Sector Trend Analysis – E-commerce trends in India

Socioeconomic profile

Country economic profile

India witnessed a sharp fall in GDP over 2020 due to the COVID-19 pandemic. The pandemic prompted a strict national lockdown and large-scale supply chain disruptions that led to a collapse in private consumption and investment. The country is forecast to witness a sharp recovery in economic activity over 2021 and regain its position as one of the fastest-growing emerging economies over the long term, supported by stimulus packages, reforms in the agricultural and labour sectors, rising foreign investment, and robust foreign exchange reserves. Despite the economic fallout, the Indian authorities are hopeful that the country can still achieve the target to become a US$5.0 trillion economy by 2025.

Exports and imports both plummeted in 2020 in real annualised terms. Indian exports and imports are set to recover gradually over the medium term. India set an ambitious target to triple its annual exports to US$1.0 trillion by 2025. To boost exports performance, the government pledged to improve logistics, ease trade regulations, and make substantial investment in trade infrastructure.

Demographics

The total population of India in 2020 was 1.3 billion and is expected to reach 1.4 billion in 2025 . In 2020, the male population represented 52.0%, female population at 48.0%, and the median age was 28.6 years.

In India, the number of households totalled 293.2 million with an average household size of 4.6 persons in 2020. The most common type of family was a couple with two children. The household head was most commonly in his 40s, owner of a business with employees or a self-employed individual without mortgage obligations. In 2020, the average household lived in a large dwelling of 100-149 square metres, usually in a rural area. In 2020, 95.1% of households had access to electricity, while around half of all households had access to piped water inside or outside the housing unit and basic sanitation facilities. Although car possession remained low over the year, 46.6% of all households owned at least one motorcycle. Despite relatively high possession of a colour TV set and a cooker, only around one third owned a bath or shower, a refrigerator, a satellite TV system, or cable TV in 2020.

Consumer income and expenditures

In 2020, the median disposable income per household in India increased by 3.4% from US$4,472.7 in 2016 to US$5,115.8 in 2020. By 2040, nearly half of the Indian adult population over the age of 15 will belong to social class E, or the lowest income earners, which is one of the lowest shares in the region. The covid-19 pandemic will highly inflate the figure in the short term, as a poor healthcare system and a rapidly-spreading pandemic in the country will cause factory closures, lockdown measures, and place financial stress on the government's budget.

Social classes C and D, the country's middle classes, will face the largest decline in share among all the country's classes over 2020-2040. The weakening of the middle class will have a negative impact on the consumer market in India, as essential goods categories are expected to increasingly dominate due to limited consumer budgets. Consumer preferences will shift more towards food, clothing, and similar goods, while discretionary goods and services will have less potential for growth.

Introduction

In 2020, global e-commerce markets were valued at US$2.6 trillion, representing an increase in CAGR (compound annual growth rate) of 22.2% from US$1.1 trillion in 2016. China was the largest e-commerce market with US$851.8 billion ( 33.2% market share) in 2020, followed by the United States (U.S) valued at US$705.7 billion (27.5% market share) and the United Kingdom (U.K) with values of US$117.6 billion (4.6% market share).

India was the ninth largest e-commerce market in the world (after Canada and France) valued at US$41.1 billion (1.6% market share) in 2020, representing an increase in growth rate of 32.9% from US$13.2 billion in 2016. The emergence of the covid-19 pandemic in 2020 accelerated the growth of the e-commerce sector in India as sales of e-commerce increased by 28% from US$32.1 billion in 2019.

India's E-commerce ecosystem

India's e-commerce market maintained relatively strong growth from 2018 to 2020 despite the emergence and disruption caused by the covid-19 pandemic in 2020. According to Euromonitor, 2020 was a year of 'two halves' for the e-commerce channel. Government imposed lockdown restrictions during the first half of the year meant that both e-commerce and store-based retailers were negatively impacted as they were regulated to the sale of essentials such as food, drink and medicines only. During the second half of the year, government imposed restrictions eased in different areas according to infection levels, enabling the e-commerce channel to offset the decline experienced during the first half of 2020 and maintain e-commerce growth as store access restrictions and consumers fear of contracting the virus continued.

