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E-commerceTrends ReportAugust 2020www.unicommerce.com

Table of ContentsForewordExecutive summaryEvolution of E-commerceSupply Chain: The Backbone of E-commerceSaaS Connecting E-commerce and Supply ChainTrends to simplify E-commerce selling I. What’s India Shopping Online?II. Rise of Hinterland Cities in IndiaIII. The Emerging Trend of Direct To ConsumerIV. E-commerce Returns: The necessary evilE-commerce in the post COVID-19 WorldI . D igitisation and a new wave of online consumer:Driving post COVID-19 e-commerce growthII. E -commerce laying foundation stone of the postpandemic WorldRoad ahead

ForewordIndia is one of the world’s most promising internet markets, with thesecond-largest internet user base globally. The massive growth ofinternet users led to the unprecedented growth of the e-commercesector in India. Today, we have consumers shopping online fromsmall towns and villages across the country, making India the fastestgrowing e-commerce market in the world.The increasing number of online shoppers presents a huge growthopportunity for e-commerce and retail companies. E-commercecompanies started leveraging multiple-fulfilment models to ensurean error-free delivery process in a country with a broken supplyinfrastructure system. Online sellers also started evolving and adopting new-age technologysolutions to meet the rising consumer demand and streamline processes for faster delivery. Thisevolution also led to the birth of multiple SaaS solutions to help companies manage inventory,warehouses, orders and every other aspect of e-commerce and retail business.While the world was looking forward to e-commerce growth in India, the business dynamicschanged globally with the breakout of COVID-19. The pandemic has changed the way peoplelive and shop, leading to a drastic change in consumer behaviour. As people are practising socialdistancing, the e-commerce industry is witnessing an important chapter with a surge in first-timeonline shoppers, and this change will provide a significant boost to the sector in the long run. Thepandemic has also helped brands discover cracks in the supply chain ecosystem and presented aunique opportunity to address these gaps.With e-commerce at its all-time high, Unicommerce is uniquely positioned to provide e-commercesupply chain technology cloud solutions to help industry players of all sizes manage their businessefficiently. Established eight years ago, Unicommerce is a market leader processing over 20% ofIndia’s e-commerce volume in the country and works with leading online players across segments.The company processes 700k order items per day, amounting to US 2.5 Bn GMV for over 10,000registered customers across India, Middle East and Southeast Asia.Unicommerce is committed towards simplifying e-commerce selling and this report is anotherstep in the same direction. The report will try to shed light on changing consumer behaviour andthe industry response to address the newly emerging e-commerce trends. It will also decode theconsumers shopping pattern and will help e-commerce players and retailers plan their businessstrategies efficiently. The report will cover insights on product delivery & return trends as well asgrowth potential across different sales channels as we prepare to enter the post COVID-19 world.By Kapil Makhija, CEO, Unicommerce

Executive SummaryIndia’s e-commerce growthIndia’s e-commerce sector grew by 20% in the last one year. The electronics segment remainsthe biggest sector with a maximum share of GMV. However, fashion and accessories is the mostpopular segment amongst consumers, with the highest percentage of order volume duringthe same period. The Beauty and Wellness segment became the fastest growing sector with130 % growth in order volume, followed by the FMCG, eyewear and Health and Pharma sectors.Rising demand from hinterland of IndiaAll leading e-commerce companies are focusing on beyond metropolitan cities. Currently, TierII and beyond cities contribute around 2/3rd of the total online consumer demand in India andthis share is expected to rise in the coming years. The aspirational young Indian consumer inthese cities is driving growth for the sector. Tier III and beyond cities witnessed 53% growth,making it the fastest-growing region.Brands going direct to consumerCompanies with strong online presence are establishing their website to develop a direct connectwith consumers and offer a great experience to its patrons. While the brands have created theirown website, the brands continue to sell on the marketplace as it still drives the majority of theorder volume. The number of consumers shopping directly from the website has witnessed agrowth of 88% as compared to 32% growth on the marketplace. The top 3 segments that haveseen an increasing penetration of D2C brands are Beauty & Wellness, Fashion & Accessoriesand FMCG & Agricultural sectors. Considering the rising number of brands establishing theirown website, the share of D2C platforms in overall e-commerce will increase significantly in thecoming years.Return orders on declineManaging returns is an integral part of running an e-commerce business. The total percentagereturns (as a percentage of forward dispatches) has seen a decline of 13% as compared to lastyear and it constitutes 17% of the overall order volume as compared to 20% in the previous4

