Internet retail growth shows signs of maturing shopper base: Report

Redseer report observes a growing habit of online shopping in both urban and rural parts of India among other electronic retail trends

India's electronic retailing market or e-tailing has witnessed a growth of 22 per cent in FY23, reaching a gross merchandise value (GMV) of $60 billion, according to a report by Redseer Strategy Consultants. 

Although the growth rate is slower compared to the pandemic years, which saw 36 per cent growth each in FY22 and FY21, e-tailing is still performing well and is 2.5 times higher than pre-Covid levels. This growth is attributed to the availability of relevant and affordable products on e-tailing platforms, along with a standardised shopping experience. 

The report also highlights the rise of direct-to-consumer brands and the increased digital adoption of traditional brands as contributing factors.

The report further reveals that India's online shoppers are showing signs of maturity, with 65 million monthly users or regular shoppers, marking the highest figure recorded. As much as 31 per cent of annual shoppers now shop online on a monthly basis, compared to 23 per cent in FY21, indicating a growing habit of online shopping across various categories. The number of new users willing to try e-commerce has increased, with non-metro users accounting for a significant share of the total user base in FY23.

Fashion has emerged as the largest category, surpassing mobile phones, accounting for 27 per cent of sales. Mobile sales remain a close second at 25 per cent. The report attributes the growth in fashion sales to strategic partnerships between e-commerce platforms and global and Indian brands, along with a change in the shopper mix and an increasing number of women shoppers. 

Beauty and personal care, although accounting for a smaller portion (four per cent) of the total GMV, is experiencing exponential growth at a rate of 52 per cent. The grocery and home categories have also shown substantial compound annual growth rates (CAGR) of 64 per cent and 39 per cent respectively between FY19 and FY23.

The report highlights the positive performance of e-tailing platforms, with revenue from product sales growing threefold, from $2 billion in FY19 to $6 billion in FY23. As the number of frequent online shoppers increases, platforms are diversifying their revenue streams. Advertising revenue in e-tailing has also experienced significant growth, generating over $1.2 billion in FY23.

Among the e-commerce players, Flipkart Group has demonstrated resilience and maintained its market share, holding 48 per cent in FY23. Redseer attributes Flipkart's success to its extensive product selection, affordability options, and deep understanding of the diverse e-tailing shopper base in India, including customers from tier 2 cities and above cities.