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Bain & Co report: Indian e-commerce sector and its small town reach is driving retail on a growth journey

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In a recent report Bain & Co has mentioned that the Indian e-retail market saw a 25 per cent growth in FY21 despite the extensive 2-month national lockdown. Even through the pandemic has wreaked havoc and brought a big pause to offline retail, online shopping clearly emerged as the winner as people, forced to remain indoors, took to ordering daily necessities online.

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According to the Bain & Co report multiple prolonged disruptions within the e-commerce universe in regional pockets were also witnessed all over the year. The report titled ‘How India Shops Online 2021’ also noted that during the same period, India’s $810-billion retail market shrunk by 5 per cent, along with a 7.3 per cent contraction in GDP. The pandemic led to a 12-month acceleration in e-retail penetration in India, taking its share to 4.6 per cent by end of FY21. This acceleration was even higher in
the top eight metro cities, where online shopping is more common: one in three people shopped online at least once last year in the top eight metro cities, the report highlighted.

While India has the third-largest online shopper base of 140 million, the market is still massively untapped and there is immediate potential to reach India’s large internet user base of approximately 625–675 million people. The e-retail market is expected to grow to $120–140 billion by FY26, increasing
at approximately 25–30 per cent per annum over the next 5 years, the report said.

Among the categories which saw growth in online sales, the report said select categories, like mobiles, electronics, appliances, saw a massive one-time spurt that then cooled off due to longer replacement cycles and recovery of offline retail. These categories did not see as substantial a jump during the
second wave over April–May 2021. However, frequent-use categories, like groceries, household, personal care, saw rapid growth and are likely to continue seeing accelerated growth post-pandemic.

On the behaviour of shoppers, the report said an e-retail visitor spends fewer than 10 minutes per visit on a platform. Brands and sellers have to cut through the clutter and have limited time to tell their story and make an impression in the minds of the consumers. Besides, one in 10 platform users adopt voice
search, and one in three new e-retail users visit through a vernacular platform interface. These features will increasingly become mainstream going ahead.

Small-town India continues to accelerate growth in India's e-retail market, with Tier-2 and smaller towns’ gross merchandise value (GMV) growing 2.5–3 times that of metro and Tier-1 cities in 2020.