Future of e-commerce in India post pandemic covid-19

Business Management

Moksha Patel

Roll no: 60
Introduction

Retail in India, both online and offline, has been witnessing monumental changes over
the past two years. Offline modern trade grew at 20% and gained share in India’s
approximately $900 billion product commerce market.

The Indian retail market is the fourth largest in the world and is largely unorganised.
This market is on the cusp of a transformation, led by the emergence of e-retail and its
growing influence on Indian shoppers.

Covid-19 has caused an inflection in e-commerce penetration globally driven by

consumers’ need for safety and convenience and even in India, online is gaining
salience. India’s e-commerce growth story is expected to be inclusive—one that
empowers the sellers and consumers both.

In India, online channels are gaining salience

For the consumers, it will provide convenient access to a wide assortment of products
across all geographies and income segments.

For sellers (kiranas, artisans, traders and homemakers) it will provide an unprecedented
impetus, by creating an easy access to a large base of customers across the country and
keeping their stores running 24x7.
E-retail has already democratised shopping in India and will further empower sellers and
consumers both post-Covid-1

E-commerce will also benefit micro, small, and medium (MSMEs) by expanding their
scope of market reach, by overcoming geographical restrictions and competing with
larger players in the same market. The psychological fear induced by coronavirus will
lead to the digital transformation of the nearby shops and several of these are expected
to move their business online once the lockdown ends. As a result, consumers will
benefit from the wider choice of goods and services available at competitive pricing.

E-retail has already democratised the shopping landscape, with access to more than
95% of India’s pin-codes, and empowering Bharat’s small sellers while breaking go-to-
market barriers for insurgent and incumbent brands. E-retail has benefitted millions of
customers across India, exponentially increasing merchandise choice, price
transparency and augmenting access and convenience.

97% postal codes in India ordered at least 1 item online in the last year
E-retail has also empowered Bharat’s small sellers

Is E-commerce going to increase?

With the market already primed for growth and success, the nationwide lockdown in
the fight against the pandemic will augur well for the e-commerce industry, as it is
expected to push e-commerce proliferation up to Rs 7 trillion by 2023. This upsurge in
e-commerce trends may also help preserve jobs amid the employment crisis.

92 percent correspondents in the e-commerce industry believe that the transaction

volumes in most verticals will be higher than the pre-COVID levels by September 2020.
This speaks volumes about the positive growth trajectory that will be brought on in the
digital space.

The future of e-commerce is unfolding now with COVID-19 forcing the very many people
who previously relied on their street’s kirana shops and their friend’s friend shops for
non-essential items to clutter the growing user lists of e-commerce companions. So,
post COVID will these people go back to their old ways of garnering items or will the
comfort, ease and the discounts rope them into staying within the world of e-commerce
is still a question.

It is safe to assume that during and post-COVID-19, the e-Commerce sector can
outgrow its previous levels if it considers providing end-to-end shopping experience to
its customers from the first mile to the last-mile, including long-haul logistics.
However, setting up such an infrastructure can be cost-intensive. Therefore, e-
commerce players would be better off partnering with logistic players who strive for
optimal utilisation of their fleets.

The exponential growth experienced in internet infrastructure has been at the heart
of the e-commerce boom in India. One look at the increasing internet penetration
explains the rise in the retail sector that has only strengthened the foundation of e-
commerce needs. The market was further solidified by friendly government policies,
which include 100 percent foreign direct investment in B2B e-commerce.

Market size

The future of e-commerce looks bright and exciting, as a lot of new industry verticals
are hopping onto the bandwagon, making every product and service available online.
Fast-growing economies such as India will witness increased growth due to higher
internet penetration and data speeds.

