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Advent of a New Stage of India’s Digital Retail Revolution

December 6, 2021

The COVID-19 pandemic has accelerated the pace of technology becoming integrated into different aspects of our lives. The swiftness and scale of technology adoption in a developing country like India are noteworthy. This leap has the potential to lead to a post-COVID-19 advent for online retail. 

India has had a long journey in the bid to enable access to digital services and facilities for individuals. In 2015, the Digital India campaign was launched to ensure Government services are available to citizens electronically by improving online infrastructure and by increasing Internet connectivity, enabling digital empowerment. Recently, the Supreme Court of India declared access to the internet as a fundamental right emphasizing the value of digital access to individuals. 

The COVID-19 pandemic accelerated the much-needed digital transformation, especially in the retail sector in the country. While other sectors incurred heavy losses due to the pandemic, it proved to be a boon for the Indian e-commerce sector. It is reported that the Indian digital retail sector witnessed an exponential growth of 36% in the volume of online orders in the last quarter of 2020 with the market value touching $46.2 billion. So, what contributed to the digital retail revolution of India? 

Consumers more inclined towards digitalization 

India is generally known as a cash-based economy. However, this pandemic brought a paradigm shift in shopping behavior with an increased inclination of customers towards e-commerce. Consumers widely opted for digital payments for the fear of contracting the virus due to physical contact. With the support of Unified Payments Interface (UPI), India’s digital payments facilitator regulated by the Reserve Bank of India, consumers easily adapted to contactless methods of payment. Since March 2020, when COVID-19 forced the first nationwide lockdown, the volume of UPI transactions has jumped nearly 240% while the spike in value terms is over 273%. 

Greater internet penetration in semi-urban cities and rural areas is a significant contributor to the rise in digital payments. The NITI Aayog Sustainable Development Goals India Index 2020-2021 report revealed that 55% of the Indian population have an internet connection, improving from last year’s 49%. Further, with most of the population residing in rural areas, around 30 million new internet users came from rural India between March and November 2019.  

Impact of COVID-19 on e-retail 

The Indian e-retail market witnessed growth in 2021 despite the two-month national lockdown and multiple prolonged disruptions in regional pockets over the year. During the same period, India’s retail market shrunk by 5%. 

The pandemic has elevated the demand, supply and workforce complexities and ushered the new normal. Notably, the demand for online goods and products mirrored the different facets of life under the lockdown. Major players in the online grocery space like Grofers and Big Basket saw a demand surge for essential items and groceries. The sudden shift to working from home led to a spike in demand for home office essentials like furniture and consumer electronic products. Amidst the pandemic, the increasing focus on personal health and wellbeing led to an increase in demand for health and fitness products. The lockdown also barred salons and beauty parlors to operate, leading to increasing demand for personal grooming products. Apart from FMCG, e-pharmacies also saw a rise in demand during the pandemic with the implementation of e-prescriptions in healthcare services. Responding to the requirement, the government subsequently permitted the delivery of medicines through e-commerce.  

These developments are indicative that the entire retail value chain is adapting to the new normal, embracing change to survive and thrive. However, it is imperative to distinguish between changes in consumer behavior that are temporary against those changes that are here to stay to mitigate long-term risks. 

Way forward 

While the pandemic has set the ball rolling for a rapid transition towards a digital economy, the Indian market, especially the consumers still influenced by their belief in “personal touch” and traditional interaction. Hence, a hybrid model in the retail sector in the post-pandemic world is inevitable.  

With the increase in digitalization, data privacy in India remains to be an area of concern. The government needs to ensure that the Data Privacy Bill and regulations like the e-commerce policy capture the dynamic nature of this sector to respond to emerging challenges. Additionally, investment in robust digital infrastructure should be encouraged. 

On the other hand, private players and the industry should support government initiatives such as National Digital Literacy Mission in an endeavor to bridge the rural-urban and gender digital divide as well as complement this effort through independent initiatives. A collaborative approach would benefit both consumers by empowering them and the industry that would be investing in their future market. 

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