The growth in the number of active users for the top 20 online retailers more than halved last calendar year, reversing the surge seen during the pandemic as shoppers shift to brick-and-mortar stores.
The active user base in these online firms reached 499 million in 2023, up from 455 million in 2022.
Nevertheless, the growth rate stood at 10%, marking a five-year low in comparison to the 22-55% surge recorded between 2019 and 2022, as per the most recent report released by the Boston Consulting Group and the Retailers Association of India.
According to the report, the slowdown in new user addition on eCom post-Covid period acceleration could be due to the consumers partially switching back to offline.
The surge experienced during Covid was a result of mobility restrictions, and a decline in funding within e-commerce is also noted, with a 58% decrease in deals in 2023 compared to the previous year.
However, the share of e-commerce retail in the total retail market has grown from 4% in 2018 to 8% in 2023, with expectations of reaching 13-15% by 2028.
“Jump in user growth during Covid was reported but growth in new user addition declining, driven by a shift in consumer habits, lower discounting and growing premiumization,” BCG said in the report.
However, the growth of e-retail is expected to continue in Tier 2 cities, with projections suggesting a contribution of over 50% in the medium term. Moreover, Tier 2 regions are demonstrating higher spending per order.
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There has been a 60% increase in time spent on apps over the past year, along with a 40% rise in data consumption and an additional 20% increase in consumer spending within apps.
India continues to be a bright spot among the major economies, growing fastest among the top 5 global economies and projected to become the 3rd largest by GDP in 2030. Additionally, India’s retail market is expected to reach $2 trillion in the next 10 years, presenting a significant opportunity for retailers.
Organised retail in India has consistently shown faster growth compared to the underlying category. Nevertheless, recent quarters have seen subdued performance due to potential headwinds.
Some major retailers have noted a decrease in like-for-like store growth. However, profitability has remained steady and aligned with global peers during the same period.
“The Indian retail sector will more than double in size to 2 trillion dollars in the next decade – across categories and formats – and the successful retailers are the ones who continue to challenge the perceived growth profitability trade off,” said Abheek Singhi, Managing Director and Senior Partner at BCG.
As per the report, consumers are allocating more of their spending towards experiences rather than products, with service categories experiencing a growth rate of 1.4 times the Compound Annual Growth Rate (CAGR) of product categories.
“By focusing on personalized customer experiences, exploring new collaborations, and leveraging AI for efficiency, we can propel India’s retail industry towards unprecedented growth and global competitiveness,” said Kumar Rajagopalan, CEO, Retailers Association of India (RAI).
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