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In India, e-commerce has been a focus area for the past two years, driven by the COVID-19 pandemic. In 2021, e-commerce penetration increased further to 4% due to the second wave of infections, leading to more consumers relying on e-commerce for shopping, particularly in tier 2 cities. Brands and retailers have invested in direct to consumer models and partnerships with third party delivery companies to better adapt to the restrictions. The pandemic has also led to an increase in online demand for niche categories such as groceries and consumer health, with new players entering the market in the last couple of years.
Despite the growth, its overall contribution to retail sales remains low, indicating potential for further growth. The ongoing COVID-19 pandemic and resulting third wave of infections will continue to drive consumers to online shopping, potentially making it a long-term habit. India is expected to see one of the strongest increases in e-commerce value sales in the Asia Pacific region in the next five years. However, last-mile connectivity issues have hindered the expansion of e-commerce in India, and companies are looking to integrate online and offline channels to overcome these challenges. As the market expands, competition is expected to increase as more brands and retailers enter the online space, particularly in niche categories such as food and drinks, apparel and footwear, and consumer health.
Flipkart is currently the leading player in the Indian e-commerce market, followed by Amazon. However, local companies such as Tata Retail and Reliance are expected to increase their market share in the forecast period. The Indian government has launched the Open Network for Digital Commerce (ONDC) to support small sellers, which aims to be available nationwide by the end of 2022 and could potentially challenge the dominance of larger players. Large e-commerce companies are also seeking to join the ONDC network. In August, Microsoft announced plans to launch a shopping app on the ONDC. The ONDC was created in response to concerns from small retailers about perceived unfair competition from large online players. Additionally, a long-awaited e-commerce bill is expected in 2022 to address some of these issues.
In the past two years, Indian e-commerce company Flipkart has made strategic investments to expand its presence in the apparel and footwear market. During the COVID-19 pandemic, several specialist retailers in these categories faced financial challenges, which Flipkart took advantage of by acquiring stakes in companies such as Aditya Birla Fashion & Retail and Arvind Lifestyle Brands. In 2021, Flipkart acquired a 7.8% stake in Aditya Birla Fashion & Retail, worth INR15 billion, and in 2020, invested INR2.6 billion in a minority stake of Arvind Youth Brands, a subsidiary of Arvind Lifestyle Brands that owns the Flying Machine brand.
Since the Indian market is relatively underdeveloped, how the competition will go depend on several factors such as the localization efforts by these brands or whether or not the government will intervene the private market.
It is expected that there will be continued consolidation in the retail, e-commerce, and technology sectors through mergers, acquisitions and partnerships. As an example, Reliance is planning to invest in the fast grocery delivery and household and personal care sectors in 2022, building on its previous investments in companies such as Dunzo, a rapid-delivery player. This trend of consolidation is likely to continue as companies look to expand their offerings and strengthen their market position.
The Omni Experience: In 2021, the integration of online and offline channels to enable hyperlocal delivery became a popular business model among retailers, particularly in the grocery, electronics, appliances, and pharmacy sectors. Retailers such as Apollo Pharmacy, JioMart, Reliance Digital, and Tata Croma benefited from this model by allowing customers to order products online and delivering them from the closest retail outlet, using their existing network of stores. This approach is expected to become more widespread in the future as it meets customer demands for fast delivery and retailers’ need to sell their inventory.
Strengthening The Last Mile: there is a trend towards the growth of organized retail stores over non-organized stores such as kirana stores. Consumers prioritize a hygienic shopping environment and packaged items, which benefits organized retailing. Organized retailers are also offering lucrative offers, discounts, and loyalty programs, driving the growth of organized retail in India. Industry leaders are reflecting this trend in their expansion plans, with companies such as Reliance, Tata Group-backed BigBasket, D-Mart, and Nykaa planning for aggressive expansion throughout India. Leading retailers are also partnering with local kirana stores to expand their networks and last-mile deliveries, which benefits both parties by increasing business for the kirana stores and providing more distribution centers for the e-commerce players.
In India, There are about 3% of people use credit cards, and 32.7% of people use debit cards. While there are 2.9% of people purchase on the internet, there is only 5.3% of people with online banking accounts.
% with financial accounts
% with credit cards
% with debit cards
% get paid through digital channels
% buy on the internet
% with internet banking
% pay bill through online
% E-Commerce Penetration
There is 643.9 million consumer goods e-commerce users in India, and they spend total of around 83.41 billion USD dollars in 2021. That makes a per capita spending on consumer goods e-commerce of around 130 USD. Also, in those e-commerce users, about 75.4% of them purchase through their mobile phone.
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