Online retail may hit Rs 4.9-trillion GMV this year: RedSeer report

India’s online retail landscape remains on a robust growth trajectory despite transition to offline. In April, May, and June this year, close to 40-60 per cent year-on-year (YoY) growth was observed, according to a report by consulting firm RedSeer.

With a compound annual growth rate of 38 per cent, the market is set for strong gross merchandise value (GMV) growth, and a GMV of Rs 4.9 trillion is expected in calendar year 2022. Additionally, a strong share of tier-2 online shoppers is also expected to further drive this growth.

“Offline retail and recreation activity are back to pre-Covid levels. Yet India’s online retail remains on a robust growth trajectory despite offline unlocking,” said Mrigank Gutgutia, partner at RedSeer, adding, “During the pandemic, there was an initial slump. Then a huge spike during the 2020 festival season, a downtrend after, and again a spike last year. Offline unlock notwithstanding, in April, May, and June, the growth momentum in overall sales has continued YoY.”

In the India e-tailing GMV Index, there is a monthly growth comparison. In 2022, this was 60 per cent higher in April than April 2021.

It was 38 per cent higher in May than May 2021 and 42 per cent higher in June than June 2021.

Besides traditional commerce, what has contributed to this growth are the new e-commerce models that have come up to cater to unsolved consumer needs. They have gained share steadily in the fashion and grocery categories.

For instance, the report said that quick commerce alone has witnessed 10x YoY growth, and that it continues to massively gain share within the e-grocery market in India, despite global headwinds.

Globally, delivery service platform Gorilla was forced to exit Belgium due to recession. Delivery start-up Gopuff had to cut 10 per cent of its global workforce and close 76 warehouses in the US. Ultra-fast grocery firm Jokr pulled out of the US and sold its assets.

In India, there are quick commerce players such as Swiggy Instamart, Zomato, Dunzo, Blinkit, and BigBasket.

Another new e-commerce model, which is social commerce, is also having a growth spurt as it effectively solves problems of affordability and customer experience. Owing to a high referral share, this also is a low customer acquisition cost model.

The share of new e-commerce is expected to grow, especially in key categories, such as beauty, fashion, and grocery, as they continue to effectively serve a key need for specific consumer cohorts. Some of these players in India include Meesho, Bulbul, DealShare, and CoutLoot.

On growth trajectory

With a CAGR of 38%, the market is well set for strong GMV growth

• 40-60%: YoY rise in e-retail market
• 200 mn: Shoppers expected in CY22 
• 57%: Shoppers expected from Tier-II cities
• $19 bn Monetisation opportunity of Indian short-form apps by 2030

“In the electronics category, given the clear dominance of players like Flipkart and Amazon, there is not much of a big play for new commerce (players),” said Gutgutia.

The report also said that larger players are likely to adopt these models more aggressively in the years to come and the sector will witness greater merger and acquisitions. Additionally, this emerging sector will also witness innovation in business models to expand top line and control costs.

RedSeer said the market is set for strong GMV growth and a continued strong share of tier 2-plus shoppers. Over 200 million shoppers are expected this year and 57 per cent of them are going to come from tier 2-plus cities.

“Here a lot of the social commerce models have played a critical role in building up the new pool of customers. They are transacting for fashion, grocery, beauty, and personal care,” said Gutgutia, adding, “The total base of online shoppers is going to double this calendar year versus four years ago.”

Another RedSeer report said that the Indian short-form applications (apps) have a monetisation opportunity of $19 billion by 2030, and by 2025, they are expected to double their monthly active user base to 600 million. This will be 67 per cent of all smartphone users. The three main monetisation levers will be video-commerce, advertising, and gifting.

“Indian short-form apps are witnessing phenomenal growth, compared to other established platforms,” said Mohit Rana, partner, RedSeer, adding, “On average, an Indian user consumes close to 38 minutes of short form content each day.”