E-commerce is expected to attain slightly increased value growth for 2021, with growth rates of 24.4% over the forecasted period. In comparison to store-based retail channels that are also expected to see increased value sales in 2021, the increase in value growth expected for the Indian e-commerce market is important to note as e-commerce is expected to retain those consumers who value the safety and convenience, low prices and expanded product ranges available to online consumers. Store-based retailers such as modern grocery retailers, are expected to look towards second and third-tier cities for growth opportunities while e-commerce retailer expansion is expected to target lower-tier cities due to the rising internet and smartphone penetration rates in these areas with access to well-known brands which are limited, or not available in store-based retailers.

Omni channel retailing is customer-centric and expected to experience growing importance amongst both e-commerce and store-based retailers. Current customer expectations are that retailers and brands are accessible through all devices, at their convenience, and offering this type of 'shopping experience' is no longer optional (especially during and post-covid) for retailers to remain relevant. Euromonitor notes that store-based retailers will likely improve their digital platforms to optimize user experience with mobile applications with value-added services such as click and collect, to support sales. Relatedly, a growing number of e-commerce retailers will develop omni channel retailing by entering or increasing their presence in offline retailing (pick-up stores for e-commerce retailing and purchasing) in order to provide a better shopping experience and promote brand awareness. For instance, Flipkart, Actoserba Active Wholesale and Amazon started to either develop their own pick-up stores or cooperated with kirana stores, so that consumers who are not at home or in an office to accept a delivery can pick it up from a physical store located near them. An increasing number of partnerships between store-based and online companies are also expected in the forecast period.

Types (select) of e-commerce in India

Business to Business (B2B)

Refers to commerce between two businesses rather than commerce between a business and an individual customer. Purchases are made to be used as raw materials, or as a service to enhance one's own business, or can be used for resale purposes. Examples of some B2B e-commerce marketplaces in India are Indiamart.com, Industrykart.com

Business to Consumer E-commerce (B2C)

Refers to commerce between a business and an individual (the virtual version of brick and mortar stores). Lenskart.com, Nykaa, Amazon India, Flipkart, Myntra and Ajio are examples of B2C marketplaces.

Consumer to Consumer E-commerce (C2C)

This e-commerce business model enables the transaction of products and services between two consumers and a third party that creates a site and payment gateway. Examples of such C2C marketplaces in India are Olx.in and magicbricks.com.

Payments and delivery

Cash continues to be the primary method of payment in India as most retailers do not accept cards for payment as they do not have the required equipment (card-accepting machines) and consumers consider cash a safer method of payment than by card. The preference for cash in India is mainly due to familiarity with this payment method also, acceptance of cards is still low as informal retailing (presence/availability in rural populations and low prices offered) is relatively high, and these retailers continue to prefer cash to avoid paying taxes. However despite the popularity of cash, post-demonetization^{Footnote 1} and the emergence of covid-19 in 2020, prompted consumers to consider and increasingly adopt non-cash payments (digital/mobile wallets and cards) due to fear of contracting covid-19 from the transference of cash through many hands.

The primary method of payment for e-commerce goods purchased online however, continues to be cash on delivery. Shipping in India is dominated by logistics companies and retailers have their own pre-selected shipping and delivery companies (generally consumers do not select the company or incur the cost of shipping their purchased products).^{Footnote 2}

E-commerce market overview

Key market trends ^{Footnote 3}

Mobile e-commerce drives growth in overall e-commerce

Mobile e-commerce, like overall e-commerce, was affected by the ban on non-essential goods during the first half of 2020, however growth improved as restrictions were lifted. The festive season in October was also an additional contributing factor to drive growth for e-commerce and mobile e-commerce. Price-conscious consumers can often also find cheaper prices via e-commerce, prompting consumers to access e-commerce via any means, which was often through their mobile phone.

Mobile commerce (m-commerce) continues to account for the majority of sales in e-commerce in India. The main reason for the general preference for using mobile devices when engaging with e-commerce among Indian consumers is based on the convenience that mobile devices offer, as well as the lower prices charged for them in comparison with laptops and desktops and, more importantly, the fact that mobile internet is far more widely available and generally cheaper to use than fixed-line internet connections. However, it should be noted that smartphones remain the dominant mobile devices for engaging with e-commerce and this is due to the very low penetration of wearable electronics and voice-assisted devices in India. The dominance of smartphones as devices for accessing the internet and engaging with e-commerce means that any company or entrepreneur serious about succeeding in e-commerce in India must adopt a clear mobile-first strategy so as to target and cater to the specific needs of the majority of the country's e-commerce consumers.

