E-tailers cart away more business amid Covid

The year 2020 got off to a normal start for the Indian e-commerce industry, but shortly thereafter, it went into a tailspin with the onset of the Covid-19 pandemic in March.

The national lockdown that followed soon after, hit mobility, food delivery, hotel tech, movie and event ticketing, as people got into lockdown mode, staying put at home and migrant workers returned to their homes, disrupting the e-commerce supply chain that struggled to function with few staff.

Most e-commerce firms trained their focus on delivering food and hygiene products to people across the country as they were classified as ‘essential items’ by the government, which banned the delivery of non-essentials to cope with the crisis. Consequently, some e-commerce categories including grocery, pharma, health & wellness, personal care & hygiene, smartphones, electronics and work from home essentials gained traction.

Innovative models

The year brought unprecedented success to e-grocery, fresh foods and meat start-ups as they unveiled innovative business models and fostered collaborations to stay relevant to customers during the lockdown. BigBasket, iD Fresh Foods, Licious, FreshToHome and Nandu’s Chicken, for instance, saw steep rise in orders, new customer acquisitions in droves and an increase in average order value as consumers looked for safe-to-eat, hygienic products to ward off Covid-19.

Similarly, fledgling health and wellness brands like Gaia, Cure.fit, Kapiva and Dr Vaidya’s witnessed significant traction for their products and services as people looked to boost immunity, eat healthy and stay fit with online workouts at home.

Contrary to the worst expectations of all the stakeholders when the pandemic broke out, this watershed year has turned out to be a huge opportunity for Indian e-commerce as evident from the steady recovery over the months leading up to a blockbuster month-long festival season sale that raked in ₹58,000 crore in sales ($8.3 billion) for e-tailers, up from ₹35,000 crore ($5 billion) last year, as per data from RedSeer Consulting.

Small cities join party

Shoppers from Tier-2 cities and beyond drove this year’s festival season sales, with the number of shoppers nearly doubling to 88 million, of which 40 million were from Tier 2 + cities. Consequently, the overall spend per customer dropped to ₹6,600 from ₹7,450 in last year’s sale, as Tier 2 + shoppers typically spend lesser than their metro counterparts.

With the need for communication and increased media consumption, mobile phones and accessories continued to account for over half of e-commerce sales during the festival period.

While electronics (laptops, printers, peripherals) increased its share by 10 per cent compared to 7 per cent during last year’s festival season sale, given the increase in remote working and schooling, reveals data from Nielson.

“The Indian e-commerce industry has performed much better than we had forecast at the start of the pandemic. It will exit CY 2020 with 40 per cent YoY growth grossing $38 billion GMV, up from $27 billion in CY 2019,” said Mrigank Gutgutia, Director, RedSeer Consulting. Indian e-commerce grossed $22 billion GMV in CY 2018.

Attributing this strong growth to the increasing wallet share of existing e-commerce shoppers and the entry of thousands of new online shoppers in 2020, he said, “We expect the total number of online shoppers to jump to 160 million in CY 2020, up from 135 million in CY 2019 owing largely to digitisation caused by the pandemic. More importantly, as a result of the continued challenge faced by offline retail, online penetration as a percentage of total retail spend will jump to 5 per cent in 2020 from 3 per cent in 2019, the highest jump ever recorded for Indian e-commerce in the last decade, driven by the e-grocery category.”

Home-bound behaviour

“Consistent with global trends, consumers in India are fitting into the home-bound behaviour. Triggered by the desire to make life and work easier and more convenient at home, we see a significant increase in shopper spend in categories that are perceived to cater to home-bound needs on account of the pandemic,” said Kunal Gupta, Head, Consumer Intelligence, Nielsen, South Asia.

Geographically, the growth of e-commerce during the festival period is led by Bharat (towns with <10 lakh population). Nielsen reported a 16 per cent increase in orders from smaller towns with <1 lakh population and a 14 per cent rise in shopper spends from >1 lakh + population, during the festive season sale.

While Flipkart and Amazon continued to dominate the Indian e-commerce market in 2020, the year heralded the entry of retail juggernaut Reliance JioMart, giving customers more bang for their buck.

Mass layoffs, furloughs, salary cuts and business model pivots prevailed for most e-commerce firms as they strove to survive the rampant business disruption that Covid-19 brought in its wake. Investors turned cautious and the total number of e-commerce firms funded in 2020 dropped to 118 compared to 176 in 2019 and total funding raised by these firms in 2020 also fell to $1.03 billion compared to $2.7 billion in 2019, as per data sourced from Tracxn.

“E-commerce companies have proved to have the wherewithal to sustain disruption which has led to their accelerated adoption and traditional companies will need to approach businesses with a digital-first mindset. The segment has been at the forefront of innovation and seems adept to the ‘new-normal’, helping bring a new cohort of customers online,” said Ankur Pahwa, E-commerce Sector Leader, EY India.