According to estimates, Indian ecommerce will reach $112 Billion GMV by FY25, growing at a 29% CAGR over FY20-25E. As per Vumonic Datalabs, nearly 50% of volume is generated by Grocery and Personal Care categories. This is mainly due to the large basket size for Grocery & Personal care vs. other categories. However, the overall value contribution of these categories is only ~10%.
It is well-established that the high growth in transaction volumes is currently coming from Tier 2 & 3 cities. According to our data, Grocery and Personal care, the transaction volume in Tier 2 & 3 markets combined is equal to the volume from Tier 1 cities.
Value-wise, Online Grocery and Personal Care sales is the 4th largest contributor to overall ecommerce value sales. We analysed more than 300K Grocery and Personal Care items sold on these platforms from the period of April to Sept 2021, and it is interesting to note that Flipkart has pressed on advantage in Tier 3 markets compared to BigBasket. Overall, Big Basket seems unassailable in Tier 1 & 2 markets.
Tier 3 is a raging battleground in this space, as there is a large untapped market. However, the challenges are equally acute. As there are many cities to cover, the traditional supply chain needs to be reinvented to maintain leadership in tier 3 markets. According to our estimates, ecommerce transactions are happening in more than 350 Tier 3 cities.
Flipkart has gained strategic advantage in lower tier markets with higher marketing spends, and better discounts. Nykaa, Purplle, and Snapdeal are also platforms who are capturing the imagination of India’s Tier 2 & 3 markets.
Keep watching this space for more interesting trends and insights on Indian ecommerce and online space.
Vumonic Datalabs is a global consumer intelligence platform. We provide high quality, deterministically linked, large structured data that can be used to derive deep consumer, business and market insights. Our proprietary data pipelines deliver unbiased actual transaction data collected in a privacy secure manner via large global panels.