E-tailing in India: RedSeer Perspective
The Indian e-tailing industry has seen good momentum from 2014. Though there was a slump in 2016 with the growth being just 12%, the industry recovered well in 2017. The growth of H1-2017 was around 15-20% but the industry picked up well in H2-2017, primarily due to multiple sale events. The industry witnessed the largest ever monthly GMV in the festive month (Sep) of 2017.
A key reason for this recovery is the shift in the focus of the e-tailers to Tier-2+ cities. We saw a good amount of new users being added from the Tier2+ cities in 2017 which was a very positive sigh for the industry. And thus we feel this growth would continue and the industry would touch $28 bn mark by 2018.
The industry witnessed growth across all the categories but mobiles continued to dominate. Mobiles, majorly due to the effect of exclusives, contributed nearly 50% to the overall GMV of the industry followed by fashion and electronics. Smaller categories like FMCG and Home witnessed good growth primarily due to the base effect.
We feel that there would not be much change in the category mix of the industry going forward as mobiles would continue to dominate and drive the growth of the industry.
The e-tailing industry witnessed good growth across the key categories. FMCG which currently is 6% of the overall GMV saw a growth of 66% driven by big players like Amazon. And now with Flipkart entering this category we expect this category to continue the growth trajectory.
Mobile which currently has 50% of the GMV share saw a growth of 51% driven by reducing replacement cycles and supply side push for more exclusives. Electronics which is 17% of the GMV share witnessed a growth of 45% due to increasing adoption of high value categories like large appliances camera etc. and enhanced affordability due to no-cost emi options.
Home and fashion category saw a growth of 21% and 18% respectively.
The Indian e-tailing industry is highly sale driven. About 30% of the annual GMV comes in just 10 days of the sale period. With the higher number of people shopping during the sale period, there is always a good number of new consumer addition in this period.
The 10 days of sale period witnesses an increase in the average order value (AOV) of the consumers as more people buy high-value items like mobiles and electronics. There is also increase in the number of daily transactions as there are more number of consumers on the platforms looking for the best deals.
The industry witnessed a sharp increase in the number of yearly shoppers from 75 mn in 2016 to 90 mn in 2017. Metros witnessed a slower growth in the number of new shoppers adding just 3 mn whereas, Tier II+ cities added nearly 10 mn shoppers in 2017.
We feel the number of online shoppers would grow by 15%, 30% and 50% in Metros, Tier I and Tier II+ cities respectively in 2018. The industry will thus add another 30 mn shoppers in 2018 majority of which will come from the Tier II+ cities.
There are two key drivers of this growth. One, more and more people will come online powered by the telecom providers like Jio. Two, the people who are currently online will start using the e-tailing services.