STATE OF THE INDIAN ECOMMERCE
Q3-2023
InFocus
Unlocking D2C
Opportunities In Tier II & Beyond Markets
Market
Ecommerce Shoppers
Ecommerce
Notable
In Q2 2023
Startup Hubs In Q2 2023
In Q2 2023
India’s Digital Economy In A Nutshell
India’s $400 Bn Ecommerce Opportunity
The ecommerce market in India is expected to grow at 19% CAGR from 2022-2030
India To Have 500 Mn+ Online Shoppers By 2030
Source: Inc42, Bain and Flipkart Report 2020
Ecommerce Market In India: Decoding The $400 Bn Market Opportunity
Overall Ecommerce Market Fashion & Apparel Smartphones
Electronics & Appliances
Food & FMCG
Beauty & Personal Care
Furniture & Home Décor Others
Source: Inc42, BCG, Other secondary sources Note:
India’s Ecommerce Ecosystem: Key Facts
Global Ecommerce Ecosystem: India Vs
China Vs The US
Total Funding (2014 - 2022)
5-Year Funding CAGR
Number Of Unicorns
Ticket Size In 2022
Source: Inc42, Crunchbase
India’s Ecommerce Landscape
Source: Inc42
Note: This is not an exhaustive list
India’s Ecommerce Landscape: Key Players
Source:
Indian Ecommerce Startups: Funding Pyramid
Source: Inc42
Note:
Seed Stage
Funded Startups
Growth Stage
Funded Startups
Late Stage
Funded Startups
Total Funded Startups
Ecommerce Funding Trends In Q2 2023:
A Snapshot
Total Funding Raised By Ecommerce Startups
Mn+ $3.5 Mn+
Median Investment In Ecommerce Startups
Of Funding Deals
Hub With Maximum Funding Deals
Source: Inc42
Most Active Investors In Indian Ecommerce Startups
Source: Inc42
Note: Based on startup funding deals recorded between 2014 and H1 2023
Ecommerce
Funding For Indian Startups Stumbles In Q2 2023
deals recorded a 67% YoY decline in Q2 2023
Q1-2019Q2-2019Q3-2019Q4-2019Q1-2020Q2-2020Q3-2020Q4-2020Q1-2021 Q2-2021Q3-2021Q4-2021Q1-2022Q2-2022Q3-2022Q4-2022Q1-2023Q2-2023
The State Of Ecommerce Funding In India
Majority Of Ecommerce Funding Deals Valued Less Than $4 Mn In Q2 2023
Lenskart, with $100 Mn funding, was the only ecommerce mega deal recorded in Q2 2023
Source: Inc42
Median Ticket Size For Ecommerce Funding Deals Report Uptick After Continuous Decline
However, from its highest value of $6.5 Mn in Q4 2019, the median ticket size declined by 46% in Q2 2023
Most Funded Ecommerce Sub-Sectors In Q2 2023
D2C
Ecommerce Funding — A Stagewise Outlook [Q2,
2023]
Source: Inc42
Mumbai Bagged Most Ecommerce Startup Funding In
Source: Inc42
Most Active Indian Ecommerce Investors In Q2 2023
Source: Inc42
Note: The list includes only publicly disclosed deals
Slowdown In Exits Through M&As Continues
Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023
The State Of Ecommerce Startup IPOs
Celebs Turn Investors — Most Active Backers For Ecommerce Startups
Source: Inc42
Note: This is not an exhaustive list
Alia Bhatt
Deepika Padukone
Shilpa Shetty
Virat Kohli
Sachin Tendulkar
M.S. Dhoni
Suniel Shetty
Unlocking D2C Opportunities In Tier II & Beyond Markets InFocus
Online Shopping Boom: Tier II & Beyond Cities Lead The Way
Source: BCG
MSMEs In India — A Geographic Distribution
Source: MSME.GOV
Andhra Pradesh
Chhattisgarh
Jammu & Kashmir
Source: MSME.GOV
Source: MSME.GOV
Odisha Punjab
Rajasthan
Sikkim
Tamil Nadu
Telangana
A & N Islands
Source: MSME.GOV
Chandigarh
Dadra & Nagar Haveli
Daman & Diu
Lakshadweep
Puducherry
Unlocking The Future: Why Tier II and Beyond Cities Hold The Key For D2C Brands
Untapped Market Potential in Smaller Cities
D2C brands have immense growth opportunities, particularly in Tier II cities and beyond. These markets are still largely unexplored by traditional brick-and-mortar stores, offering fertile ground for online expansion.