Mobile e-commerce in rural regions

In 2020, there was an increasing penetration of smartphones versus laptops and tablets (especially in rural areas-second and third-tier cities- of the country), as low prices for internet access was a contributing factor in the consumer's preference for smart phone usage. The launch of Reliance Jio Infocomm, an Indian telecommunications company, reduced the price of the 4G network, making high-speed internet accessible to a wider range of consumers. Mobile internet costs in the country are in fact amongst the lowest globally, making ownership affordable to a large base of low-income aspirational and less tech-savvy consumers in India. These factors also contributed to increasing the share of overall e-commerce value sales accounted for by mobile e-commerce. Mobile e-commerce contributed to the overall growth in e-commerce sales in India with values of US.14.0 billion $ in 2020. Of note, mobile e-commerce is mainly supported by younger consumers, who have a higher propensity to purchase via mobile than a PC (personal computer).

Development of mobile e-commerce apps

Many retailers offer consumers mobile-optimized sites and mobile apps, providing services such as shopping online, mobile payment and social media marketing to attract the computer-savvy younger generation. For instance, Future Group launched Future Pay and Price Match. Future Pay allows customers to load money in their wallet, view past transactions and see ongoing promotions. More importantly, it introduced the first Price Match initiative allowing customers to scan their Big Bazaar bill and software apps into a third party database which keeps track of the prices of all packaged fast-moving consumer goods at nearby retail outlets. If the price at Big Bazaar is higher than at another retailer, the customer is refunded the difference.

Mobile shopping apps have increasingly become more user-friendly, providing easier, faster and secure access to consumers on-the-go. In addition, more apps are being launched in local languages, with Amazon, for instance, launching an app in Hindi.

Payment options for mobile e-commerce

As more consumers shop with safety and success via mobile e-commerce, payment options will be key. Most mobile e-commerce retailers provide consumers with three payment options; payment wallet, cards/internet banking and cash on delivery.

An identified urban-phenomenon and generational trait is the use of cards/internet banking (mobile wallets) by millennials who do not necessarily carry cash. As a result, retailers and payment wallet companies offering multiple mobile e-commerce payment options will increase the convenience and popularity of the channel. For instance, payment wallet companies such as PayTm emerged as the leading player in payment wallets accumulating 200 million registered users for its digital wallet, reaching a milestone few other companies have achieved in India.

India's digital landscape – Digital device possession

Covid-19 has served to renew the commitment to improve infrastructure and widen internet (and high-speed) access, especially in rural areas. According to Euromonitor, there were 547 million internet users in India in 2020, equating to 44% of the country's total population. 98% of India's 818 million internet subscribers in 2020 were mobile subscribers, while mobile internet penetration was 59% in 2020 with overall internet penetration at 61% in 2020.

The recent increases seen in the numbers of mobile internet users can be attributed largely to improvements in internet connectivity and online infrastructure, which was one of the key aims of the Indian government's Digital India Initiative. The focus of this initiative is now turning to rural areas of the country, with the improvement of digital communications infrastructure in rural parts of the country likely to present numerous opportunities. Of note, there is significant gender inequality in India's digital landscape, with men far more likely to have digital literacy than women. These inequalities will need to be addressed before India's digital landscape can develop fully into an integrated nationwide service that caters to the needs to all of India's citizens^{Footnote 4}.

In 2020, 96% of Indian households had possession of mobile telephones (70.4% of households possessed smartphones) in comparison to just 9.0% of households that had possession of tablets. Despite the larger % of Indian households in possession of mobile telephones, the % of those households in possession of tablets experienced the largest growth rate (26.6%) from 3.5% of households possessing tablets in 2016 versus 9.0% of households in 2020. In 2025, the % of households in possession of mobile telephones are expected to remain relative, while household smartphone, tablet and PC possession is expected to increase, albeit at lower rates of growth.

The Digital Consumer: characteristics

Prior to the emergence of covid-19, India consumers experienced an increased penetration of both mobile and internet penetration drastically changing the way they accessed information and made purchasing decisions. Consumers spent more time researching products, making purchases and also reviewing purchases and their shopping experiences. Indian consumers were looking for fast service and delivery of products tailored to addressing their particular requirements.

