贝恩+印度如何在线购物

HowIndiaShopsOnline2022

Aninsightintothee-retaillandscapeand

theemergingtrendsshapingthemarket

Authors

ThisreportwaspreparedbyArpanSheth,apartnerinBain&Company’sMumbaiofficewholeadsthefirm’sAsia-PacificTechnology,Vector,andAdvancedAnalyticspractices,aswellastheIndiaPrivateEquityandAlternativeInvestorpractice;ShyamUnnikrishnan,apartnerinBain&Company’sBengaluruoffice,aleaderinBainIndia’sConsumerProducts,Retail,Strategy,andDigitalpractices;MananBhasin,apartnerinBain&Company’sMumbaioffice,aleaderinBainIndia’sConsumerProducts,Retail,Strategy,andDigitalpractices;andAbhishekRaj,anassociatepartnerinBain&Company’sMumbaioffice,aleaderinBainIndia’sConsumerProducts,Retail,Strategy,andDigitalpractices.

KeyContacts

ArpanSheth(arpan.sheth@)

ShyamUnnikrishnan(shyam.unnikrishnan@)

MananBhasin(manan.bhasin@)

AbhishekRaj(abhishek.raj@)

Formarketingqueries:SitaraAchreja(sitara.achreja@)

Acknowledgements

TheauthorsthankSankalpMehrotra(VicePresident–Monetisation),SarahGideon(VicePresident–CorporateAffairs),PrasannaR(Director–Analytics),RadhikaraniSengupta(AssociateDirector–Monetisation),MayankThakur(Manager–Analytics)andothermembersoftheFlipkartAnalyticsteam;andDevdattaPatankar,RaghawJhunjhunwala,andChaitanyaJainfromBain&Companyfortheircontributionstotheinsightsinthisreport;andBain&Companyglobalpartnersfortheirexpertiseandinput.Theteamwouldliketothankallthecompanies,executives,employees,andexperts

whosharedtheirperspectivestodevelopthisreport,includingFlipkart,forsharingvaluablee-commerceinsights.

NetPromoterScoresmisaservicemarkofBain&Company,Inc.,SatmetrixSystems,Inc.,

andFredReichheld.

Copyright©2022Bain&Company,Inc.Allrightsreserved.

Flipkart|Bain&Company,Inc.

1

HowIndiaShopsOnline2022

Executivesummary

E-retailmarketandshopperdynamics

TheCovid-19pandemichasbeenacruciblemomentforonlineretailinIndia.Thepandemichasinducedhypergrowthanda12-monthaccelerationinmarketpenetration.Indiacurrentlyhasthethird-largestshopperbaseglobally,with180–190milliononlineshoppersin2021.Inaddition,IndiaiswellpoisedtosurpasstheUStohavethesecond-largestshopperbaseinthenextonetotwoyears.

India’se-retailmarketrosetoapproximately$40billionin2021andisslatedtoreach$50billionin2022.Indiahasrobustfundamentalssupportingacontinuedboomine-retail.India’ssubstantialonlineconsumerbaseandretailmarket(thirdlargestglobally)alreadymakeitanincrediblyattractivee-retailmarket.Massiveheadroomintermsofsmartphonepenetration(36%inIndiavs.63%inChinaand76%intheUS)andaffluence(~$2KpercapitainIndiavs.~$12KinChinaand~$69KintheUS),inadditiontoalreadylowdataprices,providetheperfectingredientsforsustainedgrowth.

Risingaffluencewillfuelconsumptionandincreasespendingpershopper.Althoughthecurrentinflationaryenvironmentmightprovetobeashort-termheadwindforthemarket,thesestructuraldriverswillensurehealthygrowthinthemediumtolongterm.

India’se-retailmarketisestimatedtoincreaseto$150–$170billionby2027.Thisimplies25%–30%annualgrowthanddoublingofmarketpenetrationto9%–10%overthenextfiveyears.

Thecategorymixofonlinepurchaseswillalsoevolve.Historically,categoriessuchasmobilephones,electronics,andapplianceshaveaccountedforthelion’sshareofthee-retailmarket.Thiswillchangeoverthenextfiveyears.Fashion,generalmerchandisecategories(includingpersonalcare),andgroceryhavethehighestpenetrationheadroom(vs.maturemarkets)andwillthereforefuelgrowth.Thesecategorieswillcumulativelyaccountforasmuchastwo-thirdsofthee-retailmarketby2027.

