Fashion and apparel is set to upstage mobile devices as the biggest e-commerce category by 2025 in India.
- The prediction has been made in the report, Digitizing Consumers in India: Future of Indian ConsumerTech — Challenges and Opportunities, published earlier this week by consulting form Boston Consulting Group (BCG) and Matrix Partners India.
- The fashion and apparel segment is expected to constitute 25% of online retail in 2025, growing at a CAGR of 27-30% between 2021 and 2025. The overall online retail market is expected to be between $140 billion and $160 billion that year.
- This segment constituted 27% of the market in 2015, when the market was worth $13 billion.
- The market share of the mobile devices segment is expected to drop from 35% in 2015 to 23% in 2025, growing at a CAGR of 15-17%.
What’s Been Changing: The Indian economy, the report says, continues to show sustained growth, with increasing affluence and discretionary spending.
- The COVID-19 pandemic accelerated digital penetration by 12–24 months across different sectors, thereby boosting the adoption of e-commerce and reaching a total of 350–400 million online shoppers by 2025.
- The Indian ConsumerTech space has seen large value creation with $250 billion in valuation and over 40 unicorns as of December 2022.
- As India’s ConsumerTech ecosystem matures with 4K+ deals and $54 billion funds flow in the last five years, the study expects there would be sustained growth in the next decade as key enablers fall into place across digital payments, physical infrastructure and logistics, and internet data connectivity.
- This, the report says, is further bolstered by a deepening market with 630 million internet users and 98 million digital natives in 2022, setting a robust platform for multiple large ConsumerTech companies to be built.
- The study sees relatively high penetration and maturity of ConsumerTech in categories such as electronics, appliances, fashion and apparel.
- The next wave of growth is likely to be driven by beauty and personal care, food & beverages, FMCG, and furniture and décor.
The Driving Factors Ahead: The report has identified some key factors that would drive growth:
- Democratisation of online commerce with a large proportion of new shoppers being 35+ years old, women and from Tier 2+ cities.
- Increasing relevance of omni-channel with 6–8X growth in digitally influenced retail spending, reaching $207 million in 2021 from $24.3 million six years ago.
- Around 1.8x increase in time spent online by consumers on social media and photo/video apps in the last three years, leading to these channels becoming important for e-commerce with the emergence of discovery led shopping and social commerce.
- Marketplaces are overtaking search engines as new search sites with 35–40% consumers choosing marketplaces for searches in select user categories, such as electronics, fashion, mobile, food & FMCG and beauty and personal care.
- Consumers are seeking quicker gratification with shorter delivery options, leading to the emergence of Q-commerce, which has rapidly increased to 25–30% of the overall online grocery market.
- New commerce models such as assisted and conversational commerce, influencer commerce, live/video commerce and group buying could provide an impetus to existing and new shoppers.
- Shift in consumer preferences towards healthier lifestyle choices, sustainability and re-commerce.
- Rise of emerging technologies such as generative AI could have multiple potential applications in e-commerce (e.g., automating product descriptions, personalized marketing content, assortment planning etc.); ONDC [Open Network for Digital Commerce] could provide a further fillip to e-commerce penetration.
