Retail market contracted in FY21 but e-commerce clocked 25% growth: Bain & Co

“The growth has been broad-based. The companies who started their online journey last year might have witnessed a higher growth rate due to the lower base. The emergence of direct-to-consumer (D2C) brands have helped smaller brands too get a share of this growing pie,” Manan Bhasin, associate partner, Bain & Company told Moneycontrol.

Grocery rides the Covid-19 tailwinds

The growth and recovery were disparate across categories. “The mobiles and electronics categories witnessed a one-time growth spurt; frequent-use categories such as grocery, household, and personal care saw continued acceleration; and discretionary categories such as fashion and travel products saw relatively slower growth but have started rebounding in 2021,” it said.

Mobiles, appliances and electronics grew by over two times in June-November 2020 as compared to the pre-Covid times, these categories may see a potential cool-off due to their longer replacement cycle, it said.

Daily essentials such as grocery, personal care, and other household products grew by over 1.5 times in June-November, and are expected to sustain this momentum in a post-pandemic era as these are frequent-use products.

Discretionary categories such as fashion and travel grew by merely 0.8 times in the period but the report expects the demand will rebound for these segments in the post-pandemic period.

The future of online shopping

The consulting firm expects the growth to sustain even in a post-Covid era in accordance with the global trend.

“In the future, the e-retail market is expected to grow to $120–140 billion by FY26, increasing at approximately 30 percent per annum over the next 5 years. The growth will be led by smaller towns that account for four out of five new shoppers,” it added.

The report also projected that voice and vernacular are going to be important aspects of online users' shopping journey in the years ahead. It outlined five megatrends that will shape the future of online shopping in India — digital ecosystem, voice and vernacular, video commerce, social commerce and direct-to-consumer and omnichannel.

“Digital leaders are building scale ecosystems to capitalise on the rapidly growing user base across the digital funnel. Flipkart, Amazon, Reliance Jio, and Tata offer multiple digital services to capture an outsized share of consumer time and spending,” the report said.

The next wave of India internet users, it said, prefer voice-search and vernacular-based user interfaces and hence digital platforms will continue to invest in voice and vernacular capabilities to attract the next generation of online shoppers.

According to the report, the user base for voice-assistant apps approximately doubled to 5–6 million monthly users in 2021 (average until May). Webpage translation to vernacular languages increased by 1.5 times in 2020 (vs. 2019).

Video commerce and social commerce, which have also grown in the wake of the pandemic, are also projected to gain traction. Bhasin said that besides large social media platforms, smaller social commerce start-ups have also grown substantially in FY21.

“Livestreaming commerce start-ups such as Bulbul and Simsim have seen 9–10x growth in user base over the last year,” said the report.

While social-led models are empowering Bharat’s sellers and women entrepreneurs, three of every five shoppers now come from tier 2/smaller towns, it said. Social commerce is expected to increase from $1.5–2 billion in FY20 to $16–20 billion in FY25, growing at 55 percent–60 percent CAGR.