After the initial flip-flop by the government on what can be sold online in lockdown, it finally allowed all goods to be sold through e-commerce platforms around May and since then online platforms have witnessed one of the sharpest recoveries in sales as consumers ordered everything from their grocery to electronics online. While pre-Covid-19 sales volumes were matched by June, e-commerce companies continue to see steady demand from consumers.
Industry executives, analysts said at least parts of changes brought by the pandemic will be permanent and online commerce will go further mainstream while offline retail takes longer to recover. The slower recovery in the offline market also led to small retail shops and kiranas to adopt to digital commerce and they joined online platforms to reach consumers.
Market research firm Forrester expects consumers to spend more online once economic conditions improve in 2021. It has estimated the market to grow at a rate of over 25% in 2021 to around $42 billion, much higher than 7% growth in 2020. Etailers lost several weeks of sales when the government allowed only essentials to be sold online, and they used to be typically 10% of online commerce sales.
BONANZA FOR AMAZON
Amazon India said the unprecedented situation of the pandemic brought about a rapid adoption and acceptance of e-commerce as an essential service. “One thing we’ve learned this year is how important a role Amazon and e-commerce can play with enabling policies – for our customers as much as for small businesses and the economy. Throughout the year, we remain focused on enabling small businesses to benefit from the widest reach made possible by e-commerce as they adapted to the unprecedented situation. For customers, we continued to put together and safely deliver the best of products from our widest selection by top brands across categories to address their needs,” a spokesperson of the company said.
Amazon India is expecting businesses to seamlessly implement an omni-channel – which means the adoption of Amazon’s infrastructure. A senior executives of a top apparel brand agrees. “We used to typically see around 10-15% of total sales from online platforms. This has shot up to around 30-40%. It will come down a bit by the end of next year but it should stay at over 25% at least. E-commerce companies are exploring more delivery options where existing stores can be leveraged,” this executive said.
Satish Meena, senior forecast analyst at Forrester, said the online retail market in India will also see new models like social commerce scaling up, albeit at a slower but steady pace. A report this month from Bain & Co and Sequoia Capital said social commerce could be $20 billion in size in the next five years compared to around $2 billion currently. “Given the similarities between online behaviour in China and India, India also looks ripe for the emergence of new e-commerce channels. As in China, we expect Indian online retailers and investors to put their money on the livestreaming and reselling model of social commerce in 2021,” said Meena.
At a recent event, Amazon India head Amit Agarwal had said Indian e-commerce is still early in its evolution with barely 3% of total retail consumption but it is already ushering in faster digitisation across the consumption value chain, and enabling expanded access and opportunities for customers and businesses across the country. “India must grab this rare opportunity with both hands, by focusing on enabling policies that accelerate this shift. It is important that we ensure a stable and predictable policy framework that attracts long-term investment, and proactively remove paper-cuts impacting ease of doing business online,” he said.
TROUBLE IN TRADITION
Traditional retail, which is still limping on its way to recovery, will take longer to get close to pre-Covid-19 level sales anytime soon. Retailers Association of India (RAI), an association of brick-and-mortar retailers, said the festive season provided the much-required tailwind to the Indian retail industry which is now witnessing a steady month-on-month improvement. “Retailers are hopeful of achieving about 85% of pre-pandemic levels of business in the first six months of the year 2021. Although globally, Covid-19 vaccinations have started, the pandemic situation may take some more time to completely settle. Retailers should thus move ahead with cautious optimism in 2021,” a spokesperson of RAI said.
2021 is also expected to see entry of large Indian conglomerates to enter the e-commerce market while relatively newer entrants like Reliance will scale up operations aggressively. “With the entry of Reliance, online grocery will become more competitive in the 2021, where consumer behavior will shift to the online realm. Amazon and Flipkart struggled to fulfill grocery orders during the lockdown and will have to reevaluate their business models and logistics. Micro delivery companies are looking for consolidation, and Grofers and BigBasket, (two pure-play online grocery companies) will also be targets of acquisition,” a note from Forrester added. TOI has reported Tata group is looking to acquire majority stakes in Bigbasket and e-pharmacy platform 1MG.