Kearney, a global consulting firm, sees value e-commerce segment in the country’s lifestyle retail market growing from $4 billion in 2019 to $20 billion in 2026 and $40 billion in 2030 — a 10-fold growth in 10 years.

This trend will be led by the value conscious consumers of India shifting to online buying, driven by huge adoption of mobile Internet, said a new Kearney report titled ‘Value e-commerce: The next Big Leap in India’s Retail Market’ .

India is expected to have 110 crore Internet users and 35 crore online shoppers by 2026, the report said. The value e-commerce is the online business model that serves value lifestyle retail.

The e-commerce penetration in this value lifestyle retail segment could grow from 4 per cent to 13 per cent by 2026 and 19 per cent by 2026, said Siddharth Jain, Partner, Kearney.

Shopping behaviour

The key takeaway from the report is that companies that mold their businesses around the distinctive shopping behaviour and needs of value consumers have the chance to lead the $40-billion opportunity. While relevance and trust will drive growth in this segment, online players should continually invest in curated assortment, relevant recommendations, efficient supply chain, and omni-channel presence to pick up share in this next big opportunity in India retail, according to the report.

Besides the rise in the number of online users, the range of compelling factors driving this growth include the emergence of India-2 (low income groups, predominantly from Tier 2+/rural cities) driving most of the demand; and an increase in overall household income could propel this segment to spend more on the value lifestyle segment.

The report highlighted that India-2 drives 70 per cent of value lifestyle demand, but only 16 per cent is online due to lack of trust, resistance to online and to some extent due to limited access to Internet. Pandemic has whittled away at this resistance towards online buying. Another important factor that will drive value e-commerce growth is that Gen Z will join millennials as independent shoppers over next five years and their preferences towards online buying are higher.

Explosive growth

India’s explosive growth in mobile Internet penetration from 320 million users in 2015 to 600 million users in 2019 has begun to impact the way consumers make buying decisions, said the report. Today, however, only 20-25 per cent of people who have Internet access are using online platforms for commerce, and this has been heavily skewed toward metro and tier-1 consumers. However, active Internet use in rural towns (50 per cent of value lifestyle demand) and in tier-3 and tier-4 towns (about 25 per cent of value lifestyle demand) is gradually growing and is expected to increase sharply over the next five years. Young people in these towns are getting hooked on digital content and social media. We expect the number of Internet users in India to surpass 1,100 million people by 2026— and a third of these will be active online buyers

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