Smartphones, which have long commanded the biggest pie of online sales, may soon give way to other categories like home, fashion and fast-moving consumer goods (FMCG). A recent RedSeer Consulting report says online sale of smartphones will fall to 37% by 2023 from about 50% currently.
“The share of the category (mobiles) has started to trend down as other categories like fashion, home and FMCG gain traction,” the market research firm said.
Of 3 billion smartphones across the world currently, the Indian market accounts for over 450 million, analysts at Boston Consulting Group estimate.
The RedSeer report said that in 2015 the mobiles segment was the fastest-growing category in online retail on increased penetration of smartphones and discounts provided by brands. However, having gained close to 50% market share, the segment is reaching a saturation point and sales growth in smartphones will slow down.
“With the new FDI (foreign direct investment) rules coming in and macro trends like slowing mobiles sales poised to kick in soon, we will see a further rebalancing of the category mix to non-mobile categories,” the report said.
The government’s revised FDI norms in e-commerce that came into effect from February 1 mandates e-commerce marketplace entities to not influence the selling price of goods and services directly or indirectly, thereby maintaining a level-playing field. The FDI norms state that cashback provided by group companies of marketplace entity to buyers should be fair and non-discriminatory.
Hanish Bhatia, senior analyst at Counterpoint Research, said online channels accounted for 36% of smartphone sales in India in CY2018. Bhatia stated that while the trend is likely to continue as more people join the digital umbrella and start using e-commerce services, ‘overall contribution of smartphones to the total e-commerce GMV (gross merchandise value) may decline as new categories pick up’.
Analysts at RedSeer said grocery and beauty are the fastest growing categories in online retail with increasing adoption and improvement in supply chain for perishable products. As people staying in tier-II cities take to online shopping more often, the analysts estimate growth in fashion segment to also accelerate in the coming years.
According to the Nielsen Connected Commerce Report 2018, share of e-commerce channel has grown three times within total FMCG retail sales. While global online grocery purchasing grew 15% in the last two years, leading to an estimated $70 billion additional sales in online FMCG, 98% of consumers in India, who have access to internet, have made a purchase online.
Sensing the untapped potential in e-grocery, online supermarket Grofers has launched its own brand of low-cost FMCG products to drive its second phase of growth. Rival BigBasket which sells packaged foods, fresh fruits and vegetables has expanded to the beauty segment recently.
Analysts at RedSeer said this rebalancing of the category mix in online retail will lead to more sustained growth in terms of bottom-line for e-commerce players as non-mobile categories have higher margins.
Amazon India that captures almost 80% share of the country’s e-commerce market, along with Walmart-backed Flipkart, posted an aggregate loss of $2,645 million during FY2015-18, analysts at Kotak Institutional Equities (KIE) said in a November 2018 report.
BigBasket and Grofers’ losses during the period stood at $147 million and $74 million respectively.