The online retail market in India is expected to grow at 32 percent over the next few years with a potential to reach $225 billion, according to a recent study.
Online sales now account for 6.5 percent of the $836 billion retail sector in the country. Around 81.5 percent of the retail space is fed by traditional retail, followed by organised brick-and-mortar outlets, accounting for 12 percent, India Retail and e-commerce trends report by Unicommerce and Wazir Advisors found.
The report said that India’s e-commerce industry reported a 69.4 percent growth in order volume in FY2022 with a GMV growth of 73.6 percent, which led to a 2.5 percent on-year growth in average order value during the year.
The top categories which saw a significant rise in order volume include beauty and personal care at 143.3 percent, footwear at 67.8 percent, eyewear and accessories at 66.2 percent, health and pharmaceuticals at 62.4 percent, and FMCG and agriculture at 61.7 percent.
Electronics and fashion, which are usually the top-selling categories for marketplaces, saw a slower growth, compared to other categories in terms of order volume. On the other hand, categories such as home décor and furniture, sports equipment, books and stationery saw a 75.9 percent growth.
Growth of D2C
As per the report, the direct-to-consumer segment has emerged as the ‘key propeller’ of the online retail growth averaging an annual growth rate of nearly 45 percent with the potential to reach $70 billion over the next few years.
The report also cites that branded websites witnessed a growth of over 80 percent while marketplaces clocked 59.6 percent growth in FY2022.
Beauty and personal care, health and pharmaceuticals, FMCG and agriculture, fashion and accessories were some of the top categories that led the growth of the branded websites.
The report also cited that even major offline retail players now focus on selling through brand websites.
E-commerce growth story
The report finds that shoppers from Tier II and Tier III cities accounted for over 61.3 percent of the overall market share in FY 2022, increasing from 53.8 percent in FY 2021. Further, the order volume from Tier II and Tier III cities grew at almost double the pace of Tier I cities with 92.2 percent and 85.2 percent on-year growth in FY 2022.
In contrast, Tier I cities indicate a comparatively slower order volume growth rate of 47.2 percent.
Maharashtra, Delhi or NCR, and Karnataka contribute to the largest e-commerce order volumes, says the findings of the report.
The report highlighted that return orders were on a consistent year-on-year decline. In FY22, return orders constituted 14.8 percent of the overall order volume, as against 16.10 percent in the previous year. “While this may seem like a marginal dip, it significantly boosts the overall bottom line. Increasing focus on technology deployment for COD orders positively impacts e-commerce,” it said.
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