year1. Fashion Apparel is the category with the highest returns.E-commerce in the post COVID-19 worldA pandemic hit the world, and it has exponentially changed the way we live. It has given asignificant boost to India’s e-commerce and it will be considered as a major turning pointfor the country’s e-commerce ecosystem. It’s not surprising that e-commerce has not onlyrecovered but have grown by 17% as compared to pre-lockdown order volume. The consumerbuying patterns and preferences have changed significantly, categories like health & pharmaand FMCG & agriculture have seen a surge and exponential growth, with the rise of a largenumber of first-time online users.The retail brands across the world are now strengthening online capabilities and opting fordifferent approaches to connect with consumers. We can expect to see increasing adoptionof omnichannel solutions as a result of this. There will be increasing digitisation by brandsacross multiple categories leading to the improved shopping experience for consumers. It willbe interesting to see which habits and patterns of the pandemic-life continue and how theseevolve as we step into the post COVID-19 world.1All year-on-year data points by Unicommerce are for the period of February 2019 - February 20205

E-COMMERCE GROWTH 2019-2020ORDER VOLUME GROWTH20%GMV GROWTH23%TOP 3 STATESDELHI NCRSHARE OFTIER-II ANDBEYONDCITIES INCONSUMERDEMAND67%MAHARASHTRAKARNATAKACategory with maximum returns:FASHION APPARELD2C BRANDS SAW A GROWTH OFReturns in 201920%Returns in 202017%13%*88%RETURNS DECREASED BY13% is the decrease in % returns per forward order in 2020 compared to 2019. On absolute value; returns per forward order decreased by 3%.

Evolution ofE-commerceE-commerce has transformed the waybusiness is done in India. India is thefastest-growing e-commerce market inthe world with immense growth potential.Currently, it constitutes less than 5% ofIndia’s overall retail, and it’s expected to beone of the largest e-commerce markets inthe globe in the next few years.Not so long agoIndia was introduced to the internet in1995 and a year later, India’s e‐commercejourney began with the launch of Indiamart,India’s first online B2B commerce website.Ever since its inception, the e-commercelandscape has exponentially evolved overthe last two decades. E-commerce becamemainstream post-launch of Flipkart in 2007and the subsequent launch of Snapdeal in2010. Interestingly, around the same time,BookMyShow and MakeMyTrip were gainingpopularity in another niche segment ofonline ticket booking. India adopted onlinetravel bookings before any other categoryof e-commerce. These companies, in theirown ways significantly contributed to thefirst wave in the evolution of e-commerce inIndia.By 2013, the e-commerce industry startedbooming steadily with Snapdeal and Flipkartbeing the major players and people gettingused to the idea of ordering things online.Amazon entered India in the same year andrevolutionised the dynamics of e-commerce8

completely.As the industry was evolving with bige-commerce players selling everything underthe sun, there was another emerging trendof vertical e-commerce on the horizon. Thisentailed companies focussing on sellingniche products or services. Myntra, Lenskart,Firstcry, Nykaa, Urban Ladder, Zivame, theseare some of the prime examples of verticale-commerce players. In the last decade orso, these companies have gained immensepopularity among consumers and enjoy highbrand loyalty. Today we have sector-specificniche players in almost all segments.E-commerce growth driven byhinterland consumersUntil a few years ago, e-commerce companieswere focused on targeting consumers inmetros and other developed cities. However,affordable smartphones and economicalinternet plans led to a rise in the adoption ofe-commerce by people living in Tier II andTier III cities of India. Only one-third of India’spopulation live in urban cities and rest aredistributed across the millions of towns andvillages across the country.Rural India is driving the digital revolutionin the country with 45% growth in internetpenetration in 2019 as compared to urbanIndia’s 11%. It’s projected that there will be 7002 million internet users in the country bythis year-end and out of these 150 millioninternet users will be active shoppers. Thelocal language content and video drive theinternet boom in rural India, with a 2.5 timesrise in penetration in the last four ographicThe above statistics are a testimony tothe fact that there is immense growthpotential in rural India. Every e-commercecompany is trying to get a piece of this vastunexplored market. Major e-commerceplayers like Snapdeal have developed theirstrong foothold in these cities. The twobig players Amazon and Flipkart are alsofocusing on targeting customers and sellersfrom Tier II and beyond regions of India. Thee-commerce industry is also helping artisansand small retailers to get a platform wherethey can sell their products to consumersacross the world. Most of the e-commercecompanies have launched a website in Hindiand other regional languages to attract moreconsumers and retailers on the portal. Duringthe festive season sale, most brands witnessthe maximum volume of orders from Tier IIand Tier III cities.Social commerce: a hero in themakingAs people from across the country becamehabitual of shopping online, the e-commerceindustry started adopting new business9

