Value-conscious buyers from India’s smaller cities and towns will propel the growth of Indian E-commerce.
According to a recent RedSeer report commissioned by Snapdeal, mid-income buyers from India’s 2+ cities and towns, covering more than 80% of India’s population, will triple in size in five years, from approx 78 Mn in 2021 to nearly 256 Mn by 2026.
Termed as “Emerging Shoppers”, value-conscious shoppers prefer to buy functional products over premium options.
Their purchase decisions are directed towards finding the desired quality in their preferred price range.
They spend a significant amount of time discovering, evaluating and comparing products, discounts, offers and promotional events before making purchases.
They are also less brand-sensitive as compared to their urban counterparts.
E-commerce Shopper BaseWhile the initial phase of India’s E-commerce growth was driven largely by urban households earning above Rs. 5 Lakhs per annum (now called “mature households), the next phase is being driven by the “emerging households”, with an annual income between Rs. 2-5 Lakhs.
While the emerging households reside across India including in metros and Tier 1 cities, their density is higher in Tier 2+ cities and towns.
Growing urbanisation, increased democratized access to information, declining cost of data, affordable smartphones and the government’s push towards digitization is leading to faster consumption growth, especially online, by this segment of emerging buyers.
According to the RedSeer report, in FY 21 only 8% of the value demand was served by online channels, also known as value E-commerce.
However, by FY 2026, nearly 22% of this demand will be served by value-focused E-commerce channels, while offline channels (both traditional and organised formats) will cater to the balance 78% of the demand.
Unlike many traditional E-commerce platforms that focus on catering to the widest ranges of products at all price points, Snapdeal has chosen to focus only on the value shoppers.
Its assortment, pricing and shopping journey are customised to the needs of such shoppers.
It draws more than 86% of its orders from outside the metro cities, with more than 72% of the orders flowing from buyers living in smaller cities and towns.
With an exclusive focus on value, more than 95% of the products sold on Snapdeal are priced below Rs. 1000.
Snapdeal’s full-stack value playbook includes a steady focus on quality.
It follows a six-point quality management system that seeks to improve the quality of products offered by sellers for better customer experience through multiple interventions, including analysis of feedback from customers, sample quality checks through mystery shopping, screening of products at source, and curation of assortment in partnership with sellers.
Snapdeal also runs a ‘Power Brands’ program, where it has so far built 13 brands across popular categories like apparel, fashion accessories, footwear, home and kitchen, health and wellness, personal grooming, etc.
The Power Brands are designed to serve the needs of value-conscious users who want to pay primarily for the features and functionality that they need without having to pay brand premiums.
The brands are owned by Snapdeal and licensed to third-party, quality-focused suppliers/sellers, who own and manage the inventory on their own.
The brands and the brand standards are designed by Snapdeal to help the sellers to better align with the customer expectations for product quality, latest and relevant features, trendiness, look and styling, product packaging etc.
Catering both to new and experienced buyers, Snapdeal’s customer support services include instant messaging with agents and chatbots on WhatsApp, telephonic conversations with live agents, self-help tips, FAQs and interactive voice response (IVR) menu or help-line number.
Its user support caters to the needs of all users, including non-tech-savvy shoppers, and provides user support in various Indian languages. Snapdeal is also executing its omnichannel strategy, where it is following a distribution-led approach, partnering with existing neighbourhood stores and new franchisees to establish a physical footprint with a focus on value catchments.
As per the RedSeer report, the total addressable market for Value Lifestyle Retail in India is expected to reach INR 12.25 Lakh Crores by FY 2026.
Snapdeal’s differentiated business model with a full-stack value playbook is well-positioned and well-timed to serve India’s value-savvy buyers by catering comprehensively to their requirements of affordable pricing, good quality products, high-quality customer experience and presence across digital and physical channels.
Snapdeal Limited is proposing, subject to receipt of requisite approvals, an initial public offering of its equity shares has filed a draft red herring prospectus (DRHP) dated 20.12.2021 with the Securities and Exchange Board of India, which is available at SEBI, BSE and NSE and the websites of the BRLMs at AXIS CAPITAL, BoFA, CLSA and JMFinancial.
Any potential investor should note that investment in shares involves a high degree of risk. For details, potential investors should refer to the DRHP, including the “Risk Factors”.
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