Shopperadditionwillcontinuetobeattheheartoffuturee-retailgrowth.India’sonlineshopperbaseisestimatedtoincreaseto400–450millionby2027.Mostoftheseshoppersarealreadyinthedigitalfunnel—450–500millionusedsocialmediawhileonly180–190millionshoppedonlinein2021.

In2021alone,between40and50millionnewshopperswereaddedtotheIndiae-retailmarket,whichisapproximately30%–35%growthovertheonlineshopperbasein2020.Thesenewshopperslargelybelongtotier-3orsmallercitiesandincludeGenZ—whichwillbecomeacriticalcohortinthefuture.Theyprimarilypurchasefashionasthefirstcategoryonline,andtheytypicallystartbuyingatentrypricepoints.

Theexistingshopperbaseissimultaneouslymaturing.Overallengagementonretailplatformsisincreasing.Thepercentageofdailyactiveuserstomonthlyactiveusershasrisentomorethan25%in2021,from18%to20%in2019.Consumersnowspend20%moretimepermonthonaretailplatform,vs.lastyear.

Flipkart|Bain&Company,Inc.

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HowIndiaShopsOnline2022

Sustainede-retailgrowthhasbeenaccompaniedbytremendousgrowthinthesupplierandlogisticsecosystem.India’sonlinesellerbasehasgrown35%annuallyoverthepastyear,withapproximately40%ofnewsellerscomingfromtier-2orsmallercities.Inaddition,growthine-retailshipmentshasenabledthedevelopmentofadeepandefficientlogisticsnetwork.Accompaniedbytechnologicaladvances,e-retailhasseenasteadyyear-over-yeardeclineincostpershipmentby7%–9%perannumfrom2018to2021.Reachhaswidenedsignificantly—e-retailisaccessiblein99%ofIndia’spincodes.

Thegovernmentisalsoplayingacriticalroleindemocratisinge-retailforIndiathroughthecreationoftheOpenNetworkforDigitalCommerce(ONDC).ONDCaimstocreateaninteroperablenetworkfordigitalcommerceakintoUnifiedPaymentInterface(UPI)networkforpayments.Althoughanascentinitiative,itssuccessfulandfull-scaleexecutioncouldprovideafilliptotheIndiane-retailecosystem.

Futureofe-retailinIndia

India’se-retailhasevolvedandmaturedmateriallyoverthepastdecade.

Before2015(Phase1.0–Cautiousearlyadoption),e-retailwasrestrictedtoupper-incomehouseholdsfrommetroandtier-1cities.Categoriessuchasmobilephonesandfashionaccountedformorethan75%ofgrossmerchandisevalue(GMV),ledbyhorizontalplatforms.Made-for-Bharatinnovationssuchascashondeliveryhelpedbuildcustomertrustanddrovee-retailadoption.

From2015to2020(Phase2.0–Massification),thee-retailmarketexpandedandevolvedimmensely.RapidgrowthinthenumberofInternet-enabledsmartphoneusers,fueledbylow-costdevicesandcheaperdata,waskeytobringingIndiaonline.Platformsdemocratisede-retail.Shoppersintier-2orsmallercitiesandinmiddle-incomehouseholdscameonline,andnewsellersfromthebreadthofBharatwereonboarded.Phase2.0sawtheemergenceandscale-upofverticalplayersacrosscategoriessuchasfashion,grocery,pharma,beauty,etc.Thisperiodwasalsocharacterisedbyimprovementsincustomerexperienceviafasterdelivery(2–4days),loyaltyprograms,andtheriseofdigitalpayments.

TheCovid-19pandemicmarkedaninflectionpointine-commerceinIndia,usheringinaneweraofgrowth.Thispost-2020phase(Phase3.0–Massificationandincreasingstickiness)willinvolverapidgrowthinbothuserpenetrationanduserspend.Theshopperbasewillmatureandtransactmorefrequently,spendingmoretimeonplatforms.Phase3.0introducesaneraofinnovationanddisruptiontoaddresstheneedsofdistinctmicro-segmentsemerging,toinnovatewithnewbusinessmodels,andtodifferentiateoncustomerexperience.Wediscusseachoftheseinmoredetailbelow.

