E-commerce volumes subdued in 2022: report

Consumer demand is expected to remain subdued in the near future, given high inflation, unemployment in urban organised sector and falling real wages in rural areas.

Live Mint
Updated27 Feb 2023
In the December quarter, e-commerce order volumes for categories such as groceries, appliances, general merchandise, mobiles, among others, reported a decline. (Photo: Getty Images/iStock)
In the December quarter, e-commerce order volumes for categories such as groceries, appliances, general merchandise, mobiles, among others, reported a decline. (Photo: Getty Images/iStock)

New Delhi: Growth in e-commerce slowed down in calendar year 2022 after seeing a spike in the months following the lockdown. Return to markets and malls, along with high inflation prompted consumers to go easy on buying everything online.

“Growth in e-commerce during the pandemic, apart from a few minor dips, remained relatively secular due to the consumer shift towards digital channels. However, the subsequent slowdown in consumer demand led to order volumes for e-commerce being subdued in CY2022. The impact has been slightly lower compared to that on the FMCG player, as e-commerce is less reliant on price-elastic rural demand,” consulting firm Redseer said in a note on Monday.

It expects consumer demand to remain subdued in the near future, given high inflation, unemployment in urban organised sector and falling real wages in rural areas.

Inflation, in general, has also led to shrinking consumer demand for a variety of products, and this is especially true for consumers at the lower end of the income bracket who are either switching to cheaper products or buying smaller packs.

In the December quarter, e-commerce order volumes for categories such as groceries, appliances, general merchandise, mobiles, among others, reported a decline.

Meanwhile, a slowdown in overall demand is set to hurt startups that are staring at a funding winter.

“This comes at a difficult time for startups. They currently have limited ability to drive growth through discounts and other levers, which worked well during an easier funding environment. Therefore, startups must focus on efficient unit economics and improving profitability by sticking to their core offerings,” the note said.

Analysts at Redseer said that startups focussed on “Bharat” need to look at revamping their store-keeping unit strategy to fit the tighter wallets of mass-market consumers. The second strategy is to double down on the premium categories, which have lower price elasticity and have performed well against market pressures across sectors, they said.

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