Indian digital economy in a nutshell

By 2030, Internet users will be more than 1.3 billion, and 61% of internet penetration in India. There will be an increase of 44 % in internet users from 2022 to 2030. The cost of the internet in India is $0.68. Users spent 4.7 average hours on mobile per day and did transactions over 305 million in India. As of May 2022, the total no of UPI transactions is 98 billion and the total value of UPI transactions is $2.1 trillion. The estimated number of rural internet users is more than 373 million in 2022.

Indian startup economy:

Indian startups have been launched 57k to date, and there are 4.4k funded startups in India. These startups have increased their funding by $127 million between 2014 to May 2022. There are 102 Indian startups are in the Unicorn club. 1245 investors who have been funding in Q1, 2022 participated in Startups. The combined valuation of Indian Startups is $450 billion. Between 2014 to Q1 2022, 1021 M&A deals are recorded. There are 18 Indian Internet companies are listed to date. 

The Indian Ecommerce Market:

  • Market size and growth:

The estimated ecommerce market opportunity will be $400 billion, by 2030. From 2022 to 2030, the estimated CAGR of the Ecommerce market will be 19%. There are 5127 active ecommerce startups in India.

  • Fundraising activity:

$29 billion of funding has been increased between 2014 and March 2022. There are 627 funded ecommerce startups in India and the number of M&A is 150 in the Ecommerce sector from 2014 to Q1 2022.

  • Unicorns and Soonicorns:

There are 23 ecommerce unicorns, and 15 ecommerce soonicorns in India. The ecommerce subsector with the highest number of unicorns is the marketplace.

key statistics of the Indian Ecommerce Market:

  • In 2022, the number of internet users is 932 million.
  • The number of online shoppers in FY2022 is 128 million.
  • There is the penetration of smartphones is 61%.
  • The average mobile data consumption monthly per user is 17GB.
  • In 2022, the World’s rank in cross Border Ecommerce Growth is 9.
  • Under the Automatic Route, FDI in the B2B Ecommerce & Marketplace model of Ecommerce is 100%.
  • Compared to 2020, there is an increase in the GMV(Gross Merchandise Value) of generated sales during the festive season 2021 is 23%.

India’s ecommerce market will exceed $400 billion by 2030. It states that from 2022 to 2030, the country’s ecommerce market is estimated to rise at a CAGR of 19%. There will be some online shoppers increased to 350 million by 2025 and they will be growing at a CAGR of 28.5 % from FY2020 to FY2025.

Factors to lead ecommerce growth:

  • Increase in digital infrastructure:

With an internet penetration rate of 61%, India is the second largest internet market in the world. The highest growth in mobile broadband data usage had been seen by the country in 2021. India also gets first place on the global list with a monthly data consumption of 12 GB per user. 

  • Support from the government:

The Indian government recently launched ONDC(Open Network for Digital Commerce). It permits all buyers and sellers to transact seamlessly on any of the platforms where they are registered. This project went live in five cities, adding Delhi-NCR, Bengaluru, Bhopal, Shillong, and Coimbatore.

  • Increase of D2C model:

After the pandemic, the Direct-to-Customer model has increased traction in India. The country is home to more than 50000 digital-first brands, and the estimated market opportunity is to cross $100billion by 2025. Compared to the previous year, funding in the D2C startup space grew by more than 1140% in 2021.

  • Increased demand across tier2 & tier3 cities:

During the covid 19, ecommerce sales increased in India’s tier2 and tier3 cities. They saw a 46% increase in Q4 2020 from 32% in Q3 2019, surpassing the Tier1 cities.

  • Faster growth in ecommerce funding:

Between 2014 and Q1 2022, Indian ecommerce startups increased by around $29billion and secured a maximum of $10.6 billion in 2021. Ecommerce saw a rapid rise in demand, as the pandemic went the shift towards online shopping for safety and convenience, multiplying investor interest in this space.

Ecommerce funding Trend in Q1 2022:

Ecommerce startups bagged the biggest funding rounds in Q1 2022 and also bagged $29 billion in funding from 2014 to Q1 2022. Total funding of $1.9billion increased by ecommerce Startups during Q1 2022 and there are 94 funded ecommerce startups in India in Q1 2022. There is $25.3million of Average investment in ecommerce startups in Q1 2022. Bengaluru was the Top Startup hub for ecommerce funding in Q1 2022. Ecommerce funding’s average ticket size is $25million in Q1 2022. That means the average ticket size in ecommerce startups surged by 21%, compared to the previous year. Moreover, there is a 3x growth in ecommerce funding in Q1 2022 compared to Q1 2021. In Q1 2022, B2B ecommerce turned out to be the most-funded ecommerce sub-sector. In Ecommerce funding deals in Q1 2022, there is around 143% of growth, compared to Q1 2021. In Q12022, D2C keeps the trend and bagged maximum funding deals among the ecommerce sub-sector. Bridge funding caught the highest 6YoY peak and the highest YoY surge deal in Q1 2022 compared to Q1 2021. There are ecommerce M&As in 2022 to overrun M&A deals in 2021.

Ecommerce Unicorns in India: Revenue analysis

  1. Total revenue attained by ecommerce unicorns is $7.4billion in FY21 compared to $5.8billion in FY20.
  2. total expenditure recorded by ecommerce unicorns is $7.9billion in FY21 compared to $6.6billion in the last year.
  3. As opposed to 20.7% in total expenditure, 26.1% surge in total revenue.

