2023: A look at how the e-commerce sector is changing in India
New Delhi: 2022 saw some critical changes in the e-commerce ecosystem in India. The industry primarily dominated by the two big wigs of e-commerce – Amazon and Flipkart, saw growing competition from giant conglomerates, disruptive startups, and the launch of state-backed ONDC. Further e-commerce players refocused their strategies to tap the next set of internet consumers from the hinterlands.
Another aspect of e-commerce – B2B – came into focus and saw significant growth and investments. As we enter 2023, ETRetail spoke to analysts and industry leaders to understand the changing face of e-commerce in India.
If and how is the duopoly of Amazon, Flipkart being challenged
As per a Redseer report released in October last year, home-grown e-commerce company Flipkart emerged as the leader in terms of the gross merchandise value (GMV) and order volume in the first two weeks of festive sales, that is, from September 22 to 30. The Indian e-commerce industry recorded USD 5.7 billion in sales during the mentioned period with Flipkart holding 62 per cent market share in GMV, the report said.
While US e-commerce giant Amazon retained its second position with 26 per cent market share in terms of GMV, Vidit Aatrey-founded Meesho and overtook Amazon with the second-highest number of orders during the festive season, the report highlighted. Meesho which plays in tier 2,3 and beyond markets captured a 21 per cent share in terms of order volumes. This highlighted the underlying opportunity present in markets beyond metros and the rise of alternate e-commerce players in the country.
Commenting on the role of value commerce players in the changing landscape of online retail in India, Utkrishta Kumar, CXO, business at Meesho said that the lack of innovation to cater to India’s diverse demography and requirements has left the majority of the country’s population underserved by e-commerce.
Talking about Meesho, he added that the company is working towards enabling access and affordability and reimagining the internet commerce journey for consumers. Meesho claimed that its orders grew 135 per cent YoY not just from tier 2 and beyond regions but also from the value-conscious metro and tier 1 consumers.
“Meesho operates as the only true e-commerce marketplace in India with a non-inventory led model,” he said adding that the company has ensured that there is no private label play, no tiering of sellers, and has introduced an industry-first zero commission.
Snapdeal’s CEO Himanshu Chakrawarti told ETRetail last month that the value commerce segment is significantly underpenetrated. He shared that as per data only eight per cent of the value lifestyle segment is online. “There is a big opportunity in the value lifestyle segment as this space is not dominated by brands, and the products are of non-standard quality,” commented Chakrawarti highlighting the opportunity for online retail in this segment.
Citing a report, Adarsh Menon who heads Flipkart’s value commerce platform, Shopsy said that the online shopper base in India is estimated to increase to 400–450 million by 2027. He opined that e-retail has democratized commerce by enabling shoppers from over 95 per cent of pin codes, empowering local sellers, and breaking market barriers for new brands.
Sharing Shopsy’s strategy, Menon said that the etailer is focusing on providing an interface in vernacular languages, voice search, and high visibility filters. Further, he claimed that the company offers a no-frills, zero-commission model to its sellers. Over 60 per cent of products at Shopsy are valued at Rs 200 and below.
Flipkart’s fashion arm Myntra too recorded a growth in demand and orders from tier 2 and 3 markets. “Close to 45% of Myntra’s demand comes from tier 2 cities and beyond, and the rapid digital shift India is undergoing will further accelerate shoppers from the T2+ geographies to adopt newer ways of shopping,” said a company spokesperson highlighting that beauty and personal care products are witnessing high demand in tier 2 plus markets.
Big, vertical commerce players heat up competition
The duopoly of two big players of online commerce saw serious competition from deep-pocketed players like Reliance’s JioMart and Tata Digital strengthening their position in the market.
Jiomart launched during the pandemic is emerging as an e-marketplace retailing across a wide range of categories. Sandeep Varaganti, CEO, Jiomart-Reliance Retail told ETRetail in November that the company is no longer a grocery-led destination.
“JioMart ran as a grocery-led market for a long time. However, over the last few months, we’ve transformed it. Presently, Jiomart is not a grocery-led destination, it is a multi-category destination.” Jiomart recently announced that it has onboarded 20,000 small and medium-sized businesses to sell on its platform.