Shoppermicro-segments:Multipledisparateshoppercohorts—basedongeography,income,andage—arecomingonline.Threeoutoffiveshoppersbelongtotier-2orsmallercities,oneinthreeshoppersbelongtolow-to-middleincomesegments,andoneinthreeshoppersisGenZ(youngerthanage25).Eachofthesemicro-segmentsexhibitsdistinctshoppingbehavior.Forinstance,shoppersintier-2orsmallercitieshavehighersalienceofvoiceandvernacularsearch,whereaslow-to-middleincomehouseholdsrelymoreonimage-basedsearch.

Flipkart|Bain&Company,Inc.

3

HowIndiaShopsOnline2022

Newe-retailbusinessmodels:E-retailersareexperimentingwithahostofalternativebusinessmodelsastheypursueawideraudienceandaddressgapsintraditionalcommerce.Thesemodels—social-ledcommerce,video/livecommerce,direct-to-consumercommerce,andquickcommerce—areatvaryinglevelsofmaturityanddemonstratetremendouspotential.Forexample,social-ledcommerceisexpectedtogrowapproximately50%annuallyfrom2021to2025.Socialmediaplayersareincreasinglylookingtoleverageplatformtraffictodriveonlinesales—about10%ofInstagramusersgloballyuse“Shops”onInstagram.Video/livecommercealsoofferssubstantialpotential,withmorethan600millionusersofshort-formvideoplatformsexpectedinIndiaby2025.However,themodelisyettogainmeaningfultractionbeyondChinaandSoutheastAsia(video/livecommercedrives10%ofChina’se-retailrevenue).Quickcommerce,arecentdisruptionglobally,hasalsogainedinterestinIndia,withplayershavingraisedmorethan$3billioninfundinguptoJune2022

However,playersneedtonavigatechallengesaroundscalingsustainably.Forinstance,quickcommercehasgainedsignificanttraction,butlowaverageordervalues,lackofdemanddensity,andlowornodeliveryfees;inadditiontothinunderlyingmargins,impactuniteconomics.

Customerexperienceinnovations:Technology-leddisruptionshavetremendouslyenhancedtheonlineshopperexperiencefromdiscoverytopurchase.Theseimprovementsrangefrominnovativesearchmechanisms—voice,vernacular,andimage-basedsearch—toapplicationsutilisingaugmentedreality(AR),virtualreality(VR),andartificialintelligence(AI).Made-for-Bharatinnovationssuchasvoice-andvernacular-basedsearchhavecontinuedtogaintraction,with5xgrowthinvoice-searchusersand3xgrowthinvernacular-searchusersoverthepastyear.Theseinnovationsarehelpingmakeshoppingeasierforanewwaveofusers:Halfofallvernacular-searchshoppersarenewonlineshoppers.Mostofthesevernacularshoppers(70%)belongtotier-3orsmallercities.Simultaneously,AR/VRapplicationssuchasproducttry-onsanddemosaregainingpopularity.Forinstance,Flipkart’scamerafeatureallowsuserstosuperimposeimagesoffurnitureandlargeappliancesonlivevideosoftheirroomsthroughcamerascanning.

Thesedisruptionswillpavethewayforthenextwaveofe-retailgrowthinIndia.

Acceleratedscale-upofe-retailhasimplicationsforbothplatformsshapinge-retailinthecountryandforbrandslookingtotapthiscrucialchannel.Platforms—bothhorizontalandvertical—needtofocusondeliveringsuperiorcustomerandsellerexperience,leveragingtrafficanddatatocreatevalueandbuildingrelevantcapabilitiesandmoats.Inparallel,brandswillneedtooptimisechannelmix,designatailoredassortment,drivehighvisibility,andbuilddifferentiatedcapabilitiesaroundsupplychainanddata.

Flipkart|Bain&Company,Inc.

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HowIndiaShopsOnline2022

Indiacurrentlyhasmorethan180milliononlineshoppersandiswellpoisedtosurpasstheUStohavesecond-largestshopperbaseinthenextonetotwoyears

5

E-retailmarketand

shoppingdynamics

India’se-retailmarketisestimatedtobe$50billionin2022,growingat25%over2021.Themarketisexpectedtoscaleto$150–$170billionin2027,withupto1in10retaildollarsspentonline.

