"Online shoppers in Tier 2, smaller cities contribute to 3 out of every 5 orders": Bain-Flipkart report

In collaboration with Flipkart, Bain & Company examines the current e-retail consumer trends, and draws a future roadmap for the sector.

Bain & Company and Flipkart have just released a joint report on how India shops online.

The report states that the country's $850 billion retail market is the fourth largest in the world, and is largely unorganised. This market is on the cusp of a transformation, led by the emergence of e-retail, and its growing influence on Indian shoppers.

As per the report, India’s e-retail industry has seen an upsurge over the past five years, and there is significant headroom for further growth. The industry is expected to reach massive scale, spurred by cheap, ubiquitous mobile data, enabling nearly one billion Internet users by 2030, growing online spending by digital natives, and supply side innovations, such as vernacular-based user interfaces, voice and visual search.

The report highlights that this e-retail market is primed to reach nearly 300 million to 350 million shoppers over the next five years, propelling the online gross merchandise value to $100 billion to $120 billion by 2025.

India’s online shopping landscape includes a diverse mix of city tiers and income ranges. Online shoppers in Tier 2 cities and smaller municipalities make up nearly half of all shoppers, and contribute to three out of every five orders for leading e-retail platforms. The customers from Tier 2 and smaller cities buy similar categories of products as those from metropolises, or Tier 1 cities, with only a marginal difference in average selling price.

As Indian e-retail enters the 'massification' phase, online platforms are innovating to onboard the next hundreds of millions of shoppers. The next wave of shoppers will have different needs, and will interact differently than the current set of online shoppers.

The four key trends going forward are:

1. Voice and vernacular: The Indian vernacular language Internet user base, which is expected to reach more than 500 million users by 2021 (versus 200 million for English-speaking one), increasingly prefers voice search and vernacular-based user interfaces. Several vernacular apps, such as ShareChat, TikTok and Helo, have garnered upwards of 50 million users each.

2. Visual and video: Video content consumption in Tier 2 and smaller cities grew more than four times over just the past year. Visual search tools, live-streaming sessions, influencer videos, etc., are gaining significant traction.

3. Social shopping: For the next wave of online customers, peers and communities will play a much larger role in influencing purchase decisions than they do for the current online shopping base. Over the past five years, there has been more than 50 private equity and venture capital deals in India focused on social commerce.

Pinduoduo is a great example of a successfully scaled social shopping enterprise in China. It built a strong consumer base of more than 450 million monthly shoppers within a span of just four years. A lot of them are women, and from small towns.

4. Digital ecosystems: As e-retail evolves, platforms are trying to increase their number of consumer touchpoints to gain greater (customer) mindshare. Top e-retail companies have started to develop ecosystems that combine their core e-retail business with sticky customer services, such as video streaming, gaming, booking and payments, in a single platform, or application.

Ecosystems attract a huge customer base, which, in turn, attracts retailers that want easy access to a critical mass of consumers. And, customers gain a one-stop shop for all their needs.

You can read the full report here:

bain_report_how_india_shops_online.pdf