The Ripple Effect of Rising Disposable Income
Thanks to the nation's economic growth, a trickle-down effect has increased incomes for the middle class across the country. This upturn in disposable income has naturally led to higher consumption rates among middle-class consumers, boosting the D2C market.
Limited Physical Retail Options Fuel Ecommerce Growth
Unlike their metropolitan counterparts, Tier II cities and beyond often have limited access to various physical retail stores. Ecommerce platforms have stepped in to fill this gap, offering a diverse range of products and brands. This inclusion grants consumers in these areas access to goods that were previously hard to find or altogether unavailable locally.
A Surge in Internet User Base Expands Market Reach
The internet user base in Tier II cities and smaller is expanding rapidly. More people are joining social media platforms and engaging online, creating a fertile landscape for ecommerce companies to target. Significantly, a growing portion of online orders now comes from these less urbanized areas, indicating the vast market potential in expanding to these regions.
Source: Inc42 and multiple secondary sources
Reshaping Entrepreneurship: Unveiling The Dynamics Behind Startup Expansion Beyond Metro
Half of India's Registered Startups Sprout Beyond Metropolitan
Increased availability of skilled workforce
Human Resources
Lower attrition across experience levels
Attractive commercial propositions
Zones
Cost
Elements
Lower cost of living and real estate
Local duty incentives and tax exemptions
Tier -2 Cities
Business
Environment
Promotion of special economic zones (SEZs)
Source: EY
Increased availability of commercial space
Improved quality of connectivity
Infrastructure
Improved standard of living and quality of life
Lower pollution levels
Comparative Analysis Between Tier I And Tier II Cities
Cost play an important role for startups springing outside Tier I cities
Source: EY
Human resource
Cost elements
Business environment
Social factors
D2C Startups
Source: Inc42
Note:
Source: Inc42
Note:
Top Funded D2C Brands In Tier II & Beyond Cities
D2C Brands' Funding Highly Skewed Towards Tier I Hubs
Source: Inc42
Note: Based on startup funding data between 2015 and H1 2023
Unveiling The Districts With Untapped D2C Opportunities In India
$1.38 Bn
Gems And Jewellery
Surat (Gujarat)
$9.69 Bn
Gems And Jewellery
Mumbai Suburban (Maharashtra)
$7.71 Bn
And Jewellery
$2.48 Bn
Source: PIB
Jaipur (Rajasthan)
Dakshina Kannada (Karnataka)
Kanchipuram (Tamil Nadu)
$4.58 Bn
Visakhapatnam (Andhra Pradesh)
$2.75 Bn
Jharsuguda (Odisha)
$1.96 Bn
Gautam Buddha Nagar (Uttar Pradesh)
$3.76 Bn
The Reason For Funding Gap for Startups In Tier II Cities and Beyond
Limited Investor Presence In Smaller Cities
Venture capitalists, angel investors, and other funding sources are generally more abundant in metro cities. Investors often prefer to invest in startups within close proximity for easier monitoring and support, which can result in less attention being paid to startups from Tier II cities and beyond.
Fewer Networking Opportunities
Big cities provide a rich ecosystem for startups to connect with potential investors, mentors, and industry experts. In contrast, such networking opportunities are less frequent in Tier II cities, making it more difficult for startups to gain visibility and secure funding.
Risk Perception Affects Investment
Investors may see startups in Tier II cities as riskier investments due to challenges like limited access to skilled talent, infrastructure issues, and smaller market reach. This perception of increased risk can make investors hesitant to commit capital to startups in these areas.
Regulatory Hurdles
Investors may feel more at ease investing in startups located in cities with familiar regulatory landscapes. Startups in Tier II cities may face additional compliance and business regulation challenges that can deter investment.
Limited Access To Tech Ecosystem
Founders in Tier II cities often miss out on the tech ecosystem, industry events, and conferences predominantly taking place in major cities. This lack of exposure can limit their ability to engage with potential investors and industry experts.
