“The Amazon-Flipkart duopoly is fast becoming a four-way competition as Reliance Digital and Tata join the fray,” said the report, ‘The State of Online Retail in India’. “We estimate that Flipkart, Reliance, Amazon, and Tata (FRAT) collectively own more than 80% of India’s online retail market, and each is manoeuvring to gain market share.”
While Tata Group is working on a super app to take its ecommerce play to the next level and has acquired platforms like Bigbasket and 1mg, Reliance is building its ecommerce platform called Jiomart and has made several acquisitions, including quick commerce platform, Dunzo in January this year.
ET reported on March 16 that Tata is
seeking clearance from National Payments Corporation of India (NPCI) to start operating on the Unified Payments Interface (UPI) as a third-party payments service provider offering digital payments services. ET had
also reported on March 11th that Tata Digital, the tech arm of the conglomerate, is seeking more funds from the parent company, Tata Sons, for expansion.
The Forrester report said India’s overall retail growth slowed for the first time after several years of double-digit increases in FY21when gross domestic product (GDP) shrunk 7.3% amid the pandemic and lockdowns. But online retail grew 5%, adding $1.6 billion in sales.
It expects the Indian online market to get back on a faster growth track with the market expanding around 20% every year to reach $85 billion by 2025.
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Forrester estimates the 2021 online retail market size to be $41 billion, growing $7 billion year on year, and that it will reach $50 billion in 2022 and $60 billion in 2023.
ETtechMarket opportunity
Forrester’s Ecommerce Readiness Index 2020 categorises India as a “large and developing opportunity for online retail”. Only the US and Chinese markets have “larger opportunities”.
This readiness, it said, is evident from the more than $8 billion that local and international organisations invested in online retail in 2020 and 2021.
The number of online buyers in India shot up from 71.5 million in 2016 to 179.5 million in 2020, and Forrester forecasts this number to rise to 291.5 million by 2025.
This growth will be largely driven from smaller towns and rural areas, it said.
As of September 2021, rural India had 336 million internet subscribers, an 11.3% increase over 2020. The overall online buyer population is set to grow at a CAGR of 10.1% from 2020 to 2025; smaller towns will account for most of this.
“The pandemic has made people comfortable with online shopping,” said Ashutosh Sharma, VP and research director at Forrester. “More importantly, this has resulted in a consumer behavioural change.”
He also cited increasing investor interest in this space including top global investors such as Facebook, Google, KKR and General Atlantic investing in Jio, Walmart’s investment in Flipkart, and startups getting a lot of investments.
ETtechPost pandemic ecommerce
Before the Covid-19 outbreak, smartphones, computer hardware and software, and consumer electronics categories were the growth engine for ecommerce. But the pandemic turned the tide with groceries and personal care products seeing more growth.
Forrester predicts the online smartphone penetration to taper off due to longer lifecycle, chip shortage, and logistics costs increasing the price of products. Lifestyle, which mainly includes fashion, is set to make a comeback.
Today, most online retailers do the basics, so they will have to focus on personalisation to achieve differentiation like, for instance, tailoring experiences based on geography and shopping behaviour.
ETtech“Tata Cliq has invested heavily in this space and is already reaping benefits,” the Forrester report said. “So are smaller players like Nykaa, which saw clicks increase by more than 40% through targeted marketing.”
Another important trend is omni-channel expansion, that is, being present both online and offline. Forrester survey found that 77% of metro Indian online adults feel more confident about a purchase when they use a smartphone to do research while they’re in the store, indicating a growing trend of digital and physical integration.
