Ecommerce user base in India to outpace US in two years: Bain report

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E-commerce in India is expected to grow at a rate of 25-30% annually for the next five years, with a steady increase in user base that is estimated to beat the second largest e-commerce shopper base – United States – in the next one or two years, according to a report by consultancy firm Bain & Co and homegrown e-tailer Flipkart.

The online shopper base in India, which was at 180-190 million in 2021, will also increase to about 400-450 million users by 2027 when the industry is estimated to be valued at over $150 billion. The report pegged the ecommerce market at $50 billion this year, up 40% from last year.

“With the pace of growth we are talking about, we are very soon going to be the second largest shopping base, only behind China,” said Manan Bhasin, partner, Bain & Co.

Going forward, the category mix in online commerce is expected to evolve, with growing demand for fashion, grocery and other categories as its reach widens across the country.

Bhasin said the share of fashion will likely increase from 20-25% of overall ecommerce sales to 25-30%.

“Fashion will continue to be the gateway category for ecommerce going forward over the years as most of the time fashion products would be the first thing users buy online,” he said.

ET reported earlier this month that ecommerce firms like Flipkart and Amazon have had a good start to the flagship festive sale events with consumer demand back online across categories.

Bhasin also said the festive season sales were “pretty strong across platforms.”

Bain divides the ecommerce business in India into three phases.

The early days of ecommerce to 2015 is the first, when cash-on-delivery was introduced and there was “cautious early adoption” in the metro cities. This was followed by the growth and expansion phase from 2015 to 2020, or the “massification” phase with more users in tier-2 cities, delivery speed increasing and affordability constructs like buy-now-pay-later taking shape.

“We are now in the third phase of e-commerce, and it is an era of innovation, with micro-segmentations and new business models emerging,” said Bhasin.

He said clear lines were emerging in the e-commerce customer base with segments like Gen-Z users, low-income users, and tier-1 city users. They are being targeted with different business models like quick commerce and social commerce.

Features such as live and video commerce have not been a success in every part of the globe, Bhasin said, but they have significant potential and offer a great opportunity as 400 million users in India consume video on their smartphones.

“There are two kinds of platforms that offer live and video commerce – marketplaces and short video platforms,” he said. “And there are three moats in this way of driving commerce – strong creators and content, recommendation engine, and commerce integration.”

Source: Economic Times

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