Consumer expenditure in tier two cities has also grown faster than in tier one cities prior to covid, indicating the increasing aspirations of tier-two cities.^{Footnote 5} Millennials were also identified as the largest consumer group with more money to spend in comparison to their baby-boomer parents, poised to be the largest digitally connected consumer group with substantial spending power. In response to consumers, retailers seized any opportunities to connect with their consumers via social media, even in the most remote parts of the country, by streamlining processes through leveraging technology to deliver relevant content and products while providing customized solutions and support to ensure consumer loyalty.

The development of India's digital consumer market continued during 2020 as greater numbers of consumers than ever before engaged with e-commerce and the digital landscape with the emergence of covid-19. Rising smartphone ownership and growth in the numbers of mobile internet subscriptions has driven greater digital participation and expanded the scope of the digital consumer market.

A recent analysis conducted by Flipkart and Bain & Company^{Footnote 6} during 2020, highlights brand success in e-retail in relation to the current online shopping behaviour of the Indian e-consumer. Their analysis across online categories has yielded the following insights characteristic to the Indian customer:

limited site time

consumer online platform engagement has increased however the time a visitor spends on a platform is less than nine minutes per visit

pictures 'speak' louder

one of two visitors browse the image gallery in comparison to one in fifteen who view the detailed product descriptions - brands and sellers should invest in high-impact product highlights

product discovery

consumers are increasingly opting for e-retail platforms for product searches

vernacular searches are increasing

as an example, "Parda" was one of the top three searches in curtain coverings for the home

browse, browse, browse

online shoppers browse more than twenty product pages before making a purchase, therefore brands and sellers should tap into the consumer browsing experience in order to customize their offerings and communications for higher returns

different horses, different courses

search attributes and preferences vary significantly across categories and consumers - online shopping data provides interesting insights into specific product preferences – brand, model, theme, occasion, fabrics, etc. – of Indian shoppers at a granular level

The future of online shopping by Flipkart and Bain & Company suggests the following four key trends that will be important in addressing evolving e-consumers' needs and interactions:

voice and vernacular

the Indian vernacular-language internet user base prefers voice search and vernacular-based User Interfaces (UIs) - vernacular apps such as ShareChat, TikTok and Helo have garnered upwards of 50 million users each

visual and video

video content consumption in tier-2 and smaller towns in India grew more than four times just in the last year; visual search tools, live-streaming sessions, influencer videos, etc. are gaining significant traction

social shopping

peers and community play a much larger role in influencing purchase decisions that focus on social commerce by introducing group buying for discounts, such as Pinduoduo, a social shopping enterprise in China that built a consumer franchise of over 450 million monthly shoppers, mostly women from small towns, in just four years

digital ecosystems

platforms are trying to increase their number of consumer touchpoints to combine their core e-retail business with customer services in a single platform or application, attracting a large customer base within a one-stop shop format

In addition, the long-term impact on consumer behavior post-covid according to Mintel, is the importance of hygiene and overall health, including mental well-being. Clean label and natural ingredients will also continue to be important, as well as convenience at affordable costs. Digital media will continue to be a mainstay of consumer lifestyles, with enhanced delivery options as quality assurance will be sought. Lastly, an affinity towards heritage and community will prevail as consumers will lean to traditional practices of cooking at home with traditional foods focused on health and immunity and spending time with family will become a priority.^{Footnote 7}

E-commerce market: retail sales

Retail sales (store-based and non-store based retailing) in India were valued at US$628.4 billion in 2020, representing an increase in growth rate of 7.1% from US$478.2 billion in 2016. Store-based retailing was valued at US$584.5 billion (93.0% market share) versus non-store retailing which was valued at US$43.8 billion (7.0% market share) in 2020. E-commerce in India was valued at US$41.1 billion (6.5% market share) in 2020, and experienced the largest growth rate of 32.9% from US$13.2 billion in 2016.

Store-based retailing is expected to remain the larger retail category in terms of retail sales (US$970.0 billion) in comparison to non-store retailing (US$134.1 billion) with e-commerce (US$129.0 billion) again experiencing the largest growth rate of 24.4% by 2025.

E-commerce retail sales in India were valued at US$41.1 billion in 2020, with domestic e-commerce retail sales of US$39.5 billion (96.2% market share), and foreign e-commerce retail sales of US$1.6 billion (3.8% market share) in 2020. Of note, mobile e-commerce experienced the largest growth rates of 58.1% and 35.3% respectively in the historic and forecasted periods.

