It is a no-brainer that online retail is growing, driven by cheap data and digital savvy customers. In fact, it became a $30 billion GMV industry in FY20.
But, the future of online commerce is social. According to the report "The Future of Commerce in India - the rise of social commerce", by Bain & Company and Sequoia India, India's social commerce sector, which is a $1.5-2 billion Gross Merchandise Value (GMV) market today, has the potential to grow to $16 to $20 billion in just five years, increasing to $60 to $70 billion in revenue by 2030.
Social commerce includes transactions on social media sites such as Facebook or Instagram, or on online platforms that involve social interaction to facilitate purchases such as Bulbul, Meesho, DealShare, amongst others.
India's social commerce sector will be two times the size of the current e-commerce market within ten years, driven by formats ranging from conversational commerce on chat platforms to video-led commerce, or a vibrant social reseller community, says the report.
Arpan Sheth, partner and leader of Bain & Company's Asia-Pacific Technology, Vector and Advanced Analytics practices, said, "Social commerce in India is broadening India's e-commerce sector and paving the way for a model that's built on community, connection and trust. While traditional e-commerce will continue to flourish, social-led models will broaden the reach of e-commerce for Indian consumers."
Shraeyansh Thakur, VP, Sequoia Capital India LLP, believes the rise of online commerce has just begun. "Social-first models have been able to scale with much lower customer acquisition costs globally and we are seeing similar trends with Indian start-ups experimenting in this space."
India has the second-highest number of connected users globally, at around 572 million with substantial room for growth (41 per cent penetration). Several studies have shown how Indians spend two hours per day on messaging apps, social media networking and watching videos.
However, online commerce is still in early stages, with only 8 per cent of Indians (about 105 million) who shop for products online, accounting for an average spend of $286 per year - much lower than other markets.
"Almost half of consumers do not know what they are looking for and are not loyal to specific brands. Nudges or recommendations from relatives and friends are a big driver of action, and impulse purchases present an opportunity for sellers. Unstructured, long-tail categories make up the bulk of this landscape. Fashion is the most popular social category, followed by beauty and personal care, then food and grocery," adds Radhika Sridharan, partner and leader in Bain India's Customer Strategy & Marketing practice.