Ecommerce Unicorns in India: Profitability analysis

  1. In FY21, 30% of ecommerce unicorns in India were EBIDTA positive.
  2. In FY21, the Median monthly burn rate of Indian ecommerce unicorns is $6.4million as compared to $3.1million in FY20.
  3. The median EBITDA of Indian unicorns is -$7.0million in FY21, a 22% increase from a negative $9.1million in FY20. It indicates that among ecommerce unicorns profitability remains a question, although the aggregate value of losses has decreased. 

ONDC(Open Network for Digital Commerce) :

ONDC is the next interruption in Indian ecommerce. 

  • What is ONDC?

ONDC is an open-source ecommerce platform by the government that enables all the buyers and sellers to transact on any of the platforms where they are registered.

  • Who is it for?

      • The main goal of ONDC is to bring sellers, consumers, and logistic providers together on one platform.
  • Benefits:

  • The goal is to democratize the ecommerce industry in India.
  • bring dynamic pricing and optimum inventory management.
  • Enhance ease of business doing.
  • Current Status:

      • ONDC live in 5 cities – Delhi NCR, Bengaluru, Bhopal, Shillong, and Coimbatore with 80 industries currently working with the platform and at different stages of integration.
  • Impact on the industry:

  • ONDC aims to curb the unwarranted control of e-commerce giants- Amazon, and Flipkart.

ONDC is anticipated to digitalize the whole e-commerce value chain, standardize operations, encourage the addition of suppliers, aid in efficiency in logistics, and augment value for customers. 

Present Ecommerce Structure vs ONDC framework

Currently, buyers need to register and log separately into each marketplace. The search is limited to products listed within that marketplace. Like logistics, time of delivery, and delivery cost are decided by the marketplace from where the purchase is made.

ONDC is not an app or a platform. It acts like a bridge that connects the various entities in the ecommerce ecosystem together. The entrance of ONDC will be via the banking/payment apps. For example, it is similar to the banks or payment platforms like Paytm, PhonePe, GPay, etc. The banks, payment apps, ecommerce entities, retailers, sellers, and logistics providers will have to register on ONDC, so only they can able to provide their services and become a part of the network.

Effect of reviews on Online Shoppers:

Online shoppers buy the product based on the reviews mentioned on the ecommerce site. So, online shoppers got the wrong information with paid, unverified, and incentivized reviews. This makes customers take a biased purchase decisions. Recognizing genuine reviews was the big challenge faced by online shoppers. 

After studying the current mechanism being followed by ecommerce entities in India and best practices available globally, on May 28, 2022, the customer affairs ministry government announced that the department of Consumer affairs(DoCA) will develop a review framework. To display fairly and transparently, the government also asked the ecommerce players to reveal the mechanism to choose the “most relevant reviews”. 

The government’s fake review framework will help the customers to take their fair purchase decision and break any malpractices going on in the ecommerce platforms that influence the customer’s buying decisions.

Marketplace vs Online shoppers:

Customers’ perspective varies in different marketplaces. In the fashion marketplace, product quality is the main thing for online shoppers. In the Automobile marketplace, the User interface is a key delighter for online shoppers. App experience, delivery, and shipping are the major delighters for online shoppers on the kidswear marketplace.

Challenge in the Indian ecommerce market:

  • Profitability remains a question:

In the Indian Startups ecosystem, while ecommerce is the sector with the most unicorns, it is noticed that only 30% of unicorns are profitable. Due to the discount growth-led models followed by the players, the high cost of reverse logistics home borne by the players, and high infrastructure cost, it can be said the high cost of customer acquisition.

  • COD(Cash On Delivery) is still the preferred Payment mode:

In 2020, around 65% of all ecommerce payments were done on COD. other than that, the ecommerce orders of around 50% in metro areas were paid through cash. More number of orders canceled, ordered for exchange or returns, increases the unwanted reverse logistics cost for the ecommerce players.

  • Increasing customer expectations:

The expectation of ecommerce shoppers has risen with the advent of fast delivery in quick commerce. They look forward to availing of faster and flexible delivery that makes pressure on the ecommerce players to meet these expectations.

  • Making Customer’s Loyalty:

Keep giving a discount for the orders to the shoppers that are difficult for them for retaining customers in price sensitive market like India. So, Building customer loyalty remains a challenge.

Emerging trends in India

  • Exposure to Voice-based search in native languages:

With the feature of voice-based search, the experience of online shopping is easy. this feature has the facility to recognize vernacular languages since many Indian shoppers can’t speak English. This trend enhances the overall user experience for online shopping.

  • Customization of the product and offers:

Ecommerce companies have started offering customized recommendations and products since they have access to consumer demographics, purchase patterns, and browsing history to improve their customer engagement and enhance the shopping experience.

  • D2C brands planning:

D2C brands like Leaf Studio and Rage Coffee have plans to incursion into the metaverse. The idea is to sell the user’s identity that is going direct-to-avatar which presents big branding and monetization opportunities. As brands bet on the future virtual world, the direct-to-avatar model is expected to launch.

  • ONDC: 

It is the game changer in ecommerce. With ONDC in India, the government enters into the ecommerce ecosystem focusing to crack the ecommerce giants’ dominance and offering the chance to bring sellers, consumers, and logistic providers together in one platform. It allows dynamic pricing and optimum inventory management.


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