Thisseculargrowthissupportedbystrongunderlyingfundamentals:alargeconsumerbasewithgrowingaffluence,albeitfromlowlevelscurrently;growingInternetandsmartphonepenetration(enabledbylowdataprices);andlowshipmentcosts.

Themixofcategoriespurchasedonlinewillchange.Fashion,generalmerchandise,andgrocery,whichhavethehighestpenetrationheadroomvs.maturee-retailmarkets,willgrowdisproportionatelyandaccountfortwo-thirdsofthee-retailmarket.

India’se-retailshopperbasescaledto180–190millionin2021,with40–50millionshoppersaddedin2021alone.Themajorityoftheseshoppers(about60%)comefromtier-3orsmallercities.Anewgenerationofdigitalnatives—GenZ(18–25yearsofage)—hasstartedtransactingonlineandwillbecomeacriticalcohortinthefuture.

Fashionandlow-priceitemshavebeenpivotaltoonboardnewshoppers.Morethan40%ofnewshoppersboughtfashionintheirfirstonlinepurchase,andtheaveragesellingprice(ASP)foritemsboughtbynewshopperswas20%lowerthanforexistingshoppers.

Growthinthee-retailmarkethasbeenaccompaniedbyrapidexpansioninthesellerbaseandefficientdevelopmentinthelogisticsinfrastructure.Sellergrowthhasoutpacede-retailgrowth,withthenumberofsellersincreasingat35%annually.E-retailscalehasenabledaconsistentreductionincostpershipment,whichhasfallento8%ofaverageordervalue(vs.10%inChina).

Flipkart|Bain&Company,Inc.

6

~50

$3.3

~$3.8T

~$0.9T

~$69K

GDP

per

~$0.9T

~$40B

490M(36%)

$0.7

~$2K

Brazil

~$7K

120M(55%)

$0.9

~$0.4T

~$35B

~$47K

50M(74%)

$1.4

~$0.6T

~$165B

HowIndiaShopsOnline2022

Figure1:Indiahasrobustfundamentalstosupportalargeandgrowinge-retailmarket

UK

US

China

~$12K

890M(63%)

$0.5

~$5.2T

$1.4T

DataRetail

pricemarket

E-retail

market

250M(76%)

Smartphoneusers

(perGB)

capita

(penetration)

India

Highe-retailpotentialoverthenextdecade

1Largeconsumermarket(2ndlargestpopulation,3rdlargestretailmarketglobally)withgrowingaffluence(fromlowbase)

2Large,growinginternetandsmartphonepenetration(2ndhighestsmartphoneusersglobally)enabledbylowdataprices

3Lowandsteadilydecliningshipmentcosts

Notes:Metricspertainto2021;Chinaretail/e-retailmarketsexcludethesaleofautomobiles

Sources:Forrester;InternationalMonetaryFund;ChinaStatisticalYearbook;eMarketer;Cable.co.uk;Bainanalysis

Figure2:Indiane-retailmarketisestimatedtoreachabout$50Bin2022andgrowatmorethan25%perannumtoscaleto$150–$170Bby2027

E-retailpenetrationtogrowfrom~5%to9%–10%in2027

Indiae-retailmarket($B)

150–170

25%–30%

CAGR

Penetrationacceleratedby140bpsfrom2019,duetoCovid-19

~40

202120222027E

Penetration%

India~4.5%~5%9%–10%

China26%–28%28%–30%–

Fashion,grocery,generalmerchandisetofuelgrowthandaccountforuptotwo-thirdsofe-retailmarketby2027

Indiae-retailmarket($B)

CAGR

25%–30%

150–170

~50

(5%–10%)

(20%–25%)

Other(10%–15%)

Grocery/Generalmerchandise(30%–35%)

(20%–25%)

Fashion

(25%–30%)

(45%–50%)

Mobiles/Electronics/

Appliances

(25%–30%)

2022

2027E

30%–35%

35%–40%

30%–35%

15%–20%

Notes:Penetrationrepresentse-retailasapercentoftotalretail;“E”representstheestimatedamount;Otherincludeshome,furniture,pharma

Sources:CRISIL;Forrester;ChinaStatisticalYearbook;BainAnalysis

Flipkart|Bain&Company,Inc.

