India’s online retail opens up $250 billion market for digital-focused brands: Redeemer

India’s online retail paved the way for the first digital brands, unlocking a $250 billion market opportunity, according to a new report by Bengaluru-based consultancy and research firm, RedSeer. This follows new demand from retail channels like social and video commerce that is revolutionizing the industry, the report says.

According to the report, online retailing has seen sustained growth during the pandemic and has proven to be a lifeline, especially for smaller towns. “In fact, the GMV (gross merchandise value) of e-commerce in India reached $53 billion in CY21, demonstrating post-COVID acceleration. Moreover, Indian e-commerce has shown impressive quarterly growth in 2021 while that other global players have struggled to maintain momentum,” he said.

“The current B2C retail landscape is changing rapidly with the emergence of new consumer behaviors and expectations. The rise of new retail channels, especially video and social commerce, is further changing how consumers shop and what they expect from brands,” said Mrigank Gutgutia, Associate Partner, RedSeer.

According to the report, India will add hundreds of millions of new online shoppers over the next few years, mainly the segment that is outside major cities, has lower incomes and does very limited shopping.

To meet their needs, social and video commerce is creating a new retail channel for an ambitious new India, which is already backed by over $1 billion in funding in 2021.

“Video commerce, powered by several models, has enormous potential in India. In India, several platforms have already started disrupting consumer shopping habits with video commerce,” the report states.

The report adds that there is a $250 billion opportunity for the first digital brands to be built on these new channels. “

With the massive creation of unicorns and upcoming unicorns in the digital brand space and an increase in IPOs, 2021 has clearly been the year of digital brands, and the same can be said for this year as well, where we we will only see an upward spiral,” argued the report.

Many of these first digital brands of the new era are agents of change, offering quality products at affordable prices that are not well served by most traditional brands. Many of them also offer truly innovative products that are changing the way we as consumers interact with brands.

Consumers have also been very receptive to these digital-focused brands. “The results further suggest that consumers are opting for these new-age brands for their quality (not just price) with a significantly high willingness to repurchase,” RedSeer said.

Several tech-focused brands, which generate $100 million in revenue, have already been created across all categories in the past few years alone, each with a unique winning playbook and one-of-a-kind business model.

“As a result, digital-centric brands find it increasingly rewarding to engage with consumers on these channels and provide them with a seamless omnichannel experience. The success of these brands will depend on how effectively they leverage these new retail channels and how they innovate on the digital front to deliver a superior omnichannel experience,” Gutgutia said.

Over the 2021-30 period, RedSeer expects many more digital first brands to scale exponentially, supported and incubated by deployment platforms that are building the next wave of digital first brands for India.

This will be made possible by the growing trend of digital-first consumers who are willing to try and adopt new brands at a faster rate than traditional consumers, he said.

“This trend is expected to lead to the rapid rise of digital-first brands, with some reaching a market capitalization similar to that of large traditional brands in India in just a few years,” the report said.

Anne G. Cash