Key trends
After Covid effects

1. An inflow of online shopping:

As traditional street-side business has completely shut down, people are taking
their business online. Somehow the sales in some sectors have gone up leading
to the shortage of several products. Due to the sudden declared lockdown, panic
buying of house hold products became a trend. This eventually led to shortage
on a larger scale. People are switching from malls and supermarkets to
ecommerce for everyday commodities, the sales of companies like BigBasket and
Grofers have gone up and will continue to be that way in the coming time as
well. CouponzGuru is also providing people good deals in these tough times to
make sure that the customers do not suffer

2. Efficiency and Time Saving Power is Here to Stay:

Online shopping has a benefit that you don’t have to go out to shop and waste
time; everything is delivered at your doorstep. Even small stores are giving home
delivery. In the coming time people will prefer buying online rather than from
stores.

On the other hand, quarantine has also shown the worst side of everything so
far. It has alleviated the severe time shortages that so many people have faced
in this entire time. Since people are unwilling to go out to shop as the fear of
getting sick remains constant, insufficient labor strength is still an issue. Though
online grocery stores are receiving orders on a very large scale, the manpower is
not sufficient to deliver them on time.

3. Increase in corona virus related ecommerce store:

The shopping habits and consumer behaviour is changing rapidly. To stay

competitive, businesses have started to sell what’s important presently. Some
e-commerce sellers are adding soaps, sanitizer and other hygienic products to
meet consumer demands.

4. Retailers shifting towards selling essential goods:

Since people are still buying essential commodities, a lot of retailers selling non
essentials like jewellery, clothes and foot wears have faced a huge loss. This is
likely to have a long term impact on them. So, to bear this, retailers have started
to sell essential goods. They are using technology to be back in the game. This
may seem tough but there is still a ray of hope. Since the attitude of buyers is
changing, the retail industry is also expecting a change in the nearby future.
 5. Digital transformation of local kirana shops:

These shops have played a crucial role in this tough time. We know these kirana
shops are the life blood of people. Now due to the outbreak of the virus people
are looking for alternatives so that they don’t have to be in contact with anyone.
With the kirana shops digitizing and starting to deliver online, people are finding
it even more convenient to have everything on the tips of their fingers. Local
shops are now confined to a radius of a few kilometers in which they can deliver.
They are even offering contactless deliveries along with sanitization of the goods
that you have ordered. It helps to stop the spread of the virus and the fear among
people. Digital transformation of local kirana shops has benefitted both; the
consumers and the retailers.

In the Job Market

In a bid to cut costs, many businesses have imposed pay cuts and hiring freezes in
these times of pandemic. However, some industry players are using this as an
opportunity to hire skill-rich talent across verticals. Coronavirus’ positive impact on
hiring can be largely felt across three industries – e-commerce and allied verticals,
healthcare, and gaming.

The spike in business has led to staffing firms getting more requests from e-commerce
companies to provide manpower. To cater to the increased home-delivery demand,
business owners have stepped up to hire more people amid loss of employment
concerns. Grofers has already added more than 2,000 people from other retailers,
whose stores or warehouses are not operational during the lockdown. Amazon is also
engaged in discussions with multiple companies to provide interim work opportunities
to their under-utilised manpower to service the growing demand.

Additionally, a new paradigm has opened up as companies into e-commerce, logistics,

FMCG, and e-wallets are betting high on small towns, to explore an unsaturated
consumer base in tier II and tier III cities. Recruitment is also expected to go up by 15
percent in this space to meet the requirement of sales and delivery staff.
Consumer Habits

Online businesses have doubtlessly gained momentum. Over 5,000 stores have been
added to the fleet of leading e-commerce players during the lockdown, and more will
follow. Interestingly, the consumer base is also expanding, with even senior citizens
embracing technology. That doesn’t mean brick and mortar will fade away because
malls are primarily experience centres rather than plain shopping outlets. With travel
not on the priority list for many, malls may be the only entertainment option left. A
continued coexistence of online and physical retail will be seen.

Consumers have drawn a line between want and need. As COVID-19 continues, the
impact on the e-commerce continues to fluctuate depending upon the industry. Some
of the strongest economies in the world are struggling to get back on track. While e-
commerce has proved itself essential after the outbreak of this deadly virus, there are
still some sectors of it which are trying hard to cope with the situation. Though it is
impossible to predict the full impact of corona virus on e-commerce and online growth
rates, it will depend upon the niche and the duration of future social distancing. Social-
distancing measures and business closures have significantly disrupted consumer
spending habits. While this has created a period of uncertainty for many, ecommerce
has instead been trending in a positive direction.

