Demand from Tier 2, Tier 3 Cities Skyrocketed, More Brands Went Online- How Indian E-commerce Flourished During Pandemic

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August 25, 2020

Ever since consumers are restricted to their homes due to the Covid-19 triggered lockdown, there has been virtually zero footfall to malls and shopping complexes. To meet regular demands, consumers are now frequently opting for online modes of shopping. Reports suggest that the order volumes are so massive that it surged the past numbers recorded during the same time last year.

To cater to the booming demand, several brands established their standalone websites. Contrary to expectations, most of the demand stemmed from tier-II, tier-III cities and beyond.

The e-commerce industry in India registered a 17 per cent increase in order volume as of June 2020, when compared to the pre-lockdown period, stated the annual report by Unicommerce, an e-commerce software platform.

The sectors that stood out were electronics and home appliances, fashion and accessories, health and pharma, and fast-moving consumer goods (FMCG), with an average growth in sales of 133 per cent. The report further stated that tier-III cities saw the fastest growth at 53 per cent while the top five tier-III cities contributed 22 per cent of the total volume.

“Though traditional metro cities have seen higher growth than the rest of India in order of volume, this trend has reversed post-Covid-19. The rest of India witnessed a growth of over 31 per cent, which was primarily contributed by growth in tier III,” said the report. Additionally, tier-II and beyond cities contributed close to 66 per cent of the total online consumer demand in India.

In the pre-Covid period, sectors which showed growth were beauty and wellness — with an order volume growth of 130 per cent — followed by FMCG and agriculture, and health and pharma.

Another consumer trend which saw growth was- consumers buying directly from brands’ websites. In the last one year, there has been 65 per cent growth of brands developing their own website, which led to an increase in self-shipped orders.

The report also stated that the number of consumers shopping directly from the brand’s website is increasing at a much faster pace than marketplaces. Brand websites have witnessed 88 per cent order volume growth as compared to 32 per cent order volume growth on marketplaces

Managing returns is an integral part of running an e-commerce business. The total percentage returns saw a decline of 13 per cent as compared to last year.

“As the world is grappling with the effects of Covid-19, the e-commerce industry in India has seen a major boost since the beginning of this year. With changing consumer buying patterns and preferences, a rise of new first time online users, increased focus on digitisation by retailers, brands opting for D2C model etc, we are confident the e-commerce industry will emerge as the most promising market across the globe with tremendous growth potential in the future,” said Kapil Makhija, CEO, Unicommerce.

According to a report by credit card bill payment platform CRED, e-commerce spends surpassed pre-Covid-19 levels after the lockdown across Delhi, Mumbai and Bengaluru as more individuals opted to shop online for their discretionary and non-discretionary spends.

The report is based on an analysis of credit card spending patterns of over three million members across the three cities. The data took February 2020 spending as a baseline and compared it to spends in subsequent months under which the lockdown and unlock time periods fall, said the report.

CRED said there were two topline insights gathered from the study. The study was done to understand larger trends reflected in spending behaviour of affluent consumers pre, during and post the lockdown.

However, more individuals opted to shop online for their discretionary and non-discretionary spends during the lockdown but they have continued the shopping trend after the lockdown as well. This indicates a larger behavioural trend, the report added.

Sharp spike was recorded in online grocery and e-commerce surpassing even pre-COVID-19 levels, while spending on physical grocery and shopping fell substantially. Moreover, online searches, for “pharmacy near me” increased by 58 per cent and “grocery delivery near me” spiked unprecedentedly by 550 per cent.

According to a report by the National Retail Federation in India, 9 out of every 10 consumers have changed their traditional shopping habits, and more than 50 per cent of them have ordered products online that they would have normally purchased at a store.

A study by Facebook and Boston Consulting Group said that India displayed the highest surge in preference for e-commerce, amongst other top nations such as China, Brazil, Indonesia, Thailand and the Philippines.

However, there are challenges that the e-commerce sector is facing. News18 has earlier reported that sellers on e-commerce platforms in India have been struggling for the last month trying to find ‘country of origin’ for their products. The new rule has now started to incur losses for them as e-tailers are not allowing the listing of products that do not have the tag mentioning its origin.

The Consumer Protection Act, 2019, which came into force on July 20, 2020, has brought in a new regulatory framework, mandating online platforms to display the country of origin of items sold, where a product is made or assembled.

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Demand from Tier 2, Tier 3 Cities Skyrocketed, More Brands Went Online- How Indian E-commerce Flourished During Pandemic

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