the research platform showed. The ECCI, a metric derived from household surveys, gauges consumer sentiment concerning future spending habits, based on four fundamental parameters such as ecommerce spending, net promoter score, new category adoption, and new user adoption. The ECCI is graded on a scale of 1 to 200, with readings exceeding 100 indicating a positive outlook. Nevertheless, the ECCI for the second quarter, standing at 131, slightly trails the first quarter ECCI of 142.

“ECCI for Q2FY24 underscores that ecommerce will continue to be a key driver for retail growth and consumer spending, driven by existing users. However, given the slowdown in new user adoption, going forward companies will have to craft their strategies for preimmunizing their offerings, devising upselling and cross-selling schemes, and developing loyalty programs, with a continued focus on customer satisfaction”, stated Mohit Rana, Partner at Redseer Strategy Consultants.

The expansion of e-commerce is anticipated to be powered by segments such as fashion, grocery, beauty, and personal care. Newcomers to the e-commerce space are projected to emerge from affluent demographics, showing a willingness to explore online shopping for fashion items, mobile devices, and electronics. Fashion, grocery, and personal care are poised to experience the most significant growth in expenditures, while the mobile and home categories are anticipated to undergo subdued growth in the second quarter.