From 2016 to 2020, consumer electronics was the largest category of e-commerce in India, witnessing robust growth of 35.2% in retail value sales from US$3.0 billion in 2016 to US$9.8 billion in 2020 . In 2020, India's third largest product category of e-commerce retail sales, food and drink, reached US$2.7 billion and experienced the second largest historic growth rate (58.4%) of all product categories from sales of US$421.9 million in 2016, as busy schedules, higher disposable incomes and the rising adoption of smartphones made food and drink delivery services an increasingly popular choice, especially in urban areas. Despite this growth, food and drink e-commerce represented 6.5% of the total market share in 2020.

During 2020 with the emergence of covid-19, greater home seclusion and temporary foodservice closures prompted greater demand for food and drink as more consumers were cooking at home. Grocery retailing (seen as an essential service during covid) was one area of e-commerce which registered particularly strong positive sales growth in 2020.

The emergence of online supermarket grocery suppliers such as BigBasket.com (India's largest e-grocery player) assisted in revolutionizing food and drink e-commerce in India prior to, and has been especially essential as a supply source during covid-19. Recently, BigBasket.com in its decade-long existence and a presence in more than 25 cities across India, has been acquired by Tata Digital, a deal that places India's largest conglomerate against entrenched e-commerce players in the country.^{Footnote 8}

In addition, Amazon (Amazon Pantry) and Flipkart (Flipkart Supermart) have launched online grocery shopping (supermarkets), assisting in providing food and drink essentials while encouraging millennials and affluent consumers to move from shopping in physical stores to online. Relatedly, as more consumers shifted towards contactless payments for safety, security and convenience; large numbers of India's iconic grocery retailers also adopted digital payment methods, notably scan and pay options, to cater to customers' needs. For instance, Fintech player PayNearby emerged as a key figure as it announced the expansion of its hyper-localized discovery and purchase application BuyNearby to cover all of India's territory. This app has been developed and is operated in collaboration with IndusInd Bank, which also acts as the app's digital payments processing partner.

Grocery retailing via food and drink e-commerce is expected to maintain its immediate growth momentum into 2021, as some consumers are expected to limit the number of shopping trips for groceries and depend more on the convenience of e-commerce, especially in higher purchasing power urban areas. E-commerce companies are also continuing to expand their portfolios of private label lines, especially in the food product category. These private label products are priced cheaper in comparison to brand label products, offering a more affordable option to consumers when shopping online. This will be particularly important given that consumers' price-consciousness is expected to continue, at least in the beginning of the forecast period. Lastly, logistical challenges experienced by food and drink e-commerce are also hoped to be addressed in the interim with the opening of 'dark stores', by retailers partnering with store-based retailers in second-and third-tier cities to make delivery distances shorter and cheaper.

Within the food and drink e-commerce category, packaged food made up about 33.5% of the sectors' online sales, while the remaining 66.5% are estimated to come from beverages (hot drinks/soft drinks/beverages containing alcohol) and fresh (unprocessed) foods.

Food and drink e-commerce sales are expected to continue to see increasing growth, with a forecasted compound annual growth rate of 43.2%. In 2025, food and drink e-commerce sales are expected to reach US$17.9 billion and account for 13.9% of total e-commerce sales. This continued growth is due to an increase in consumer interest in purchasing edible goods online and increasing smartphone penetration.

Overall, e-commerce sales in India are expected to reach US$128.9 billion by 2025, at a compound annual growth rate of 24.4%. This growth will be further driven by changing consumer habits, continued demand for convenience, further advancement in technology, innovation in product offering, and improved logistics, as the economy evolves through covid-19.

In 2020, packaged food witnessed US$901.0 million in online sales and experienced a compound annual growth rate of 47.5% from US$190.6 million in 2016 (+70.3% from US$529.1 million in 2019). In comparison, store-based packaged food sales increased at a growth rate of 14.5% (+12.3% from US$70.0 billion in 2019) from US$46.0 billion in 2016 to US$79.0 billion in 2020.

