The world faced the biggest pandemic in 2020. Industries across the globe are realigning their strategies and making efforts to revive from the impact of the COVID-19 crisis. Amidst all the gloom, one thing that brought us a ray of hope was the e-commerce industry which saw a significant uptick in demand during these times. As the world grows accustomed to virtual meetings, practice social distancing, and the use of masks, the year 2020 will be considered a redefining year for the e-commerce industry and consumers at large.
How they worked
A study done by Unicommerce and Kearney on e-commerce trends show that a rising number of consumers started shopping online after the lockdown was announced. E-commerce companies and etailers left no stone unturned to cover up from the losses in other channels. The last quarter of the year is always special for India's e-commerce industry with high sales volume due to the festive season. FMCG and personal care which were predominantly offline are now considering online and Direct-to-consumer platforms. The report that focused on the e-commerce growth in Q4 2020 saw the rise of Tier II and Tier III cities.
The growth story
E-commerce grew by 36% and 30% YOY in terms of volume and value respectively. Fashion and Accessories (F&A) and Electronics have been the two key segments driving e-commerce growth But now consumers are shopping across all categories including personal care, beauty and wellness. The biggest gainers were FMCG and healthcare which saw volumes grow by 95% and 46% YOY. The electronics segment witnessed 12% YOY growth in AOV in addition to 27% YOY growth in volumes and has the highest share of e-commerce value. New consumers from Tier II and Tier III cities are driving the e-commerce growth accounting for 90% YOY incremental volume and value growth.
Success in smaller cities
While Tier I cities did continue to command the lion's share of the volume, there was a focus by the e-commerce industry on Tier II and Tier III. The total contribution of Tier II and Tier III cities increased from 32% in Q4 2019 to 46% in Q4 2020. The 'Bharat vs India' was visible as the growth of Tier II and Tier III outpaced Tier I cities. This will continue to expand at a faster pace as was observed through a growth of 87% and 151% in Q4 2020 respectively.
What led to the growth?
The growth is supported by multiple factors like the rising adoption of social commerce, faster and timely deliveries, content in vernacular language, and rising adoption of digital payment coupled with greater internet penetration. The consumers in Tier III cities were the biggest shoppers of Q4 2020 with value growth of 178% in Q4 2020 from 66% in Q4 2019.
What is D2C?
The pandemic and the lockdowns gave rise to the growing trend of Direct to Consumer (D2C) with more bands launching their own websites. Brand websites have recorded a growth of 94% in Q4 2020 as compared to the same period last year, while the marketplaces saw a growth of 58% during the same time frame. Multiple trends that support the growth of D2C include the development of plug-and-play supply chain and logistics options enabling brands to compete with marketplaces for fulfilment. The popularity of D2C is expected to increase in the years to come.
Focus on supply chain
The thin margins in e-commerce and rising customer expectations for faster delivery times make it imperative for brands to set up a robust supply chain. Investment in forward and reverse supply chain capabilities with technology-led integration across channels is critical for success. Each category has its own share of supply-chain challenges and there is no one solution that fits all. Companies need to find a tailored supply-chain solution that helps them automate the processes and improve business efficiency.