7

400–450

2021

2020

~105

HowIndiaShopsOnline2022

Figure3:E-retailpenetrationheadroomexistsacrosscategories

E-retailpenetration*bycategory(2021)

~70%

~70%

~60%

~60%

~50%

~40%

China

~30%

US

~25%

~20%

India

~10%

~10%

~5%

~10%~5%

<1%

Mobile/Electronics/

Appliances

Fashion

General

merchandise

Home/Furniture

Grocery

*Penetrationrepresentse-retailasapercentoftotalretail

Sources:Forrester;Marketparticipantinterviews;Bainanalysis

Figure4:Shopperadditioniskeyforgrowth,with40–50Mshoppersaddedin2021alone

Indiaonlineshopperbasewillscalefrom

180–190Mto400–450Min2027

OnlineshoppersinIndia(million)

2027E

180–190

~140

30–35%

CAGR

2019

40–50M

onlineshoppersaddedin

2021

3rd

largestonlineshopperbaseglobally(onlybehindChina,US);potentially2ndby2022

Sources:Forrester;Similarweb;Bainanalysis

Majorityfuturee-retailshoppersarealreadyinthedigitalfunnel

Indiadigitalfunnel(2021)Userbase

450–500M

Chattingandsocialmedia

Videocontent

400–450M

Servicetransactors

250–300M

Product

transactors

180–190M

60%

ofsocial-mediauserbasedidnotshoponlinein2021

8

HowIndiaShopsOnline2022

Figure5:Newe-retailshoppersareadiversegroup

Newonlineshopperscamefrom

thebreadthofBharat…

>60%

ofnewonlineshoppersare

fromtier-3/smallercities

…andanewgenerationofdigitalnativesisshoppingonline

newonlineshoppersareaged<25years(GenZ)

1in3

Shoppingfestivalscontinuetoaidnewshoppergrowth:

>3Xnewonlineshoppersonboardedperdayduringflagshipannualfestivalsversusrestoftheyear(2021)

Notes:Metricspertainto2021;Metroarea/tier-1categorycoverstop50citiesbasedonpopulation,tier-2categorycoversnext100cities,andtherestofIndiaisclassifiedastier-3/smallercities

Sources:Marketparticipantinterviews;Bainanalysis

Figure6:Fashionisacruicialcategorytoonboardshoppers;majorityinitialonlinepurchasesareatentrypricepoints

Whilefashioncontinuestobethegatewaycategory,generalmerchandise,electronicshavealsogrown

%ofshopperswhobuyproductcategoryintheir

firsttransaction(2021)

40%–45%

20%–25%20%–25%

5%–10%

Fashion

Mobiles

Electronics*General

merchandise

2020

Initialonlinepurchasestendtobeat

entrypricepoints

%ofnewshoppers(2021)

50%–55%

30%–35%

10%–15%

1,500+

<500

500–1,500

ASP**ofpurchasesmadeinfirstyearof

onlineshopping(INR)

*Includeslargeappliances,**ASP=AverageSellingPrice

Note:Productcategorychartfornewshoppersisnotadditiveto100%duetooverlaps

Sources:Marketparticipantinterviews;Bainanalysis

Flipkart|Bain&Company,Inc.

9

HowIndiaShopsOnline2022

Figure7:Matureshoppersbuyathigherpricepointsacrosscategories

ASPbyproductcategory(2021)

(Indexedtonewshoppers’ASP)

Electronics

Appliances

Fashion

Mobile

GM*

+30%

+10%

+30%

+10%

+15%

+10%

+15%

+25%

~20%

higherASPforexistingonlineshoppersvis-à-visnewshoppers

Washingmachine

Audio

Laptop&

desktop

Smallhomeappliances

Newshoppers(<1yearsincefirstpurchase)

Men’sclothing

Sportfitness

Mobile

phones

Men’s

footwear

Existingshoppers(1+yearssincefirstpurchase)

*GM=Generalmerchandise

Sources:Marketparticipantinterviews;Bainanalysis

Figure8:Thisgrowingshopperbaseisalsomuchmoreengaged

Usersvisitplatformsmorefrequently…

>25%

Shareofmonthlyusersvisitingdaily*

(vs.18%–20%in2019)

…andspendmoretimeonthem

~20%

Annualincreaseintimespentonaplatformperuserpermonth(2019–21)

*Referstotheratioofaveragedailyactiveusers(DAU)toaveragemonthlyactiveusers(MAU)

Note:Metricspertainto2021

Sources:Marketparticipantinterviews;Bainanalysis

Flipkart|Bain&Company,Inc.

