The Changing Dynamics of India’s Online Retail Landscape

Today, more than ever, we are seeing consumers move to online buying instead of visiting brick-and-mortar shops. Even though lockdown restrictions will eventually be eased to restore normalcy, people will prefer staying home as much as possible due to the scare of infection. Over the past few months there has been a surge in online grocery shopping via Amazon, Big Basket, Grofers and even food delivery apps like Zomato joining in to deliver essentials. These e-retailers although faced a few hiccups in adapting to the new reality of no contact delivery, social distancing etc, soon picked up pace and came to our rescue. Increase in delivery time and dearth of slots, all tell us the story of the urban Indian consumer increasingly choosing online buying over visiting stores.

The Story of India’s e-Commerce Industry

India’s online retail story started in 2007 with the launch of Flipkart. The website started off by being an online bookstore that promised to deliver anywhere in India. In 2007, Flipkart made 20 deliveries. At that time, India lacked the digital infrastructure and the level of internet penetration required for online retail to compete with physical stores. Indian consumers who had access to the internet, too, preferred offline shopping over online buying. The Indian buyer took a while to ease into the idea of buying via the internet without being able to see or assess the products in person. The trust deficit of Indian customers in buying products based on images online was one of the biggest challenges for online retail in India, apart from the logistics.

Although, what made India an attractive market For e commerce companies in each sector including fashion design is the scope in terms of the large population that can be catered to. By 2012, Flipkart had expanded shopping categories including everything from electronics to fashion and launched its mobile app. 2012 also saw US giant Amazon making its entry into India with its website Junglee.com, the first step towards eventually becoming the largest e-tailer in India.

By 2014, Flipkart had acquired fashion e-commerce website Myntra. Flipkart itself was acquired by American multinational retail giant Walmart in 2018, further strengthening the belief in the immense Indian e-commerce opportunity. While Flipkart and Myntra together accounted for 36.6% of market share in the Indian e-commerce market in 2018, Amazon accounted for 31.2% (Data: Forrester Analytics).

The COVID-19 Era

Going digital has become a necessity for companies with the world being taken hostage by the coronavirus pandemic. FMCG and retail companies across the board are preparing for a seismic shift to increase their digital engagement to ensure brand recall and worthiness. As government imposed lockdowns to curb the virus are being extended endlessly, corporations have now realised the urgent need to place their products on online platforms.

When the lockdown was announced in March, companies worried about the lack of consumer demand – while consumers struggled to procure essentials and other requirements in a manner which was safe and would require minimal human contact. As staying at home became the new normal, consumers soon shifted to online platforms for meeting their needs, and the e-commerce industry had to match up to the surged pent-up demand.

Once shipping and state border restrictions were eased, Indian e-commerce sales recovered 90% of their pre-COVID volumes by June 2020. In fact, online sales of electronics jumped by 145% compared to sales before COVID-19, according to technology solutions provider Unicommerce. Brands which sold products directly to consumers via their websites saw 25% faster sales recovery than brands which sold only through online marketplaces.

The pandemic also offered a boost to the online grocery segment, for which Indian consumers largely depended on physical stores and local vegetable vendors. New players like Reliance’s Jio Mart aims to create new opportunities for local kirana stores by giving them an online platform to sell their products. Amazon and Flipkart too have similarly partnered with local kirana stores to sell their products online. This amalgamation of online and offline sales will ensure a shift of Indian customers to buying online increasingly from their trusted local stores. It also leaves behind the age-old struggle of supporting local business owners vs buying from the comfort of your home.

The pandemic lockdown experience has prepared the Indian customer to put its trust and increase its dependence on buying online. Big bonanza deals and sales announced by e-commerce players in the midst of a pandemic is evidence that the demand for online purchasing is immense. With the penetration of e-commerce currently at just 3.5%, there seems to be huge scope for current major players like Amazon & Flipkart and even new players who wish to serve the Indian market. While shopping as an activity is unlikely to go away in India anytime soon, e-commerce players can further tailor themselves to the Indian market during the pandemic when they are needed the most. The Indian online retail industry is surely on the cusp of exponential growth over the next few years.