Info-tech

E-tailers buck the slowdown blues

Sangeetha Chengappa Bengaluru | Updated on December 27, 2019 Published on December 27, 2019

Investor sentiment continued to be robust during the year   -  SARINYAPINNGAM

Festival season sales, rise in non-metro shoppers drive growth

Bucking the economic slowdown led by tepid consumer sentiment across consumer goods, retail and other industry sectors, the Indian consumer Internet industry grew 38 per cent, exiting 2019 at $76 billion and is set to exceed $100 billion in 2020.

Consumers, who chose to cut down on overall and discretionary spend, loosened their purse-strings only during big sale days that dotted the year, from the Republic Day sale in January right up to the annual blockbuster Diwali sale, which saw e-tailers rake in a record $3 billion in the first 6 days of the festive sale month with high-ticket categories such as mobiles, electronics, large appliances and home decor registering a 3-4X jump in sales.

Good year

“Despite a tough macro-economic environment e-tailing fared well in 2019 for two major reasons. First, during challenging times, consumers look for better value which e-tailers created with multiple affordability initiatives including cashbacks, private labels, no-cost EMIs etc. Second, as a result of non-metro customers migrating to online shopping driven by the strong value proposition provided by e-tailers this year, the online shopper base from Tier-2 plus cities grew to 50 per cent compared to 40 per cent in 2017,” said Ujjwal Chaudhry, Associate Partner, RedSeer Consulting.

Convenience matters

Online shoppers, who are deal seekers, are also looking for convenience, says Kunal Gupta, Head E-Commerce, Nielsen, South Asia. “There is a phenomenon of ‘prime time’ that is apparent in digital shoppers today; with 23 per cent sales happening between 8 pm and 11 pm and a third of the sales coming through the course of the night, reinforcing consumers’ quest for convenience with anytime, anywhere access to the shopping cart,” he said.

Non-metro shopper base

As per Nielsen’s E-Analytics solution which passively captures digital shoppers behaviour through an opt-in panel of 1,90,000 Internet users spread across 52 cities, every second online shopper is new; shoppers anticipate and hold back spending for sale periods as evident from the fact that more than 84 per cent of festive season sale came from September 28 to October 25 as against just 16 per cent during non-sales days. While mobiles continue to enjoy a larger share of online sales contributing 48 per cent, online shoppers in India are increasingly buying fashion. This also includes apparel, footwear, luggage and accessories (value contribution 16 per cent) and within this, men’s clothing at 58 per cent is the highest contributor, with women’s at 36 per cent. FMCG vs other categories has the highest volume of orders at 56 per cent.

Upbeat investor sentiment

Investor sentiment continued to be robust in 2019 despite some blips — the government’s decision not to extend the February 1 deadline to comply with revised norms relating to FDI in e-commerce, the draft national e-commerce policy by the DPIIT later that month, which made out a strong case for foreign companies to start localising data, as well as nationwide protests led by CAIT throughout the year, against the “unethical and unfair business practices” of leading e-commerce majors Flipkart and Amazon.

Although the total number of e-commerce firms funded in 2019 dropped to 126 compared to 136 in 2018, the total amount of funding raised by these firms in 2019 increased by 56 per cent at $2.35 billion, up from $1.51 billion in 2018, as per data sourced from Tracxn.

Jump in valuations

“The sentiment is very upbeat in the start-up and venture capital space with many new funds being set up, providing a lot of capital to e-commerce firms. Government pronouncements were also mostly positive. The Angel Tax issue getting comprehensively addressed after years of being a nuisance and several new initiatives including CSR funds for incubators and accelerators were very welcome. Valuations saw a huge bump up with several milestone deals — Paytm at $16 billion, OYO at $10 billion plus; Udaan, Freshdesk, Swiggy and Byju’s raising substantial new funds at unicorn valuations. And excellent exits/returns for LPs in many of the funds that invested early in these companies,” summed up K Ganesh, Serial Entrepreneur, Partner at GrowthStory.in

To exceed $40 b in 2020

This year, e-tailing which constitutes 40 per cent of the overall consumer Internet market that is dominated by OTAs (online travel agents) will reach GMV of $30-31 billion, up from $23 -24 billion in 2018 and is set to exceed $40 billion in 2020. The online shopper base which was 90 million in 2017 has grown to over 120 million in 2019, as per RedSeer estimates.

Published on December 27, 2019
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