Over the past decade, the Indian e-tailing industry has undergone a remarkable transformation, with the annual Gross Merchandise Value (GMV) experiencing a nearly 20-fold increase. To provide context, in 2014, the industry’s GMV for the entire year stood at Rs 27,000 crores. However, in 2023, it is expected to reach approximately Rs 5,25,000 crores, according to Redseer’s projections, a leading strategy consulting firm. This substantial growth has been accompanied by a 15-fold increase in the number of annual transacting users.
Indian e-tailing has become a crucial barometer of consumer demand in the country. This year’s 10th festive season sale holds particular significance due to recent consumption slowdowns and the economic challenges stemming from external shocks over the past three years, as highlighted by Redseer.
In the wider macroeconomic context, Redseer notes that prior to COVID-19, the year-on-year growth rates of nominal Private Final Consumption Expenditure (PFCE) were around 8-9 per cent. However, external shocks, such as the COVID-19 pandemic and the Russia-Ukraine conflict, disrupted the market. In the last few quarters of FY23, there was a noticeable slowdown in consumption due to tightening liquidity conditions. Nevertheless, PFCE growth has rebounded to 9 per cent, supported by stabilising factors like maxed-out interest rates, efforts to resolve the Russia-Ukraine conflict, and robust Indian economic growth.
In terms of e-tailing performance in the calendar year so far, there was significant fluctuation, with strong growth post-COVID followed by relatively subdued growth in the last two quarters. The e-tailing industry recorded approximately 10 per cent year-on-year GMV growth (January to July 2023 vs. January to July 2022). With the broader economy returning to normal levels, the upcoming festive season is expected to boost online consumption demand, according to Redseer.
Redseer projects that the 2023 festive season’s GMV for Indian e-tailing (for the entire festive month) will be around Rs 90,000 crores, marking an 18-20 per cent increase from the previous year’s festive month sales. This growth will be driven by approximately 140 million online shoppers expected to make at least one transaction during this festive period.
Furthermore, this year’s festive season is anticipated to witness a greater contribution from higher-margin categories like beauty and personal care, home and general merchandise, and fashion. There will also be a continued trend of premiumisation, resulting in higher Average Selling Prices (ASP). Increased advertising and promotional revenues are likely to make this festive season the most efficient from a margin perspective.
Mrigank Gutgutia, a partner at Redseer Strategy Consultants, noted, “We’ve seen enhanced GMV contributions from categories beyond electronics in recent quarters, indicating consumers’ willingness to purchase multiple categories online and more brands catering to their needs. We expect increasing GMV contributions from non-electronics categories like Fashion, BPC, Home & General Merchandise, and more this festive period.”
Redseer anticipates several sub-themes playing out, including Direct-to-Consumer (D2C) brands being more prominent during this festive season. Looking ahead, Redseer expects D2C brands to grow 1.6 times faster than the broader e-tailing market (CAGR 2022-27). In terms of city-tier wise growth, metros have been outpacing Tier 1 and Tier 2+ cities in recent quarters, with growth exceeding 10 per cent for metros compared to 8 per cent for other city tiers. However, robust growth is expected across city tiers during this festive season.
Additionally, Redseer predicts that new-age technology solutions like generative AI will be more widely adopted in various use cases during the sale period, leading to enhanced and innovative consumer experiences and stronger growth momentum.