India's non-metropolitan regions are showing a considerable presence in the race for online retail, suggests a new report by e-commerce focused SaaS platform Unicommerce. It has pegged e-commerce demand share of consumers based in Tier II and beyond cities at two-thirds, while traditional metros contribute only 34 percent of overall online retail.
The impact report on trends in the e-commerce industry, said that in the last half-decade, e-commerce companies have been able to establish their niche, especially in Tier II and Tier III cities. With demand growing more so than ever, the Indian e-commerce industry is banking heavily on the growth of new consumers based out of Tier II and beyond cities of India.
Hinterland demand for e-retail grows
In a strong show of non-metro demand, online shoppers annually in Tier-II and beyond cities and rural areas stood at around 50 million in 2018, this was expected to grow to approximately 170 million in 2023. The share of unique shoppers from Tier-II cities and beyond will be 1.6X of those in the Tier I cities. Rise of social commerce, vernacular language content and improved last-mile delivery will further drive e-commerce growth in Tier II and beyond regions, shares the report.
According to the platform, fashion apparel is the most popular category in Tier III cities and it constitutes over 50 percent of Tier III consumer demand as compared to 44 percent in the previous year. Historically, most marketplaces and brands have focussed on traditional metros, but this is fast changing. Though traditional metro cities have seen higher growth than the rest of India in order of volume, this trend has reversed post Covid-19.
Notably, Delhi NCR, Maharashtra, and Karnataka make up for a combined 65 percent of overall India's e-commerce volume.
Post-Covid recovery goes strong
The report showed that fashion and accessories, consumer electronics - particularly smartphone - and beauty and wellness industries have shown a massive order volume growth, pre-Covid. For the post-Covid era, the report claims that overall e-commerce has not just recovered but witnessed an order-volume growth of 17 percent as of June 2020 - showing a significant thriving period for online shopping in India.
"The consumer buying patterns and preferences have changed significantly with categories like health and pharma, FMCG and agriculture seeing a surge and exponential growth, with the rise number of first-time online shoppers.
"After e-commerce resumed operations post Covid-19, the return rate has seen a dip of 10-30 percent depending on the category. The reduced return can be attributed to the new safety norms, increasing demand for essential products, which are generally non-returnable. However, it will be interesting to see if the trend of lower returns continues in the long term," Unicommerce said in the new report.
Brand websites drive e-commerce
As opposed to buying from a select e-commerce giant pool, there is an increasing trend of consumers buying directly from brands' websites, the report says. Retail brands are now strengthening their online capabilities and opting for different approaches to connect with consumers.
In the last one year, there has been a considerable growth of 65 percent for brands developing their own website, which led to an increase in self-shipped orders. However, the percentage of self-shipped orders declined from 35 percent in Feb 2020 to 30 percent in June 2020. The decline in self-shipped orders can be attributed to brands trusting marketplace logistics due to better service levels and lower unpredictability during current uncertain times.
