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Aug, 2022     

Could India Be the Poster Kid for New eCommerce Models?

New eCommerce models are catering to unsolved consumer needs that we never even knew existed

We have always kept a watchful eye on India’s retail and eCommerce space, and it has never failed to disappoint. We witnessed the emergence of eCommerce and saw it change and transform India’s economy and digital ecosystem. With exponential growth year after year, the industry is stronger now than ever before. But here’s the best part: there seems to be a tectonic shift within this sector, yet again. As customer behavior changes, new eCommerce models are disrupting the space even more. It’s safe to say that these new eCommerce players have set a hawk-eye focus on
the latest dynamic trends to ensure the success of the businesses for years to come. In this week’s newsletter, Mrigank Gutgutia and his team explain all this, and more, so read on…

1. Despite the resurgence of offline retail, online remains on a robust growth trajectory with 60% y-o-y growth

We’re well aware of how the world made its switch to online owing to the COVID-induced pandemic. In the last few months, however, offline channels are slowly opening up. India’s online retail landscape remains on a robust growth trajectory despite the transition to offline, in fact, in April, May, and June this year, close to 40-60% year on year growth was observed.

2. New eCommerce models are catering to unsolved consumer needs that we never even knew existed

Over the past decade, eCommerce has evolved faster than any other industry. The needs of consumers have been met faster than ever before, and new questions have been raised about what our retail experience should look like. The answer has been to build a better experience and improve the way we interact with the brands we love most. This has led to some of the most impressive customer experiences in the world and has also given rise to some of the most innovative eCommerce plaforms.

3. Interestingly, we saw that the growth trajectory has been robust for new eCommerce models who have gained share steadily in fashion and grocery categories

Quick commerce has become a hot favorite and it shows with its 10X growth y-o-y. In our most recent report, we saw that this exciting sub-segment is ready to grow 15X in just three years, to reach a market size of $5 billion. Another impressive sector is Social commerce, which involves buying products and services from other people on social media. It includes buying products or services from influencers, finding products or services on social media platforms and using social media platforms to share products or services with others. This sub-segment is on a growth spurt as it effectively solves problems for affordability and customer experience. Owing to a high referral
share, this also is a low CAC model, stated the report.

4. It comes as no surprise that the market is well set for strong GMV growth and continued strong share of Tier 2+ shoppers

With a CAGR of 38%, the market is well set for strong GMV growth, and a GMV of ~INR 4.9 Lakh Crore is expected in 2022 Additionally, a strong share of Tier-2 online shoppers is also expected to drive this growth further. Sustainable growth is the key- new ecommerce players need to find the right combination of aggressive monetization (via ads, relevant higher margin products and others) while doubling down on their inherently lower CAC model to achieve EBITDA profitability at scale

Larger players are likely to adopt these models more aggressively in the coming years and the sector will undoubtedly witness more M&A activities. Additionally, this emerging sector will also witness innovation in business models to expand topline and control costs.