models to make the experience moreinteractive. In the last couple of years, socialcommerce has emerged as one of the fastestgrowing business models for online retailersin India. Social commerce is an amalgamationof the use of social media and e-commerceand its growth can be estimated with India’svast social media user base and our appetitefor e-commerce. The use of videos in socialmedia platforms such as Instagram andSnapchat is driving massive growth of socialcommerce, especially among millennials.Similarly, regional social networking platformslike ShareChat and Roposo, have developedtheir strong foothold in the niche market withits vernacular content which furthers booststhe use of social commerce.In the last half a decade, the homegrownsocial commerce players have been able toestablish their niche, especially in Tier II andTier III cities. In the past 12 months, theseplayers on-boarded over 10 million resellersand raised over 100 million in fundings.Meesho, BulbulTv, Shop101, and Mall91 aresome of the leading players in the socialcommerce domain.A recent survey revealed that India is alreadythe leading Asian market for social commerceand is projected to become a 100 billionvertical of e-commerce by 2025. One of thecritical reasons for this massive successof social commerce in India is the sentationregional connect and the role of personalreferral. Social commerce players are nowexperimenting with both marketplace andreseller models. They have been able to crackthe code to reduce customer acquisition costsand establish more trust among consumers.Leading retail brands are also creatingchatbots and leveraging technology to helpconsumers shop directly on Whatsapp.Whatsapp has a monthly active user baseof over 400 million in India and it providese-commerce companies with a platformto interact directly with consumers. Thismakes WhatsApp one of the most lucrativeplatforms for small and medium sellers. Over1mn sellers are using Whatapp for Businessin the country. In the last few years, we haveseen the emergence of companies that buildWhatsapp chatbots for retailers, which helpsthem manage a large number of orders withthe help of AI.India’s e-commerce landscape has evolveddrastically with new business models, a robustsupply chain, and a rising number of onlineconsumers in the last decade making it themost promising market across the globe withtremendous growth potential in the future.Industry reports from the pre-COVID timesestimated that the e-commerce market inIndia is expected to reach 200 billion by 2027from 38.5 billion in 2017, and the number ofonline shoppers may reach 220 million by20253.10

Supply Chain:The Backbone of E-commerceThe Beginningwell as a high investment for companies.The supply chain plays a pivotal role in thee-commerce industry. In the initial years,e-commerce companies used to rely ontraditional logistics payers for deliveringproducts. Back then, the conventionallogistics systems were primarily used byenterprises and were not designed to servethe complexities of online deliveries. As thesystems were mostly supply-driven withnegligible technology intervention, thewhole process was expensive with little orno integration with various software systemsused by different stakeholders across thesupply chain ecosystem. Therefore, thetraditional logistics system was ineffective asWe have come a long way since then, andthe e-commerce logistics industry hasevolved significantly in the last decade withmultiple business models designed to deliverproducts in a fast and cost-effective manner.Birth of third-party logisticsAs online transactions grew multi-fold,e-commerce companies realised the direneed for a robust supply chain ecosystemto manage last-mile delivery in a countrylike India, with a population of over 1billion. It became a daunting task fore-commerce companies to manage their

