How did the Indian online retail sales increase by 500% in the last 7 years?
7–10 years ago if we would have to purchase a T-shirt, Bag, or any other consumer good we would wait for festive occasions or Birthdays. Since the rise of smartphones and the internet, we would search for the product we want to buy on the internet to know more. For the search engine like google, we are the product and after the search, we would then start seeing the ads for the same. The ads would offer us discounts, loyalty points, free delivery and entice us with the need for the product. This would result in us falling prey to the ads and pre-pone the purchase by 1–3 months. With that thought, the next bag we would want to buy will get preponed by the 3 (Earlier bag pre-pone time)+3 = 6 months and the bag after that would get preponed by 3+3+3= 9 months. Considering that each purchase cycle is 1 year, every 4 purchase cycles we started creating an artificial demand for one more purchase cycle. (4 purchases preponing the purchase by 12 months!)
Now, this started happening for pretty much all the products we use and thus started the rise in online retail sales.
Let’s connect the dots with the below factors collectively responsible for the rise of Indian online retail growth.
1. Growth of Mobile smartphones
Before 2008 the mobile phones would primarily help us make calls and use flashlights!. Later when the smartphone came it could help you do more with the likes of the Camera, Music player, and Radio the need for smartphones started to increase. India had 6 million smartphones in 2010 and is set to have 760 million smartphone users in 2021 which’s a 12,566% increase.
Smartphones are now helping consumers not just click photos, listen to music or radio but to book cabs, order food, transfer money, and save lives! That’s pretty much all things we do and need so in a way smartphones have become our life.
2. Growth of internet data and speed
In 2010 when I got my first touchscreen smartphone it had a TATA-DOCOMO internet pack of 2 GB for one year! While being in college the use of mobile smartphones was mostly for Facebook and Googling text content. In one year I had consumed around 684 MB of data.
Cut to 2014, I started with a 1 GB per month plan to primarily consume content on YouTube and Googling content. That became insufficient within few months and I had to take a broadband connection at home. The cost of data was INR 250–270 per GB back then.
Cut to 2021, I dumped my broadband to get a fiber connection in addition to the 35 GB of data I consume per month on my smartphone for work, Video entertainment, Google, etc. With such heavy use, the cost of data today is INR 30–50 which had dropped to INR 15 in 2020.
So from 2010 to 2021 from 2 GB per year to 420 GB per year (excluding broadband), that’s a rise of 20,900% increase in the use of data.
Cheaper data and faster smartphones have only made it easier for customers to browse easily and place orders
3. Increased internet startups and foreign funding
In 2008 when Flipkart started as an e-commerce startup that was the start of Internet startups in our country, we had the liked of Naukri start even before that but 2008 started a new era for Indian startups. From 62 startups in 2008 the network has now grown to more than 50,000 startups in 2021 that is an 80,500% increase!!
I still remember pretty much in 2014 if you would order a book online it would take around a week to be delivered but in 2021 it gets delivered in 24 hours that’s a massive improvement in last-mile delivery and back infra being streamlined. This acts as a huge upside for one to reduce their efforts to get the product they want.
Startups generally have a long gestation cycle to get profitable and in order to invest in the technology and infrastructure, large international funds started investing in Indian startups in order to make it happen. Billions of dollars being pumped in Indian startups was a boost to increased online services by the startups.
Especially after 2016 when JIO launched its free data plans the internet startup's user base nearly doubles in just under 1 year. like American story many Indian independent startups are now using services such as Shopify (to host e-comm website), Razorpay (Payments platform), Dunzo (last-mile delivery) to build their own e-commerce by outsourcing the services and focussing only on the product. One such great example is Mamma Earth which recently hit $100mn in top-line revenue which gets more than 80% of its sales through online orders.
4. Change in the strategy of Indian Telecom
Since 1991 when India opened the doors to the telecon much didn’t change till 2010 then the prices of calls going down. In 2010 TATA DOCOMO made a great revolution by offering INR 1 paisa per second (Price back then was INR 1 per min as a fixed charge) disruption in telecom and that changed the game. The real twist happened when in 2016 jio overnight launched itself as a data-first telecom player to offer data plans as cheap as INR 50
The move forced other telecom carriers to position plans as per data being the primary sales proposition. The average cost of data per GB was INR 230–250 in 2014 which dropped to INR 30–50 making it much affordable to get the more than billion population of India online. This improved strategy will only help get more people to access the internet and services of internet-based companies
5. Increased consumerism due to social media
From a 5-year-old to an 85-year-old everyone is hooked on social media. Flaunting their jackets to salaries everyone has become cool on social media. That has only increased the dopamine hit we get due to validation and that has largely resulted in us making the purchase more often than we would in the past.
More social formats, thereby marketing products by creating artificial demand and giving us the dopamine hit are the biggest boost to the increased online consumerism.