Covid Restrictions Fuel Growth in Online Retail Space
A report entitled ‘How India Shops Online 2021’, released by Bain & Company, has shown that the Covid-19 pandemic has driven a12-month acceleration in e-retail penetration – a growth level that is even higher in the top metro cities, where one in three people shopped online at least once last year.
Retail categories have seen disparate growth and recovery patterns during and post the pandemic. Mobiles and electronics categories had witnessed a one-time growth spurt through the initial phase of the lockdown in India, while frequent-use categories such as grocery, household, and personal care saw continued acceleration. Discretionary categories, however, such as fashion and travel products saw relatively slower growth but are expected to rebound to pre-pandemic growth rates soon.
“This Covid-19-induced inflection in e-retail is a global phenomenon driven by an enhanced consumer need for safety and convenience, especially during elongated stay-at-home periods. This has also played out in India wherein e-retailers have been the lifeline for both consumers and sellers – enabling access to essential commodities and hygiene products to millions of households during the lockdown and providing business avenues to thousands of sellers. We expect the surge in penetration to sustain post stabilisation, as a similar trend has been seen globally,” said, Arpan Sheth, a partner in Bain & Company’s Mumbai and Washington, D.C. offices.
The Indian retail market is the fourth largest in the world and is quickly evolving to include a sizeable e-retail component. However, the market is still massively untapped and there is immediate potential to reach India’s large internet user base of approximately 625–675 million people. The fiscal year ending March 2021 was one of contrasts for India’s retail market. The overall retail market shrunk by 5 per cent, along with a 7.3 per cent contraction in GDP. However, the Indian e-retail market saw a 25 per cent growth to reach $38 billion, despite a 2-month national lockdown and multiple prolonged disruptions in regional pockets over the year. This was driven by Covid-19, which caused an increased adoption of online channels.
The market is expected to grow at 30 per cent per annum over the next five years to reach $120–140 billion by 2026, which is expected to be higher than modern trade. This growth will be led by smaller towns that account for four out of five new shoppers. During the pandemic, reverse migration from metro cities further accelerated growth in smaller towns. In addition, women and older shoppers have gained prominence in the online shopper base over the last year, and this trend is expected to increase the e-retail base.