The growing number of value-conscious online shoppers is reshaping India’s e-commerce landscape. While the 2010s have been about getting affluent users from metros and tier 1 cities to shop online, the 2020s are about the rise of mid to low-income, value-conscious users from urban areas, tier 2-4 cities and from rural India.
Buyers from this cohort focus on finding affordable products that meet their needs of desirable quality, durability, and trendiness. The distinctive shopping behaviors and needs of these consumers have led to the rise of value e-commerce – differentiated business models optimized to serve the needs of value-conscious online customers.
The rise of value e-commerce
Currently estimated at $4Bn, value e-commerce is expected to see fast growth at 26 percent CAGR and will reach $40 Bn by 2030. The new report, “Value e-commerce: The next big leap in India’s retail market”, by global consulting firm Kearney focuses on what is driving growth for value e-commerce in India. E-commerce in India is evolving rapidly, led in large part by the huge rise in the number of Internet users and active online shoppers. India is expected to have 1.1 Bn Internet users by 2026 (up from 600 Mn in 2019) and 350 Mn active online shoppers (up from 120 Mn in 2019).
The journey of the value buyers toward online shopping has created a large and growing value-focused opportunity for India’s e-commerce sector – one that is poised to grow 10X in 10 years. The Kearney report also focuses on how various e-commerce companies in India are moulding their businesses around the needs of the value-conscious segment to lead this USD40 Bn opportunity.
The rise of India-2 is driving the growth of value e-commerce in India; Gen Z will accelerate this over the next five years
India-2 comprising of aspiring & mass households (less than 10 LPA) in tier 2-4 cities and rural areas accounts for more than 80 percent of India’s population and about 70 percent of India’s value lifestyle retail demand. Today this segment accounts for only 16 percent of value e-commerce demand because of less access to the Internet and a lack of trust, leading to resistance to online shopping.
However, consumers’ resistance to online buying, driven by the lack of trust and a desire to look at and feel the items, has begun to recede, aided by online buying during the pandemic.
With an increase in overall household income and relatively stable levels of savings, this segment is expected to spend more on the value lifestyle segment.
The report expects that this group of consumers will account for 38 percent of value e-commerce demand by 2026 and nearly 50 percent of value e-commerce demand by 2030.
The rise of the value-conscious shoppers from India-2 is expected to be one of key drivers of value e-commerce growth in India. The trend will be led majorly by young people over the next five years as Gen Z joins millennials as independent shoppers, accelerating internet adoption and online buying, prompted also by a lack of adequate brick-and-mortar options.
By 2030, 19% of value shoppers will be served online via value e-commerce
The value lifestyle retail market which caters to these value-conscious users is expected to grow from $90 Bn in 2019 to $215 Bn by 2030. This includes categories like apparel, footwear, fashion accessories, cosmetics, small appliances, home and living.
While this market is growing fast, it is also rapidly going online. Today only 4% of this demand is served online through value e-commerce. By 2030, 19% of this demand will be served online through value e-commerce.
While a large part of value e-commerce growth will come for mid to low income households, the affluent households are also avid value shoppers online, especially in Tier 2-4 cities and rural markets, says the report.
What makes online value buyers different?
A 2021 survey done by Kearney for the report shares:
Budget-oriented buying: While almost all value lifestyle consumers have a budget in mind, 62 percent also adhere to it, spending a lot of time finding and evaluating products before they buy them.
Active discount hunting: Nearly 87 percent of value buyers actively look for discounts, often purchasing products with the biggest discount. Digitally savvy shoppers more than three product evaluations before making a purchase.
Brand-agnostic: About 68 percent of the value lifestyle consumers in the Kearney survey were brand-agnostic and were focused on getting the best quality in their preferred price range and were willing to experiment across a preferred basket of brands.
Aspirational mindset: 70% of all value lifestyle consumers surveyed make purchases for aspirational needs, choosing products that are desirable by others and help improve their self-image, particularly among younger consumers aged 18 to 35.
Highly influenced by friends, family, and social media: 75 percent of value lifestyle consumers are strongly influenced by friends and family—a trend that holds across age groups. Meanwhile, 72 percent of value lifestyle consumer segments who are younger than 35 trust social media influencers.
What are Indian companies doing to capture the $40Bn value e-commerce opportunity?
The report incorporates a case study that highlights how Snapdeal has reinvented its positioning in the e-commerce space by focusing entirely on value e-commerce. The case study covers Snapdeal’s success with creating good quality assortment at sharp price points, which is brought to life by personalised recommendations using technology and analytics.
The report also highlights how companies like Nykaa, Lenskart have expanded their offline presence to integrate new consumer touch points. The report also covers the efforts of certain modern format value retailers like V-Mart to expand their e-commerce channels.