In terms of packaged food sub-categories, dairy, rice, pasta and noodles, ready meals, sweet biscuits, snack bars and fruit snacks and confectionery were the leading online grocery items purchased by Indian consumers in 2020. Altogether they made up 79.6% of packaged food's online sales, with dairy worth US$200.2 million (with 22.2% market share), rice, pasta and noodles worth US$172.6 million (with 19.2% market share), ready meals worth US$154.4 million (with 17.1% market share), sweet biscuits, snack bars and fruit snacks worth US$126.1 million (with 14.0% market share) and confectionery worth US$64.0 million (with 7.1% market share) in 2020. Of note, the processed fruit and vegetables and processed meat and seafood categories saw the largest growths of 165.9% and 160.4% respectively from 2016 to 2020.

Store-based sales of packaged food accounted for 98.9%, while e-commerce sales represented 1.1% in 2020.The categories with the highest online value distribution share in 2020 in comparison to store-based retail sales were ready meals (33.2%), breakfast cereals (10.0%), baby food (6.5%), sweet biscuits, snack bars and fruit snacks and processed fruit and vegetables (2.2%) respectively. Those categories with the highest growth rates in e-commerce retail sale share between 2016 to 2020 included processed fruit and vegetables (116.6%), processed meat and seafood (108.8%), rice, pasta and noodles (103.1%), baby food (52.6%) and baked goods (45.6%).

Foodservice is the fourth largest e-commerce industry in India with retail sales of US$3.1 billion in 2020, representing an increase in growth of 40.1% from US$805.6 million in 2016 (-11.6% from US$3.5 billion in 2019). Foodservice is expected to experience an increase in growth rate of 27.5% as retail sales are forecast to increase from US$4.7 billion in 2021 to US$12.4 billion by 2025.

In 2020, online foodservice sales via mobile telephone device in India were valued at US$2.4 billion, representing a 77.2% market share, followed by purchases via personal computer US$614.4 million (19.8% market share) and purchases via tablet US$91.9 million (3.0% market share). All device types made significant increases in growth rates within the historic period, with the emergence of covid as a dominant influence, while forecasted growth is expected to continue at lower rates.

In 2020, consumer foodservice saw declines in both values and transaction volumes due to the various rolling lockdown measures implemented in India. Chained consumer foodservice however, was less impacted than independent consumer foodservice in 2020, due to customer loyalty, delivery options, discounts and scale of operations. In particular, food delivery services recovered back to pre-covid levels in the later part of 2020, as food delivery aggregators and restaurants offered substantial discounts to attract consumers. In addition, the National Restaurant Association of India also announced its online platforms which enabled online ordering, food deliveries, loyalty programs and contactless payment. Further, the concept of ghost kitchens or cloud kitchens increased due to home seclusion and the increased growth in food delivery services in 2020. ^{Footnote 9}

Recovery from covid-19 in the Indian consumer foodservice industry is expected to slowly recover and reach pre-pandemic level by 2021 as hygiene and the quality of food will remain the main factors when it comes to the success parameters for restaurants.

Top e-commerce companies and brands

Walmart Inc and Amazon.com Inc were the largest companies in terms of e-commerce sales in India with retail values of US$16.8 billion and US$14.0 billion respectively, representing a combined market share of 74.8% in 2020. FNS E-Commerce Ventures Pvt Ltd accumulated the largest growth of 62.6% as sales increased to US$238.8 million in 2020 from US$34.2 million in 2016. In contrast, Rediff.com India Ltd experienced the largest decline in growth rate (45.0%), as sales declined from US$13.1 million in 2016 to US$1.2 million in 2020.

E-commerce is an effective channel for Canadian agrifood exporters to enter the Indian market or grow their existing footprint. Of note, the Trade Commissioner Service (TCS) in India has developed a strong plug and play model in partnership with Amazon for Canadian exporters, allowing them to leverage the e-commerce route for faster market entry in India with minimum risk while also reaching millions of potential consumers in the world's fastest growing consumer market. In partnership with Amazon, the TCS in India launched a Canada store on the Amazon India platform in 2021; which is a Canada-specific landing and e-commerce page profiling Canadian Agri and Agri-food products available in the market. The Amazon site currently features more than ten Canadian brands, and the dedicated online store will provide a one-stop-shop for Canadian products on one of the biggest e-commerce marketplaces in India. ^{Footnote 10}

