Meesho, Snapdeal are trying to ‘democratise’ e-commerce

Global management consultancy firm Kearney says that value-driven purchases via e-commerce are set to grow tenfold by the end of this decade. The market for value commerce — defined as consumer purchases of affordable products online — was an estimated $4 billion in 2019, and will reach a whopping $40 billion by 2030. Ergo, the segment is the next big opportunity for e-commerce players who now have their eyes firmly fixed on tier-II markets and beyond.

“The first e-commerce revolution in India focused on buyers who typically have significant purchasing power. Much less attention was paid to consumers in smaller towns and those from lower income groups in metros,” points out Utkrishta Kumar, CXO, business, Meesho that operates largely in the value commerce space.

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Homegrown online shopping platform, Snapdeal, has already been pivoting to value-conscious shoppers, and recently formed a subsidiary, Stellaro Brands, whose aim is to create affordable brands in fashion and lifestyle. Himanshu Chakrawarti, CEO of Snapdeal and Stellaro Brands, explains that the new entity will allow the company an opportunity to make its mark in a relatively untouched space that has few prominent brands. Stellaro Brands, which employs the house of brands model, will operate as an independent business unit from Snapdeal and offer products in three broad categories of fashion, beauty and personal care, and home.

“Today, 75% of the value market is unorganised and that is the huge opportunity we are targeting,” explains Chakrawarti. By FY26, the share of the value segment as part of overall e-commerce is expected to rise to 22% from a mere 8%.
“Within the lifestyle categories, there are a lot of white spaces. For instance, there are very few brands selling quality sarees in the price range of `400 to `500. The same goes for a category like athleisure or plus sized fashion in the value segment,” he observes.

The subsidiary, which houses brands like Urban Mark, Rangita, Nord and HomeTales has also begun selling on platforms like Amazon and Flipkart, aside from Snapdeal, and expects to sell on all e-commerce platforms over the next couple of months.

Big deal

Industry estimates peg the number of e-commerce shoppers in India at about 190 million as of 2021. Of the next 200 million shoppers, close to 150 million are expected to be from the value segment. “This is the logical direction of how online retail will evolve, because the next growth wave was always going to come from tier-II markets and beyond, considering that the majority of our population resides there. As online retail penetration increases, these customers will continue to drive growth in user and GMV terms in the next couple of years,” says Sanjay Kothari, associate partner, Redseer Strategy Consultants, predicting that categories such as fashion, home, beauty and personal care will continue to do well in that segment.
Meesho says nearly 80% of its orders come from tier-II plus regions and 60% from tier-IV plus regions.

The platform seeks to create a level-playing field for sellers, while boosting affordability for consumers. As per a Redseer report released in October last year, Meesho in fact overtook Amazon with the second highest number of orders during the festive season, capturing a 21% share in order volumes on account of its presence in smaller markets.

Stellaro Brands too has kept away from private labels “because they offer no added value”. The focus will remain on ensuring stringent quality checks while keeping pricing low and competitive, the company says. “While it’s still too early to define our revenue targets for Stellaro, by the end of CY24, we want to be among the top three players in each of the categories in which we operate,” Chakrawarti says.

Players in the value commerce segment are also working around specific challenges that are unique to smaller markets. For instance, Kumar notes that for users in areas with poor connectivity, Meesho’s app is light at 13.6GB, and integrated for both, sellers and consumers. This makes it compatible with even low-end smartphones and allows a more seamless experience.
Language and audio tools are also critical, adds Chakrawarti. Brands cannot adopt an “anglicised approach” to the mass market where vernacular languages are critical, considering that consumers are very often first-time shoppers.

The opportunity

Estimated value of value commerce market in India in 2019 — $4 billion
Projected value of value commerce by 2030 — $40 billion
75% of the value market is served by unorganised players
Value commerce currently accounts for only 8%; this will reach 22% by FY26
E-commerce shoppers in India are around 190 million as of 2021; 50% of these are value commerce shoppers
Close to 150 million of the next 200 million e-commerce consumers in India will be value commerce shoppers
Key categories in value commerce are fashion, accessories, home and personal care
Growth will come largely from tier-II markets and beyond