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By 2026, small towns will power value e-comm: Siddharth Jain

Yatti Soni Bengaluru | Updated on September 08, 2021

The $4 billion value e-commerce segment has been pegged as the biggest growth opportunity for Indian lifestyle retail in the next 10 years. The segment Value e-commerce currently accounts for only 4 per cent of the value lifestyle retail market but is estimated to grow to $20 billion by 2026 and double that by 2030.

While the 2010s have been about getting affluent users from metros and tier 1 cities to shop online, the 2020s are about the rise of mid- to low-income, value-conscious users from urban areas, tier 2-4 cities and from rural India. Consumers in the segment focus on finding affordable products that meet their needs of desirable quality, durability, and trendiness.

BusinessLine spoke to Siddharth Jain, Partner, Kearney about the firm’s latest report on value e-commerce and the growth drivers in this segment. Excerpts:

How is value e-commerce different goods that are already available online?

Value segment is defined by the price point of the product relative to the category and its quality and value e-commerce is the channel for these products.

Value focussed products do not need to be discounted to reach a certain price point. On the other hand, discounts are available on products across all price points on e-commerce, including even premium products, which will not necessarily fall in the value segment even after discounted price.

What are the growth drivers for value e-commerce in India?

The growth in demand for value e-commerce has been led by various factors like growing smartphone and internet penetration and the emergence of new e-commerce buyers from less affluent households and small towns as well as rural areas.

Currently less than 40 per cent of value e-commerce demand comes from small towns with 5-6 per cent from rural areas.

By 2026, we expect over 60 per cent of value e-commerce demand to come from Tier 2-4 towns and rural India. Rural itself could account for 20 per cent of value e-commerce demand.

Further, on the supply side, the growth has been driven by value focused e-commerce marketplaces like Snapdeal along with brick and mortar brands such as Max India, Pantaloons and V Mart who have invested significantly in building their e-commerce capabilities. Further, the entry of a large number of small and medium businesses on the online channels has also boosted the growth in the value e-commerce segment.

How do you define value-conscious consumers and where do you think they will come from?

Value buyers are consumers with key buying criteria based on affordability, minimum desired quality, yet with an aspirational mindset. Value e-commerce is about offering users good quality lifestyle products at affordable prices with minimal trade-off between price and quality – the mass, economy and masstige segment.

Value buyers tend to emphasise more on budget adherence (>60 per cent value consumers strictly adhere to budget), high on bargain hunting and low on brand loyalty. They also tend to replicate their offline buying behaviour online, they seek – convenience, relevance and trust in their online buying Value-buying happens across income segments, tiers and categories – albeit at different levels.

Value-buying is not new to India. Is online taking it forward from where the offline has brought it so far or do see both online & offline continuing to grow in the value space?

We see both online and offline growing in the value space. If you look at the offline space in lifestyle categories like apparel, the organised modern retail formats have a mere 16 percent share of offline retailing. We expect this segment to see robust growth too and become 30 per cent of offline retailing by 2030.

Which platforms do you currently see are tapping this opportunity?

So far Amazon and Flipkart have dominated the e-commerce space including value segment. This was largely because of the e-commerce demand coming from affluent households even within value segments. As more and mid-low income households start buying online, we see a massive opportunity for value focussed market-places such asSnapdeal and Lenskart.

Can a value platform build trust and loyalty among value-conscious consumers, especially with the new buyers, without offering discounts and cashback - given the margins are already slim.

Yes, there are multiple other levers to build trust. Some of them include, continuous consumer engagement through shopper assistance, timely returns and refund, COD options beyond Metros, not having a minimum basket size requirement, leveraging peer reviews and omnichannel models with some offline presence can also make a big difference.

Published on September 08, 2021

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