10

HowIndiaShopsOnline2022

Figure9:Shoppersbrowsemorethan15productpagesformostcategories

#productpageviews(PPVs)percustomerbeforemakingapurchase

62

4847

39

29

Average31

17

17

11

13

MicrowaveWashing

machine&dryer

Appliances

Makeup&fragrances

Babycare

Mobile

Women’sMen’ssportsAudioPowerbank

westernwearfootwear

Generalmerchandise

LifestyleElectronics

Notes:PPVsrefertonumberofproductpagesviewedacrosssingleormultiplevisitsmadebeforeapurchasebyauserforagivencategory

Sources:Marketparticipantinterviews;Bainanalysis

Figure10:E-retailgrowthhasprovidedsellers,especiallythoseinsmallcities,accesstoawidershopperbase

Onlinesellerbaseisgrowingrapidly…

~35%

Y-O-Ygrowthinonlinesellerbase

Onlineshopperproposition–

“Deeperandwiderselection”

...withnewsellerscomingfromthebreadthofBharat

~40%

Newsellersbelongtotier-2/smallercities

Sellerproposition–“Incrementalsalesvianewchannels”

Notes:Metricspertainto2021;Metroarea/tier-1categorycoverstop50citiesbasedonpopulation,tier-2categorycoversnext100cities,andtherestofIndiaisclassifiedastier-3/smallercities

Sources:Marketparticipantinterviews;Bainanalysis

Flipkart|Bain&Company,Inc.

11

HowIndiaShopsOnline2022

Figure11:Deeplogisticsdevelopmenthasdemocratisedaccesstoe-retailforBharat

Lowerfulfilmentcosts,achievedwithautomationandincreasingscale…

~8%

Costpershipment(CPS)inIndia,

as%ofAOV*(vs.~10%inChina)

(7%–9%p.a.**decreaseover2018–21)

*AOV=averageordervalue;**p.a.=perannum

Note:Metricspertainto2021

Sources:Marketparticipantinterviews;Bainanalysis

…enabledexpansionine-retail’sgeographicalreach

>99%

Pincodeswithatleast

onee-retailorder

Flipkart|Bain&Company,Inc.

12

HowIndiaShopsOnline2022

Phase3.0ofe-commerceevolutionintroducesaneraofinnovationtoaddresstheneedsofdistinctmicro-segments,toinnovatewithnewbusinessmodels,andtodifferentiateoncustomerexperience.

13

Thefutureofe-retail—newcustomers,

newe-retailmodels,CXinnovations

E-retailinIndiahasevolvedmateriallyoverthelastdecade.Phase1.0(pre2015)canbecharacterisedasaphaseof“cautiousearlyadoption.”Themediumwasrestrictedtoselecthouseholds(typicallyaffluent,metro/tier-1)andcategories(typicallymobiles,fashion).Phase2.0(2015–20)heraldedaneraofgrowthandmassification.E-retailexpandedtonewshoppersacrosstier-2cities(enabledbyacrashindataprices)andnewcategories(suchasgrocery,beauty,etc.).Thiswasjuxtaposedbyadramaticincreaseinecosystemmaturitywiththescale-upofthird-partylogistics,innovativeaffordabilityconstructslikebuynowpaylater(BNPL),low-costequatedmonthlyinstalments(EMIs)andco-brandedcards,etc.

TheCovid-19pandemicsteeredIndia’se-retailmarketintoPhase3.0ofitsevolution—aneraofinnovation.Overthelast12–18months,threedistincthallmarksofPhase3.0haveemerged.Theseincludetheemergenceofshoppermicro-segments;theintroductionofnovelbusinessmodels;andtheuseoftechnologytodeliverabespoke,life-likecustomerexperiencetoshoppers.

