Will e-commerce growth slow down post vaccination?

Kapil Makhija | Updated on March 20, 2021

Covid has had a lasting impact on consumer behaviour as well as businesses. The strong growth momentum in e-commerce is likely to continue as consumers have started experiencing its benefits both in terms of convenience and discounts

E-commerce has impacted society in ways that go far beyond the ability to purchase products anywhere at any time. It has transformed the retail industry and has changed the way brands interact with their customers. While online shopping and brick and mortar stores have co-existed for many years, the Covid-19 pandemic led customers to significantly limit physical interactions and become heavily dependent on e-commerce. It provided people with access to a variety of items from the convenience and safety of their homes and was able to continue operations despite contact restrictions and confinement measures.

The “Q4-2020 E-Commerce Trends Report” by Unicommerce and Kearney stated that the e-commerce sector saw 36 per cent growth in volume and 30 per cent growth in value, year-on-year (YoY), during the last quarter of 2020. However, in order to understand the real impact of Covid, it’s important to measure the growth of the same period during the previous year. The Q4-2019 witnessed a 26 per cent order volume vis-a-vis Q4-2018. The sharp spike in volume growth of Q4 2020 signifies that the demand for e-commerce has increased significantly in the last year.

In fact, e-commerce was one of the only industries that emerged as the clear backbone of the economy in India. The country saw people shifting buying habits during the lockdown with many consumers acceding to online shopping for the first time and sellers realising the immense potential that e-commerce holds.

The pandemic not only accelerated online shopping growth in terms of demand, but also led many businesses to join the e-commerce bandwagon. Players that had embraced and quickly transformed the e-commerce trend, experienced expansion, while retail was shrinking. The report also mentioned that personal care, beauty and wellness, as well as FMCG and healthcare were the biggest beneficiaries that saw volume and value growth of 95 per cent and 46 per cent, respectively. Interestingly, the bulk of the demand was from Tier 2 and Tier 3 cities, which accounted for 90 per cent YoY incremental volume and value growth.

While the offline retail continued to have a single-digit growth, the e-commerce sector is growing at a CAGR of more than 20 per cent. During the lockdown, we have seen e-commerce becoming a necessity rather than a choice. Whether it was grocery shopping, medicines or other necessities, consumers went the e-commerce route.

Will the momentum continue?

However, with the general population getting vaccinated, the question everyone in the industry is asking is: Will consumers go back to the old ways, or will they continue their newly-dependent habits of e-commerce?

E-commerce, one believes, is here to stay as Covid has had a lasting impact on consumer behaviour as well as businesses. For example, consumers spent an hour more per day on digital activities in 2020, than they did in 2019. And total digital time is now on track to surpass eight hours by the end of 2022. An eMarketer report cites that, while e-commerce growth won’t surge in 2021 as it did last year, globally the sector will keep up its momentum to reach the $5 trillion mark, where e-commerce is projected to grow by 14.3 per cent this year.

Moreover, about 75 per cent of buyers and sellers prefer digital modes of transactions over physical channels due to both safety, speed and convenience. The benefits which online shopping provide are unmatched. For consumers, e-commerce websites are extremely convenient to buy products in a short period of time, whether they are at home, office or on the way. It gives them enough choices to pick products round the clock comfortably and conveniently.

Additionally, new types of e-commerce trends have emerged due to the pandemic. Concepts like social commerce, shoppertainment and influencer marketing have taken centrestage, which are much more engaging than traditional e-commerce and are being viewed as alternatives to window-shopping or replacement of the touch-and-feel factor.

Consumer experience

During lockdown, companies came up with innovative ways to connect with consumers like few apparel brands launched “stores on Wheels” and malls offering a virtual tour, however, these concepts took a back-seat once consumers started stepping out of their homes. As more consumers started shopping online, businesses had to undergo massive digital transformation to be relevant to their audiences. While a lot of small businesses started by listing their products on the Amazons and Flipkarts of the world, many leveraged the opportunity lockdown as an opportunity to re-invent and establish deeper connections with their customers by going the D2C (direct-to-consumer) way.

D2C allows brands to maintain their exclusivity and engage with their customers — something not easily doable on marketplaces. For example, brands like Country Delight or Pharmeasy set up essential goods supply-chain during the Covid lockdown and thrived. Now that people are habitual, most are still continuing with their services.

The Indian digital consumers are getting mature and have started experiencing the benefits of convenience and discounts, which have led to an increasing number of brands adopting D2C strategy and e-commerce first strategy. In the last many months, an increasing number of physical stores have gone online and improved digital self-services to garner a lasting consumer experience. The last year has helped companies realise the importance of agility and continuous innovation. Companies that are able to innovate and evolve on the basis of changing consumers preference and buying patterns will always be able to leverage such opportunities and thrive in the long run.

Having said that, the growth in e-commerce due to the pandemic has set a high bar for what is now considered baseline growth. It has pushed the sector by years. The transformation from physical stores was already happening, but we’ve now accelerated ahead in time to the future of e-commerce. There is increasing digitisation at the back-end and adoption of concepts like omnichannel to offer a uniform experience across offline and online sales channels.

The writer is CEO, Unicommerce

Published on March 20, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like