Other leading online retailers like Flipkart and Amazon have leveraged their presence across online categories by offering consumers hefty discounts in conjunction with the partnering of brands (affordable private label products which builds brand loyalty) to sell exclusively on their portals. Initiatives like Flipkart's Big billion Day and Amazon's Great India Festive Sale have boosted sales by offering additional discounts. These leading online e-commerce retailers are also focusing on expanding their store presence. Having acquired Flipkart, Walmart is expected to add more than 10 Best Price wholesale stores every year. Flipkart is also expected to open grocery stores in India, leveraging the global expertise of Walmart. Further, high logistic expenses incurred by India's online retailers are hoped to be offset by having a robust distribution network. For instance, Amazon has recently invested in nine fulfillment centres and thirty delivery centres exclusively for large appliances and furniture products. Amazon has also opened up multiple fulfilment centres which are temperature controlled for grocery delivery.^{Footnote 11}

Flipkart (Walmart Inc) and Amazon (Amazon.com Inc) are the top e-commerce brands in India with retail values of US$14.4 million and US$14.0 respectively in 2020. Nykaa.com (FNS E-Commerce Ventures Pvt Ltd) experienced the largest increase in growth rate (66.5%) as retail sales increased from US$31.1 million in 2016 to US$238.8 million in 2020.

Opportunities and challenges for Canadian suppliers

Opportunities

According to Euromonitor, the shifts seen in consumer preferences over the course of 2020 due to the unprecedented exigencies of the COVID-19 situation are expected to become permanent during the forecast period as consumers increasingly seek convenience. This is tied to the increasingly hectic lifestyles being led by India's affluent urban middle-class even, which means that consumers are interested in anything that has the potential to save them time. Furthermore, it is expected that many of the white-collar professionals, service industry personnel and office workers who began working from home during 2020 due to the COVID-19 pandemic will continue to work from home throughout 2021, and possibly on a permanent basis. This is part of the general shift towards people spending more of their time in the home environment, with very positive implications for Canadian suppliers of agri-food and seafood and value-added products to the Indian e-commerce market.

In addition, Euromonitor notes the influence of aggregators and marketplace comparison websites remains an important feature of e-commerce in India as consumers rely on such online shopping price comparison tools to obtain the best value and lowest prices. As such, the forecast period is expected see greater use of such websites among e-commerce players as increasingly intense competition means that maintaining a strong presence on websites that are able to attract consumer attention to specific websites and maximize the chances that clicks will be converted into completed purchase orders will become increasingly crucial to success in e-commerce.

Furthermore, with many e-commerce companies looking to expand their online presence and maximize their online sales, there will inevitably be an increase in the prevalence of partnerships between e-commerce players and online aggregators and marketplace comparison websites, increasing the potential development of partnerships between Canadian exporters and store-based and e-commerce retailers in the growing expansion of the Indian e-commerce environment. The recent launch of the Canada store on the Amazon India platform, in 2021 highlights the importance of such online partnerships between the Canadian agrifood exporter and the Indian consumer in promoting and leveraging Canada's distinct brands via a one- stop -shop format in the Indian marketplace.

Challenges

The pandemic caused serious interruption to commercial activity in key sectors of the Indian economy during 2020 and this had a very negative impact on overall consumer spending. In particular, spending became heavily focused on daily essentials, with discretionary spending plummeting over the course of the year. This inevitably resulted in declining value sales in e-commerce during 2020. As the world and Indian economy recover from covid-19, competition from store-based retailing is expected to resume.

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Resources

• Euromonitor International, February 2021. Country Report: Retailing in India
• Euromonitor International, February 2021. Mobile e-commerce in India
• Euromonitor International: E-commerce goods and services in India
• Euromonitor International, April 2021. Country Report:  Digital Landscape in India
• Euromonitor International, June 2018. Connectivity reinvents retailing in India
• Euromonitor International, August 2019. E-commerce in India; Opportunities amid Challenges
• Euromonitor International, February 2021. Consumer Foodservice in India
• Mintel, How covid-19 will impact Indian consumers, April 3, 2020
• The Economic Times, ETRetail.com; Tata says acquired majority stake in online grocery BigBasket

Sector Trend Analysis – E-commerce trends in India
Global Analysis Report

Prepared by: Laurie Bernardi, International Market Research Analyst

© Her Majesty the Queen in Right of Canada, represented by the Minister of Agriculture and Agri-Food (2021).

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