Inthisphaseofgrowth(Phase3.0),platformswillneedtosolvefordistinctshoppermicro-segmentsacrossgeographies,incomes,andagegroups.Threeoutoffiveshoppersbelongtotier-2orsmallercities,oneinthreeshoppersbelongtolow-to-middleincomesegments,andoneinthreeshoppersisGenZ(<25years).Eachofthesemicro-segmentsexhibitsdistinctshoppingbehaviors.Forinstance,GenZshoppersfrequentlyusewishliststoshortlistproductsbeforeaddingitemstothecart.

India’se-retailmarketiswitnessingtheemergenceofnovelbusinessmodelsinPhase3.0ofgrowth.Thesemodels,currentlyatdifferentstagesofmaturity,include:

–Social-ledcommerce:Includesthreemodels—social-networkled,reseller-led,andcommunitybuying.About40%ofshoppersusingtheresellermodelarefirst-timee-retailshoppers,andtwo-thirdsofshoppersbelongtotier-3orsmallercities.

–Video/livecommerce:ThemodelisnascentandhasseenlimitedtractionbeyondChinaandSoutheastAsia.However,thereisenormouspotentialwithover600millionusersofshort-videoplatformsexpectedinIndiaby2025.

Flipkart|Bain&Company,Inc.

14

HowIndiaShopsOnline2022

–Directtoconsumer(D2C)commerce:Indiahaswitnessedamassivescale-upofonline-firstbrandsacrosscategories.Thesebrandshavegarneredmorethan$2billioninfundingbetweenfiscalyears2015and2021.

–Quickcommerce:Q-commerce,arecentdisruptionglobally,hasgainedinterestinIndia.IndianQ-commerceplayersraisedmorethan$3billioninfundinguptoJune2022.However,long-termsustainabilityofthemodel(especially<15-minutemodel)isunproven,especiallyintheabsenceofdeliveryand/orconveniencefees.

Tech-ledinnovationwilltakecentrestageinPhase3.0ofe-retailgrowth.Playersarealreadyutilisingtechnologytodeliveranupgradedcustomerexperiencetoshoppers.Notableexamplesincludevoice,vernacular,andimage-basedsearch;augmented/virtualreality(AR/VR)and

AI-basedproductdemos;andvirtualshopfronts.Eachinnovationcaterstodistinctcustomermicro-segments.Forexample,vernacularsearchiskeyforshoppersfromsmallercities(70%ofvernacularshoppersarefromtier-3orsmallercities),whereasAR-basedvisualisationiskeyfor

shoppersinmetroareas(60%ofusersofFlipkart’scamerafeaturearefrommetroortier-1cities).Phase3.0ofIndia’se-retailevolutionwillhaveprofoundimplicationsforplatformsandbrandsalike.

Flipkart|Bain&Company,Inc.

15

Enablement

HowIndiaShopsOnline2022

Figure12:India’se-retailmarkethasevolvedandmaturedoverthepastdecade

1.0

(Cautiousearlyadoption)

2.0

(Massification)

3.0

(Massificationandincreasingstickiness)

Pre2015

2015–2020

2020onward

Shoppers

Geography/

affluence/

age

•Primarilymetro/tier-1cities

•Upperincome

•Typicallymiddle-aged(>25yearsold)

•Significantexpansionintotier-2andbeyond

•Upperandupper-middleincome

•EmergenceofGenZshoppers(<25yearsold)

•Greaterspendsinmetro/tier-1;deeperpenetrationintotier-3andbeyond

•Upper,upper-middle,andlower-middleincome

•GenZtogainspendingpowerwithmaturity

Business

model

Categories/horizontalvs.verticalreliance

Operating

model

•Horizontals—limitedcategories(mobiles,electronicsconstituted>75%GMV)

•Emergenceofverticalplayersinfashion,furniture,pharma(lowscale)

•Horizontals—cross-categoryexpansion(mobiles,electronicsdroppedto<50%ofGMV;generalmerchandise,grocery,witnessedgrowthinGMV)

•Scale-upofverticalplayers(especiallyfashion,beauty,grocery,pharma)to

10%–15%share

•Horizontalsandscaleverticalplayers—greatersalienceofhigh-frequencycategories(grocery,generalmerchandi