logistics operations and as a result, theystarted outsourcing their supply chain to3rd Party Logistics (3PL) service providers.This led to the birth of e-commerce andtechnology focussed logistic players likeDelhivery, GoJavas, EcomExpress, Ekart andXpressBees to name a few. As e-commerceevolved with new business models, thesupply chain industry has also evolved withtime to ensure a quick turnaround. In the lastfive years, there has been a large amount ofcapital inflow in the logistics sector and sometremendous technological advancements inthe operational cycle of e-commerce players.3PL companies have established their nicheand are one of the key driving factors ine-commerce growth. They constitute over28% of overall e-commerce logistics in India4.From a long cumbersome delivery processto hyperlocal delivery being the buzzword ofthe present time, the supply chain cycle wentthrough a tremendous transformation.E-commerce companies have also developedtheir in-house logistic arms which helpsthem in reducing costs and ensures morecomprehensive control over customerexperience. The in-house logistics armprovides consistent and great customerexperience and exercise control over thewhole process. The rising consumer demandis also leading to e-commerce companiesexploring new ways to ensure faster deliveryand with warehouse and logistics ecosystemcompanies being able to process orders at amuch quicker pace.Connecting India: Forward logisticsThe rising consumer demand and increasingfocus on consumer experience led to4immense pressure on the supply chainsystem of companies to be error-free andcost-effective. Consumers have becomeaccustomed to quick and same-daydelivery along with free shipping options.With a large amount of capital inflow andrising demand for e-commerce; logisticscompanies will continue to rejig businessmodels to accommodate the fast, free andconvenient delivery services that are essentialto increasing consumer demand.Today e-commerce companies have beenable to capture a huge customer base inTier II and Tier III cities of India which is nowgrowing faster than metro cities in terms ofnew users. Over 70% of India’s population livesin rural areas and e-commerce companiesare banking on the rising aspiration of theseconsumers. Companies are extensivelyinvesting in logistics and warehousingto ensure faster deliveries in the region.Consequently, the dynamics of the supplychain industry are fundamentally shiftingas logistics companies are now investing insmaller fleets of transportation vehicles thatcan deliver goods on shorter and quickerroutes with more frequent runs, needed toaccommodate a significant increase in lastmile delivery.Fulfilling the rising online shoppingappetite of IndiaAs online shopping demand soars acrossIndia, e-commerce companies startedinnovating and adopting different fulfilmentmodels depending on the nature of businessand products. While there is no perfectbusiness model that companies can f/2018/05/e-commerce-retail-logistics.pdf12

an online seller or marketplace chooses amodel that works best based on the scale ofoperations, partnerships, and required controlover supply chain operations.Two of the most popular models are the‘seller-fulfilment/dropship model’and‘marketplace-fulfilment model’. In the sellerfulfilment model, the marketplace informsthe seller about the order, assigns a courierpartner and the seller takes care of packagingand delivery. In the marketplace fulfilmentmodel, sellers share inventory with thee-commerce companies and the companytakes care of the entire order and the deliveryprocess. This model helped e-commercecompanies to have direct control over qualityand delivery time.Over the years, different aspects of the abovetwo models have evolved into a HybridFulfillment model. In this, marketplaces leasea dedicated part of the seller’s warehouseand offer them relevant technology solutionsto operate efficiently. Another model, whichis widely practised in the vertical commercesegment is the “Just In Time” model, wherethe marketplace places an order with theseller whenever there is a demand andseller sends the product to the marketplacewarehouse and company takes care of all thedeliveries.Reverse logisticsWhile all the e-commerce brands and logisticscompanies are working towards quickproduct delivery, the other important aspectof managing logistics is ensuring hassle-freereturns. Returns constitute a major part of the5logistics cost and e-commerce companieshave been consistently working to reducereturns with the help of technology andimprovement in supply chain processes.The returns can be broadly classified into twocategories: Return To Origin wherein (RTO): In this,the order is returned before reaching thecustomer or could not be delivered dueto multiple reasons like “Wrong Address”,“Couldn’t Reach Customer”, “CanceledBefore Delivery” etc.Customer Initiated Return: In this, thereturn is initiated by the consumer postdelivery and this can also be due tomultiple reasons like “Didn’t like products”,“Wrong Size”, “Quality Issues” etc.An industry report suggests that returnshipments constitute roughly 20 percentof total shipm

E-commerce in the post COVID-19 world A pandemic hit the world, and it has exponentially changed the way we live. It has given a significant boost to India’s e-commerce and it will be considered as a major turning point for the country’s e-commerce ecosystem. It’s not surprising that e-commerce has not only