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View | The rising face of India’s e-commerce industry, and retail trends to watch for in 2023

CNBCTV18 logo CNBCTV18 13-01-2023

The breakthrough made by India’s e-commerce industry seems to be playing a vital role, leading Indian brands to scale greater heights across the global business landscape. Significantly impacted by the COVID-19 pandemic, the Indian retail industry has got into its fast recovery mode as many retail companies were spotted focusing on taking the e-commerce route in 2022.

According to recent industry reports, the e-commerce industry witnessed a phenomenal 36.8 percent YoY growth in terms of order volumes. As consumers prefer to shop online throughout the year, this fast-changing consumer preference towards online shopping reveals the mature status acquired by e-commerce brands in India.

While India’s online shopper base continues to rise, brands are now focusing on capitalising on new online shoppers joining the e-commerce bandwagon. Some of the key trends that are going to define the growth of India’s e-commerce industry during 2023 are:

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House of brands and roll-up firms to scale new heights 

The last two years have seen the emergence of many ‘roll-up firms’ where companies invested aggressively in acquiring smaller brands, and many established D2C brands shifted gears to a ‘house of brand’ approach by launching new labels or acquiring smaller companies. These companies have also invested in building robust operations that help achieve better unit economics and move towards profitability. Over the next year, these companies will work on building brand loyalty and expanding the customer base for their new set of brands. Some companies are also focusing on building sector-agnostic portfolios to improve exclusivity and cater to a wider audience with a diversified product portfolio in place. Going ahead, these brands are eying on expanding their operations to the international markets and companies can be expected to make additional room for newer brands focusing on these markets.

Finding the right solution is the key

While the industry observed widespread adoption of technology during 2021, automation was seen as a prominent factor that companies took to tread their growth path throughout 2022, especially amongst the upcoming brands in metropolitan cities. With SaaS making automation affordable and easy to deploy, an increasing number of brands are further lured to use technology across business operations.

More companies, including small sellers, ought to use technology to amplify the pre-purchase and post-purchase experience of consumers. The pre-purchase technology includes solutions that will help brands in reducing customer acquisition costs with automation of target marketing, personalised offers for consumers, addressing consumer concerns through chatbots, and leveraging automated communication tools to help them make a purchase decision.

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The post-purchase experience includes automation of the supply chain and returns management as it helps companies to ensure improved business efficiency and cost optimization which leads to better unit economics. It also assists companies in improving user experience as they are able to ensure faster and error-free deliveries. The global macroeconomic factors will also force companies to give extra attention to improved unit economics and this is further expected to boost the technology adoption amongst brands.

Growing omnipresence of retailers

While 2021 witnessed steady growth in the retail market in India, leading retail brands like Chumbak, GAP, Crocs, TCNS, Bestseller, FabIndia and Bata among others were seen shifting their focus toward an omnichannel approach. According to a recent industry report, the ship-from-store orders showcase climbing numbers with 55.6 percent YoY growth in 2022. Interestingly, offline-focused brands are moving online and investing in building their online presence and amidst the D2C landscape, while online-first brands are now exploring offline channels and setting up stores to ensure connectivity with a larger audience.

As consumers shop across online and offline channels, brands have to be present on all these channels and offer a unified experience to the consumers. While brands continue to deploy omnichannel, the industry can expect to see multiple use cases such as ‘ship from store’ and ‘endless aisle’ in 2023. Another interesting omnichannel trend that is anticipated to become big in the coming years is brands partnering with fulfilment providers and leveraging dark stores at various locations to ensure faster order fulfilment.

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Induction of newer categories

From consumer focus on industry segments like electronics, fashion, apparel and accessories during the pre-pandemic era, the last two years highlighted the spotlight being shifted to segments like beauty and personal care and health and pharma recording remarkable growth and becoming prominent contributors to the overall e-commerce industry. Similarly, over the next few years, newer segments are expected to emerge in the e-commerce industry as more consumers adopt online shopping.

Some of the segments that have shown promising numbers and have garnered the interest of consumers are pet care, baby products, nutraceuticals, home decor, and kitchenware. These segments not only observed inland routes to the ecommerce landscape but have also attracted a lot of interest of investors across the business landscape. The home decor and kitchenware segment witnessed an impressive YoY growth of 59.2 percent in order volumes in 2022 providing a high-rising trajectory for the segment in 2023.

Consumers are the real growth driver 

With improved internet penetration in India’s hinterland and heightened access to smartphones, 2022 witnessed a surge of 50.9 percent and 64.7 percnt in order volumes from Tier-II and Tier-III towns, respectively. In the last one year, the growth of ecommerce volumes from Tier-II and III towns in the country outpaced Tier I cities where brands were observed to increasingly focus on the specific needs of the audience in these regions.

In 2023, brands are expected to further dive deeper into Bharat using specialised marketing strategies to target the rapidly rising online consumer base in these areas. This will also give rise to local sellers and businesses hopping onto the ecommerce bandwagon along with their traditional B&M setups.

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Made in India, for the world 

With the D2C phenomenon gaining momentum over the last two years, many home-grown online first brands have been able to establish a strong presence in the country with consistent profitability and increasing brand loyalty. Many of these companies are now planning to foray into international markets, to further expand their consumer base and take Indian brands to the global map. Some of the key focus markets for these companies are emerging online geographies of the Middle East and Southeast Asia. This will bring international capital to the economy and will boost other Indian brands to expand internationally. The D2C ecosystem may also witness some consolidation with either traditional brands or leading D2C brands making bigger bets by acquiring other D2C businesses in India and international markets to power their fast-paced growth.

With the rising expectations of consumers, e-commerce is becoming a preferred way of shopping, and as companies attempt to heighten their standards for customer service, technology is going to play a key role in the growth of India’s retail business in the coming years. The industry also anticipates witnessing new e-commerce models such as voice-enabled shopping, social commerce, WhatsApp commerce, etc. as we move ahead. With Indian brands making a mark in the global market, the ecommerce industry is being seen as a growth driver for the traditional retail in India.

— The author is CEO of Unicommerce. Views expressed herein are his own.

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