Tata’s fashion and luxury e-commerce marketplace, which runs Tata Cliq too is strengthening its position in the online retail space. Recently, Tata UniStore which runs Tata Cliq raised Rs 1,600 crore.
Started as a beauty marketplace, Nykaa has grown to become a key player in the Indian e-commerce ecosystem. Moving above beauty, the etailer has forayed into fashion, launched private labels across lifestyle categories, and is planning its foray into international markets.
New York headquartered marketplace, Etsy, which sells unique and creative goods is expanding its presence in the country. Pankaj Jathar, VP & country head India, Etsy said that he sees the preference for personalized experiences growing in India. “Indians are now looking for unique items that they won’t be able to find anywhere else, items that they can personalize or customize according to their preferences.”
He added that he expects to see the trend of intentional shopping gaining traction in 2023. “It’s a huge opportunity for small businesses to explore online selling as a channel to reach wider audiences.”
Govt-backed ONDC a challenger to Amazon, Flipkart
2022 saw the launch of the state-backed Open Network for Digital Commerce (ONDC) which is said to democratise e-commerce in India. The initiative aims to create a level playing field for small retailers; unbundling commerce.
Commenting on how ONDC could turn out to be a game changer in the Amazon-Flipkart-dominated e-commerce ecosystem in India, Amarjeet Singh, partner, and national lead – emerging giants and startups, KPMG in India said, “The ONDC platform is a future-defining innovation-led transformation in e-commerce. It aims to create new opportunities, curb digital monopolies and support micro, small, and medium enterprises and small traders and help them harness the power of digital.”
He added that ONDC will make e-commerce available to the common man, giving them the freedom of choice – product, payment, and logistics.
Kumar from Meesho which recently joined ONDC said that the partnership will help connect buyers with hyperlocal sellers, thus facilitating the discoverability of products for consumers while creating a wider market for hyperlocal suppliers. Like Meesho, apps like MyStore, Paytm Mall, SpiceMoney, GoFrugal, Dunzo, Shiprocket, and Delhivery have gone live on the ONDC platform.
B2B to drive next wave of e-commerce
With digitization of kiranas, an influx of startups in the B2B segment, and investments and the growing focus on etail giants, B2B e-commerce emerged as one of the fastest growing segments of the online retail market. Over the next decade, B2B is projected to play a crucial role in India’s e-commerce growth story.
“According to a recent report by Redseer, India’s eB2B market is projected to reach a GMV of $100 billion by 2030,” said Koteshwar L N, business head, Flipkart Wholesale. He highlighted that the need to build a sustainable omnichannel business model, applications of technology, and increased adoption of digital commerce among small retailers and MSMEs will be key trends to dominate the B2B e-commerce market in India in 2023.
Commenting on the same, an Amazon Business spokesperson said that a highly personalized e-commerce experience, mobile-first purchase, and adoption of digital procurement and omnichannel strategies with an in-built transparency system and process automation are some of the trends that will drive the B2B space in the coming years.
“The fully online model of eB2B with both discovery and transaction happening online will continue to grow with Kirana’s increasingly adopting eB2B sourcing,” said Rajat Tuli, partner, Kearney noting that this trend is very similar to other developing economies like Indonesia where the overall share of eB2B in general trade is expected to cross 5 per cent in next 3-4 years.
Citing that that B2B eCommerce market in India is still less than 1 per cent of the USD 1 trillion addressable market, Udaan’s spokesperson said, “…a horizontal business model catering to mass-market like ours has the potential to change the overall consumer landscape as more retailers and kirana stores across Bharat adopt digital.”
Sharing that Amazon Business has introduced features such as high-volume discounts, bulk and quantity deals, and multi-user accounts for control and monitoring, the spokesperson said that going forward it will continue to add more features with a customer backward approach.
Giving a peek into strategy for 2023, LN from Flipkart Wholesale said, “Our focus for the next year will largely remain on providing differentiated and value-added products and services to our members.” He added that the company will bring in more technological and digital interventions to drive e-commerce adoption and accelerate the growth journey of its kirana partners.
KPMG India’s Singh highlighted that with recent economic volatility and inflation, contextualized real-time pricing is going to be a real game-changer in the future. It will allow B2B companies to offer consistent, personalized prices to customers, both online and offline. Further, multiple payment options are vital to B2B e-commerce and business consumers, he noted.