Ecommerce is expected to grow three times faster than offline and by 2026, online could account for over 25% of sales in most categories, excluding grocery, a recent report by Redseer Strategy Consultants revealed. According to the report, in terms of category sales, online currently accounts for 53% mobiles, 44% electronics, 20% large and small appliances, 18% fashion, 17% beauty and personal care and 15% home and living. This shows that digital brands have been a rage over the last few years as online continues to drive retail growth, the report said.
Furthermore, the report which was launched during Redseer Consultants’ new age business summit, Ground Zero 7.0, stated that the findings reflect a 45% of incremental market growth from online, as the retail market is said to grow from $335 billion to $510 billion by CY2026. The findings further revealed that more than 50% of incremental market growth will come from online through categories such as mobiles, electronics, home and living, large and small appliances and, fashion among others.
As per the report, Digital Native Brands (DNBs) account for 40% of online sales. DNBs have been gaining share over traditional brands and have increased their share of online sales from 25% in 2018 to 40% in 2022. That means that traditional brands are playing only in 60% of the market, the report said.
In consumer electronics categories with high online penetration, DNBs are now not just digital leaders but also market leaders, the report said. It added that in the case of wearables, the category has been driven by and is dominated by online-only brands. Wearables plus hearables today are as big a category as television and will be significantly larger in the next four years, the report said.
Furthermore, the report said over the next four years, many traditional brands will have the opportunity to up their online game, or they may become victims of brands with high digital penetration sweeping the online market. Traditional players, particulalry in FMCG/fashion recognise the opportunity and the challenge, and they have been preparing to compete online. Some of their strategies include acquisitions of digital brands, launching their own digital brands targeting specific customer cohorts, and strengthening D2C capabilities while still pushing ahead with their brands and aiming to get higher shares online, the report said.
Redseer analysis of various brands on its ecommerce excellence framework suggests that large players find it difficult to use their traditional brands to compete with DNBs. A key factor is that online sales are still only a small part of their large organization. This leads to lower agility in terms of product, pricing and marketing than is required to compete online. Moreover, these brands are often broad-based and not aligned to the needs of Gen-Z and millennials, the largest online segment.