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India’s social commerce sector can reach $60 to $70 billion in revenue by 2030: Report

Hemani Sheth Mumbai | Updated on December 09, 2020

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The social commerce sector in India has the potential to grow to twice the size of the current e-commerce market within ten years, according to a new report titled ‘The Future of Commerce in India – the rise of social commerce’ released on Wednesday by Bain & Company in partnership with Sequoia India.

As per the report, India’s social commerce sector currently is of $1.5 to $2 billion Gross Merchandise Value (GMV) market. This has the potential to grow to $16 to $20 billion in five years, increasing to $60 to $70 billion in revenue by 2030.

The growth of the market can be driven by “formats ranging from conversational commerce on chat platforms to video-led commerce, or a vibrant social reseller community,” as per the report.

“Social commerce in India is broadening India’s e-commerce sector and paving the way for a model that’s built on community, connection and trust. While traditional e-commerce will continue to flourish, social-led models will broaden the reach of e-commerce for Indian consumers,” Arpan Sheth, partner and leader of Bain & Company’s Asia-Pacific Technology, Vector and Advanced Analytics practices, said.

The growth of social commerce can help in democratising online commerce.

“Indian e-commerce—powered by cheap data, supply-side innovations and digitally savvy customers, has become a $30 billion GMV industry in fiscal year 2020 (FY20),” the report said.

Democratising e-commerce

The country also has the second-highest number of connected users globally, at around 572 million with a potential of 41 per cent growth. However, digitally connected users who shop for products online are much less in number than other countries. According to the data, 8 per cent of Indians, nearly 105 million shop for products online, accounting for an average spend of $286 per year.

A majority of digitally connected users spend time on social media platforms. Indians spend an average of over three hours per day online. Out of the time spent, around two hours are spent on messaging, social media networking and watching videos.

“Social and video platforms have more universal usage for both online transactors and non-transactors. By leveraging the popularity of these formats, millions of small retailers are finding innovative ways to sell directly to consumers,” as per the report.

One of the major hindrances to transacting on the platforms currently, for about 400 million non-transactors, is the lack of trust.

Shraeyansh Thakur, VP, Sequoia Capital India LLP said, “Social commerce is playing a key role in democratising online commerce, connecting brands, consumers and small businesses directly through social platforms and meeting the modern consumers’ need for personalized, differentiated products.”

“Social-first models have been able to scale with much lower customer acquisition costs globally and we are seeing similar trends with Indian startups experimenting in this space. While early in its evolution in India, it’s set to scale rapidly in the next 5-10 years, offering a huge opportunity for innovative new products and business models,” added Thakur.

Benefits for small businesses

The sector can also help over 40 million small businesses and entrepreneurs across India reach out to consumers. Currently, 85 per cent of sellers who leverage social commerce are small, offline-oriented retailers, as per the rpeort.

“A subset of resellers are often first-time entrepreneurs earning 5,000 to 10,000 rupees a month and leveraging the power of their existing social networks to sell to friends and family. This stands in sharp contrast to the larger, organised seller base on e-commerce platforms,” the report said.

“For most of these sellers, social commerce represents the ability to create incremental value over and above their existing business. However, because the process of initiating contact with the customer, negotiating and then closing a sale often spans multiple platforms, a more streamlined order-management process and better customer analytics are the biggest asks from sellers,” it adds.

Mohit Bhatnagar, Managing Director, Sequoia Capital India LLP said: “Small sellers who are now able to sell to first time online buyers, will form the backbone of this sector. We encourage the entire Indian retailer ecosystem, 85 percent of whom are currently small retailers selling their products offline, to internalise the findings of this report and embrace social commerce in order to stay ahead of the curve.”

Growth strategy

Social commerce can especially be helpful for categories such as fashion and home decor, where it can satisfy consumer needs to discover and explore new products. Fashion is currently the most frequently purchased category within the sector, followed by Beauty and Personal Care, then Food and Grocery.

Social commerce can reach its potential for growth with a cohesive social commerce strategy combined with a simplified shopping experience and pricing strategy tailored to the value proposition of products. This in addition to “seamless back-end integration with platforms” and “cost-effective and scalable hyperlocal solutions” can help the sector growth further.

“Social commerce presents a great opportunity for customers and sellers to discover one another. Almost half of consumers do not know what they are looking for and are not loyal to specific brands. Nudges or recommendations from relatives and friends are a big driver of action, and impulse purchases present an opportunity for sellers. Unstructured, long-tail categories make up the bulk of this landscape. Fashion is the most popular social category, followed by Beauty and Personal Care, then Food and Grocery.” added Radhika Sridharan, partner and leader in Bain India’s Customer Strategy & Marketing practice.

Published on December 09, 2020

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