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With 3 out of 5 orders, Tier-II, smaller towns leads online sales

The e-retail industry in India is currently only constitutes 3.4 per cent of the overall market and has enough headroom to grow

Sonal Khetarpal | June 17, 2020 | Updated 02:35 IST
With 3 out of 5 orders, Tier-II, smaller towns leads online sales

Online retail in India has democratised shopping with access to 97 per cent of the country's PIN codes and also empowering sellers - big and small - to sell to a wider consumer base.

COVID-19 has led the country's $850-billion retail market to the cusp of transformation as it saw a lot more online shoppers who preferred e-tailers for safety and convenience. Online shoppers in India will reach nearly 300-350 million shoppers, growing at 30 per cent CAGR over the next five years according to the report, 'How India shops online?' by Bain & Company and Flipkart.

What is interesting is online shoppers in Tier-II and smaller towns make up more than half of all shoppers and contribute to three out of every five orders for leading e-retail platforms. These customers from Tier-II and smaller towns buy similar categories of products as customers from metro cities or Tier-I towns, with only a marginal difference in average selling price.

The e-retail industry in India is currently only constitutes 3.4 per cent of the overall market and has enough headroom to grow. As is the case currently, the top categories driving the growth will be related to fashion. This phenomenon is seen in the mature markets of the US and China.

One of the key reasons for the growth of online consumers is the decreasing cost of data that is likely to bring nearly 1 billion users online by 2030, and the growing online spends by 'Digital Natives' and supply-side innovations like vernacular-based user interfaces, voice and visual search.

"Globally, COVID-19 has caused an inflection in e-commerce penetration driven by consumers' need for safety and convenience. Even in India, online is gaining salience which offers several MSMEs an opportunity to accelerate their business by reaching out to millions of consumers," said Shyam Unnikrishnan, Partner, Bain & Company and Leader, Bain India's Consumer Products, Retail, Strategy and Customer Strategy & Marketing practices.

Some other consumer trends online include that more and more consumers are opting for e-retail platforms for product searches - nearly one in three in India. Vernacular searches are gaining popularity: for example, "Parda" was one of the top three searches in curtains. Also, photos play an important role as one in two visitors browse the image gallery and only 1 in 15 click the detailed product description.

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