Social commerce emerges as the new driver of online shopping in Indian Internet users’ survey.
Even though Internet penetration continues to be dominated by entertainment and communication, social commerce is also trying to flap its wings in a big way in India now.
According to the Internet in India 2022 report by the Internet and Mobile Association of India and analytics firm Kantar, e-commerce or online buying is witnessing increasing adoption, thanks to social-networking platforms in India.
The country has 759 million Internet users out of which 34%, or 258 million, are shopping online at least once a year. The number swells to 52%, or 395 million, taking into consideration Internet commerce users or Internet users who have done online transactions such as bill payments, food ordering, or cab booking, besides online shopping. Out of this, at least 77 million are shopping online through social commerce, an increase of 51% in one year.
Entertainment and communication continue to lead the chart with 645 million (85%) and 584 million (77%) million users, respectively. Social media is next with over 530 million users.
However, while the growth of entertainment and communication has flattened in the last one year, social media has witnessed a negative growth of 8%. This, at a time when Internet commerce and online shopping continue to grow.
“For entertainment or social media, you don’t have to pay any money. It is easier to watch content than to shop. But once consumers get used to it, they start shopping online,” says Arnab Dutta, group account director of Kantar.
While on the face of it, the numbers look promising, there is no insight into their shopping habits or repeat purchases. According to Dutta, for the time being, most of this growth is driven by discounts offered by marketplaces.
Even though discounts seem to be incentivising customers to make select purchases online, the report states that the confidence to make digital payments is still lower in rural areas as compared to urban clusters. While 61% customers were comfortable making online payments in cities, the number stood at 31% in the villages of the country.
Three out of five Internet commerce users in India were from urban areas, and in urban India, six out of 10 such users came from cities with a population of more than 1 million, the report said.
While the report, which surveyed 86,000 people, does not specify the categories that are attracting users to shop online, according to a report last month by Boston Consulting Group and private-equity company Matrix Partners, categories such as fashion and apparel, food and FMCG, and beauty and personal care are expected to have a higher share of India’s online retail pie by 2025.
US-headquartered Amazon as well as home-grown e-tailers such as Flipkart and Meesho are banking big on the next set of millions of customers expected to come from small towns and villages.
In a report jointly released with Bain & Co last year, Flipkart said that the size of the online retail industry was expected to grow to USD150 billion by 2027 from the existing USD50 billion. It also expected the online user base to grow to 400 million-450 million by the same time.
The Walmart-owned e-tailer already claims to be having 200 million monthly active users and in the words of chief executive Kalyan Krishnamurthy, the company is looking at the next 200 million-300 million users with “disproportionate focus”.
Amazon, which is completing 10 years of operations in India, has also been proclaiming its focus on social commerce to get to the next wave of “500 million” users in India.
Both Flipkart and Amazon get 60%-65% of their gross merchandise value (GMV) from electronics, closely followed by fashion and cosmetics accounting for around 15% of the GMV.
While the reports claim big numbers, users who make regular online purchases of general goods — three to four times a month — barely add up to around 40 million.
So far, while the growth of the e-commerce business was driven by mobile, electronics, and other branded goods, the next leg of growth is expected to come from non-branded items specially around fashion, self-care, and home merchandise.
Source: Dailyhunt
Even though the numbers may present rosy pictures, the e-tailers will have to take a reality check as the ticket size of these product lines will be lower than what is sold in large cities. Growing while keeping cost efficiency in mind will be the key.
This will be a steep climb as the companies have started aspiring for profitability ahead of hitting the public button.
Source: The Economic Times
