After years of steep growth during Covid, e-commerce GMV slowed in FY23: Redseer

The average dollar spend per shopper stagnated at $273 in FY23, even as inflation ran high in the year. It was $272 in FY22 and $233 in FY21.

After growing at over 35 percent during the pandemic years, the rate of increase in  e-commerce gross merchandise value (GMV) slowed in the previous financial year (FY), the analysts at Redseer said.

E-tailing GMV grew by about 44 percent from $25 billion in FY20 to $36 billion in FY21. And then the GMV further increased by around 36 percent year-on-year (YoY) to $49 billion in FY22. However, the pace of YoY growth slowed sharply to 22 percent in FY23 when the GMV increased to $60 billion.

Simply put, GMV is the total sales over a period of time. It may sometimes be the same as revenues depending on the type of business. For e-commerce companies such as Flipkart and Amazon, while GMV is a reflection of the total value of goods sold, their revenues are only the fees/commissions earned from sellers during that period.

“The e-tailing market in India has been slowing since the pandemic to grow GMV at 22 percent in FY23 to reach $60 billion,” said Mrigank Gutgutia, partner at Redseer, a consultancy firm.

“Overall consumption growth has been tepid in recent quarters owing to inflationary concerns yet e-tailing (is) better placed than offline,” the report added.

Growth pattern

Thanks to the price pressures, even the monthly shopper base increased at a slower pace to reach around 65 million in FY23, from 50 million in FY22. While that was an increase of 30 percent YoY, the pace was slower than the 43-percent jump that it registered in FY22 over FY21.

Redseer said the monthly shopper base was likely to grow at around the same pace, as it did in FY23, as the market matured. However, shoppers spent less in the year.

The average dollar spend per shopper stagnated at $273 in FY23, even as inflation ran high in the year. It was $272 in FY22 and $233 in FY21.

“Over the last three years new users who are willing to try e-commerce throughout the country have increased and non-metro users account for a large share of the total user base in FY23. However, the growth pattern in FY23, and likely going forward as well, is different wherein the ‘regular shoppers’ i.e. the monthly user base is now larger than ever before,” as per the latest Redseer report titled “India E-tailing update”.

Green shoots

Despite the slowdown, e-tailing is 2.5X of its pre-Covid levels, thanks to the increase in categories among other factors. The growth in the overall market has allowed more monetisation opportunities for companies.

The revenue from advertisements for e-tailers nearly doubled to $1.2 billion in FY23, a year which had 210 million annual shoppers. The advertisement revenue in FY23 was at around $641 million in FY22, when there were about 170 million annual shoppers. In FY23, the revenue from ads has nearly quadrupled from $324 million in FY19.

“Ad revenue is growing significantly faster than the overall digital ads market reaching a 15% share of the digital ads market in FY23. Global platforms have more than 3% of fulfilled GMV coming from ads business, and the Indian market can grow much further.” the report said.

That growth in ad revenue should augur well for companies like SoftBank-backed Meesho, which charges 0 percent commission from sellers and instead relies on ad spends and other streams to earn money.

Fashion biggest category now

While mobile phones dominated the category divide in FY19, in FY23 fashion was the single largest category with a share of 27 percent whereas beauty and person care (BPC), grocery and home categories are the fastest growing categories, thanks to an “...increasing share of women shoppers has resulted in an explosion of fashion sales,” Redseer said.

Separately, growing at about 17 percent -- faster than the industry average of around 11 percent in the January-March period of 2023 -- the Flipkart group "has been resilient and maintained its market share at 48 percent in FY23 despite growing competition," Redseer's report said.

The industry-beating growth rate for the Flipkart group was especially prominent in only the January-March quarter of 2023. In the first half of CY22, the Flipkart group grew just by around 20 percent, while the wide industry growth expanded at about 30 percent.

And in the second half of CY22, the Flipkart group grew just a few percentage points above the industry's growth rate of about 20 percent, Redseer's data showed.

To be sure, the consultancy firm did not provide the market share and the growth rate of other players such as Amazon, Meesho, Ajio, and several others and how it changed over the previous years or quarters.