The buying habits that have been changing are unlikely to suddenly shift back to what
they once were, even after things “get back to normal.” Because of this, now is the
time to bet on ecommerce. Its future influence will be far greater than it has ever
been.

Bain and Co.’s consumer sentiment survey done through April shows that about 35% of
urban shoppers increased their online purchases in existing categories; 30% bought more
categories online; and 8% were first-time online buyers. Homemakers, who earlier
insisted on multiple shopping trips, shifted to WhatsApp orders to get products home-
delivered from kirana stores. There is reluctance to step outside, and increasing
salience in budget shopping.

Shift in Consumer budgets and habits

Buying online might become pricier or less convenient, we might need to rethink fast
deliveries, and our neighbourhoods may look different. Some possibilities are sketched
out to get one thinking about how consumer shopping budgets and habits could shift.

1. Mini warehouses might pop up everywhere:

If more of us are ordering online, companies might opt to open more small
package distribution hubs closer to where people live to provide faster
deliveries. But that will mean more spots where delivery trucks move in and out,
increasing traffic, noise and pollution.
 So far, we haven’t consistently planned roads, airspace and neighborhoods for
more home deliveries. But in the future, cities and towns could impose costs and
restrictions on deliveries, like congestion fees or requiring clustered deliveries
instead of allowing trucks to drive into the same housing development multiple
times a day.

Some changes might lead to higher prices for what we buy online, Ken Cassar,
an e-commerce industry consultant, told me.

2. Shortages might continue:

One of the myriad reasons we’re having trouble finding toilet paper and pasta
online is that Target and Amazon limit the quantity of products they stow in
warehouses. That saves them money when shopping behaviors are predictable,
but it leaves less flexibility when demand spikes unexpectedly.

If coronavirus hot spots pop up occasionally, it’s possible isolated product

shortages will continue. Or if e-commerce companies permanently decide to
keep more products on hand, that could increase costs for the companies — and
for us.

3. Fast delivery might cost more:

Most online shopping companies hate the cost and headaches of fast shipping,
and it’s not great for the environment either, said Sucharita Kodali, who studies
the e-commerce industry for Forrester Research.

Companies could seize this moment — when they must invest more in e-
commerce and we’re thinking about our shopping habits — to retrain us. We
might be forced to consider the cost and consequence of that heavy bottle of
laundry detergent arriving at our door from thousands of miles away.

Rest assured we have been paying for that “free” delivery of the laundry
detergent, even if the costs are hidden. Now, the cost could become more
explicit.

4. Returns might be harder:

For some items, like clothes, roughly 1 in 5 items bought online are returned.
But now because of sanitation concerns, many stores are limiting the returns
they’re accepting.
If safety fears continue, return policies may permanently become stricter. Stores
that can’t resell as much of their returned merchandise, or that must sanitize it
more thoroughly, will most likely pass their higher costs onto shoppers.
How India shops online?

Bain & Company along with Flipkart examined current e-retail consumer trends and
drew a future roadmap for the sector.

E-retail in India is expected to have 300–350M shoppers and $100–120 billion in GMV by 2025

Online searches

Searches are increasingly moving to e-retail platforms (1 in 3 product searches in India

already starts on an e-retail platform), with vernacular searches on the rise

Vernacular searches are gaining popularity

Online shopping data provides granular insights on online shopping preferences—brands
and sellers should tap into this to customise their offerings and communications for
higher returns

Shoppers browse at least 20 product pages for most categories

The Future

The online shopper landscape is rapidly changing with an increasing share of tier-2 and
smaller town consumers. E-retailers are investing across four key areas to win the next
wave of Indian shoppers:

Voice and Vernacular:

By 2021, 500 million vernacular
speakers are expected to be online,
versus 200 million English speakers—
number of voice searches on Google
has almost tripled in the last year
Visual and Video:
Video consumption in tier-2 and
smaller towns in India grew 4x in the
last year

Key Areas

Social Shopping: Ecosystems:

50+ private equity and venture
Multiple digitally-led ecosystems are
capital investments in social
emerging in India as online retailers
commerce were closed in the last five
try to tap into more customer
years. In China, e-retailers are trying
purchase occasions and win a higher
to win women shoppers in tier-3 and
share of their time and spending
tier-4 towns through social shopping

E-retailers are innovating to attract and serve the diverse Indian online shopper base
Voice and vernacular are key to win the next wave of shoppers

Visual searches & livestreams are critical to product discovery

E-retailers building ecosystems in India

The expansion of Flipkart and Amazon across categories, and Swiggy and Zomato in food
delivery in the past two years, is more than what offline players had managed in 20
years, placing India on track to “leap-frog" from traditional commerce. Vertical
specialists, such as BigBasket, Myntra and Nykaa, began to upend incumbent offline
players. And, sure enough, regulatory uncertainties kept everyone on their toes.
But in the past 50 days, the winds of change have approached gale force. Facebook’s
investment in Reliance Jio, promising seamless hyperlocal commerce, is but the most
prominent example. Offline stores DMart and Big Bazaar have scaled up delivery and
online shopping, Vishal Mega Mart and Spencer’s have partnered with Uber and Flipkart,
and multiple hyperlocal grocery plays, such as Saffola Store on Swiggy, ITC Foods on
Domino’s, 24Seven on Swiggy, have debuted. The speed of innovation has been
unprecedented and new models have unfolded in a matter of days.
Brands should evaluate their readiness across seven key levers to win online

Optimal online assortment

Right operating model

Product and supply chain execution

Kicking off the marketing flywheel

Conversation

Consumer insights feedback loop

Organisation implications
Optimal online assortment

• Range-width depending on category dynamics

• Modified pack sizes and combos for the online buyer

Right operating model

• Complementary assortment across channels/sellers

• Synergistic roles of channels (marketplace, own site)

Product and supply chain execution

• Highly rated products—good quality

• Supply chain: Fill rate, promised vs. actual delivery timeline
• Good, discreet packaging
• Low returns relative to the category

Kicking off the marketing flywheel

• Marketing mix optimisation and content hyper-personalisation (including

vernacular)
• Inorganic/paid visibility
• Organic visibility—content, search engine optimisation, conversion
• Role of influencers and digital-specific advertisements in improving engagement

Conversion

• Descriptive product display pages with the right mix of images, videos and pithy
product summaries
• Appropriate pricing

Consumer insights feedback loop

• Leverage e-retail’s granular consumer data and ability to do rapid prototyping,

A/B testing, etc. to accelerate new product launches/improvements and
improve targeting and go-to-market efficiencies

Organisation implications

• Coordination across digital merchandising, content, supply chain, DTC,

technology, aligned capabilities, budgets, incentives
• Agile cross-functional teams trained in winning in digital
Conclusion

As per the latest analysis report by Unicommerce, the e-commerce sector has recovered
by over 90% as compared to its pre-lockdown order volume. The report expects the
industry to recover completely by the end of this month. The recovery is driven by the
sales of electronic appliances. The sector has not just recovered its pent up volume but
also shown great improvement with over 45% growth in the overall order volume
compared to pre-lockdown levels. Another ongoing study by Mastercard suggests that
shopping in India has also shifted online as 86% of people feel that hygiene concerns are
here to stay. It said that e-commerce is on the rise with 49% of Indians planning to make
more purchases online. This will also see an increase in digital payments with 49 per
cent respondents in the country saying that they plan to use less cash in the coming
months. A large majority in India (77%) believe the shift to contactless payments is here
to stay. As communities and economies emerge from the pandemic, the new consumer
mindset sends a clear signal to merchants of all shapes and sizes that online shopping
and touch-free transactions are essential to building the business and ensuring customer
loyalty now and in the future

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