India’s internet retail growth is tapering but shopper base is maturing: Redseer

• India’s monthly users or ‘regular shopper’ base is now at 65 million.
• Fashion is now the single-largest category as it overtook mobiles; beauty and personal care is one of the fastest-growing categories.
• Advertisement revenue of e-tailing also experienced a steep growth to generate over $1.2 billion in FY23.

India’s e-tailing or electronic retailing, grew 22% in FY23 to $60 billion in gross merchandise value (GMV). The growth rate is slower compared to the pandemic years — which saw growth of 36% each in FY22 and FY21, says a report by Redseer Strategy Consultants.

“Despite losing momentum, e-tailing today is 2.5x of pre-Covid levels and is performing much better than overall retail consumption, which has been tepid in the recent quarters due to inflation concerns,” said Mrigank Gutgutia, partner at Redseer.

This robust growth is driven by highly relevant and affordable supply on e-tailing platforms and standardised experience. Growth in direct-to-consumer brands and accelerated digital adoption of traditional brands aided the growth, according to Redseer’s India E-tailing Update.

Growth in regular e-shoppers

At the same time, shoppers are showing signs of maturity – as indicated by shopping online becoming a habit. There are as many as 65 million monthly users or regular shoppers’ — this is the highest it’s ever been.

As many as 31% of annual shoppers are now monthly shoppers as well. This number is up from 23% in FY21 – indicating that more people shop online more frequently across categories.

“Over the last three years new users who are willing to try eCommerce throughout the country have increased and non-metro users account for a large share of the total user base in FY23. The growth in new users has also turned steady,” Redseer says.

It’s fashion over phones

The depth of e-tailing market has grown as compared to pre-Covid levels, across categories. Mobile phones had been the most dominant category before the pandemic, in FY19, but now fashion has become the single largest category, accounting for 27% sales. Mobile sales are a close second at 25%.

“Strategic partnerships of e-commerce platforms with global and Indian brands along with a change in shopper mix and an increasing share of women shoppers has resulted in an explosion of fashion sales,” Gutgutia adds.

Though beauty and personal care accounts for only 4% of the total GMV, it’s growing at an exponential rate of 52%. Grocery segment and home categories have seen 64% and 39% compound annual growth rate (CAGR), respectively, between FY19-23.

Platforms gain traction

The sellers also have been gaining. With 1.2x better take rates, the revenue from product sales across India e-tailing has grown 3x – from $2 billion in FY19 to $6 billion in FY23. As the number of frequent e-shoppers grows, the platforms are able to diversify their revenue too.

Advertisement revenue of e-tailing also experienced a steep growth, with ad monetisation generating more than $1.2 billion in FY23.

The report also said that Flipkart group, one of India’s pioneering e-commerce sites, has been the most resilient in terms of market share in the last few years, with a market share of 48% in FY23.

Redseer says that Flipkart withstood competition from incumbents owing to a large selection, varied affordability constructs and strong understanding of needs of the vast e-tailing shopper base in India including those from T2+ cities.