The report said that the rise of technology adoption among small and medium businesses is also expected to drive the growth for digitally native companies.
The e-commerce sector in India is predicted to grow at a 27% CAGR over 2019-24 and is expected to reach $99 billion by 2024, according to a report released by EY-IVCA Trend Book 2021. Grocery and fashion/apparel are said to be the key drivers of this growth.
The report revealed that India will have 220 million online shoppers in India by 2025. The penetration of retail is expected to be 10.7% by 2024, compared to 4.7% in 2019. It stated that the government is aiming to build a trillion-dollar online economy by 2025, through itsDigital Indiaprogramme.
“The online retail market in India is estimated to be 25% of the total organized retail market and is expected to reach 37% by 2030-27,” it said.
The increase in online users has been witnessed across various segments coming from Tier 2 and 3 cities. This could serve as a great market for native startups to tap in. The report said that the rise of technology adoption among small and medium businesses is also expected to drive the growth for digitally native startups. With small merchants, increasingly implementing online payments and mobile channels they are also exploring collaborations with technology-driven startups.
At the same time, there have been various initiatives from the government with the aim to digitize the traditional offline market and boost the e-commerce sector such as Start-up India, Digital India, Skill India, Innovation Fund and BharatNet.
“Various regulatory reforms such as new draft e-commerce policy, the national retail policy and consumer protection rules 2020 showcase the government’s inclination towards building this sector further,” the report stated.
It further added that the rapid increase in internet users has attracted new budding entrepreneurs to set up establishments coming up with innovative pricing and stocking practices (marketplace vs inventory) while traditional players (brick and mortar stores) are slowly catching up. This has helped in the development of B2C e-commerce as there are now numerous choices in terms of brands, faster delivery, discount offers, personalization, digital payment options, cash on delivery, and easy returns.
“Companies are creating an omni-channel presence, blending online shopping and offline retail to overcome trust issues of customers. Leading e-tailers in India are planning to open brick-and-mortar stores. Digital B2C companies have also invested in creation of brands which attract young millennial crowd consisting of a majority of the online shoppers who tend to be more brands conscious. These companies are forming innovative product bundles aligned with the needs of customers and thus ensuring greater customer engagement,” the report stated.
The rise of B2C e-commerce
There has also been a significant influx of capital in B2Cs primarily to support the supply chain, global expansion, acquisitions and to bring innovative product offers to the market. The report revealed that the growing B2C e-commerce scenario is attracting a lot of attention and key investments from international companies.
Some key investments in the B2C market in 2020: $90 million investments in interior designer marketplace LiveSpace and $52 million investment in online grocery platform BigBasket. Key investors include Venturi Partners, Bessemer Venture Partners LP, Goldman Sachs, TPG Capital Inc., CDC Group Plc and Alibaba.com India.
Karthik Reddy, Managing Partner, Blume Ventures and Vice-Chairperson, IVC
Association (IVCA) said in a statement, “In the next phase of ecomm, we expect a surge of demand from Tier 2 and Tier 3 cities and towns in India, bringing in the next 100s of millions of consumers. A new wave of investments in this sector in both B2B and B2C commerce are creating a huge gig economy, several sub sectors have emerged, and innovation is going to storefronts, local commerce, e-commerce infra and payments.”
In 2020, e-commerce and consumer internet companies raised more $8 billion in PE/VC capital spread over 400 deals (excluding Jio platform investment) giving rise to nine new unicorns. Edtech and hyperlocal segments led the investment activity, together accounting for over 40% of 2020 investments and witnessing 5x and 2x growth in funding value respectively over 2019.