Source: Inc42 and multiple secondary sources
Cross Border Commerce: Cities Leveraging Amazon Inc The
Source: Amazon Exports Digest 2022
Mumbai, Delhi, Jaipur, Lucknow
Surat,Jaipur, Kolkata, Amritsar
Mumbai, Jodhpur, Bengaluru, Roorkee
Noida, Erode, Mumbai, Jaipur
Top
Indian Cities And Products Sold Via Cross Border On Amazon Inc
Region
Cities
Emerging Product Categories
Top Product Categories
NORTH INDIA
Amritsar, Roorkee, Delhi NCR, Jodhpur, Jaipur
Leather Goods, Jewellery, Toys, Office Products, Wireless
Books, Watches, Camera, Pet Products, Home Decor
EAST INDIA
Patna, Siliguri, Guwahati, Kolkata, Cuttack, Bhubaneswar
Watches, Furniture, Personal Care application, Tools, Electronics
SOUTH INDIA
Hyderabad, Chennai, Bengaluru, Coimbatore, Trichy, Madurai
Board games, Shoes, Home Entertainment, Sports Gear, Camera accessories
Books, Apparel, Health & Personal Care, Beauty, Home Decor
Books, Apparel, Kitchen, Lawn And Garden, Home Decor
WEST INDIA
Source: Amazon Exports Digest 2022
Bhopal, Indore, Mumbai, Pune,Ahmedabad
Arts & Craft, Music, Video & DVDS, Luggage, Personal Appliances
Jewellery, Apparel, Kitchen, Office Products, Home Decor
Financial Analysis Of Key D2C Brands
Profits/Loss After Taxes(FY22)
Source: Company Filings, Inc42 Calculations
Note: (+/- X%) depicts year-on-year change | INR to USD exchange rate is 80
Source: Company Filings, Inc42 Calculations
Note: (+/- X%) depicts year-on-year change | INR to USD exchange rate is 80 Brand Name
Profits/Loss After Taxes(FY22)
Source: Company Filings, Inc42 Calculations
Note: (+/- X%) depicts year-on-year change | INR to USD exchange rate is 80 Brand Name
Profits/Loss After Taxes(FY22)
Traditional
Indian Retail Stocks Performed Better Compared To New Age Stocks
Source: NSE, Inc42 calculations
Ecommerce In India: Key Challenges
The Cycle of Competition & Costs
Intense market competition and saturation push ecommerce companies into a cycle of high spending to attract customers and skilled talent. This continuous expenditure, coupled with pricing pressures, erodes profitability, making sustainable financial success an elusive target for many firms.
Rise In Ecommerce Frauds
Ecommerce fraud has surged, with the volume of orders increasing by 37% in 2022 alone. To combat this, ecommerce startups are enhancing supply chain transparency and investing in technology to minimise fraudulent activities and other mishaps.
Navigating Omnichannel Adoption
Embracing an omnichannel approach presents challenges for brands, as selling across multiple platforms necessitates meticulous planning to maintain brand integrity and avoid losses. As omnichannel strategies are expected to dominate in 2023, startups must identify accurate data metrics for monitoring and evaluating various distribution channels.
Hurdles in Cross-Border Expansion
Indian eccommerce companies face complex logistics issues related to customs and delivery when expanding overseas. Additional challenges include a limited understanding of foreign markets, regulatory complexities, diverse consumer preferences, and resource limitations for effective market adaptation and localisation.
Source: Inc42 and multiple secondary sources
Methodology
Funding data is for the period between 2014 and H1 2023
Seed stage: Startup at angel or seed stage
Growth stage: Startups at Series A and B funding stage
Late stage: Startups at Series C or above funding stage
Bridge funding: Connecting funding rounds (in this case primarily Pre Series A & B)
Unicorn refers to any digital / tech company valued at or above $1 Bn (we also include companies which have ever received $1 Bn valuation, even if they lost the unicorn status later)
A soonicorn is any public or private digital/tech company valued at or above $200 Mn.
Data in some sub sectors may differ from previous reports because our sector thesis was updated in 2023
The survey is based on 50 C-level executives of leading D2C brands
Standalone financials are used for financial analysis
Inc42 Ecommerce Sub Sector Segmentation:
B2C Ecommerce: Online sales transactions between businesses and individual consumers.
B2B Ecommerce: Online sales transactions between businesses, often involving larger orders and longer-term contracts.
Rollups: A type of business in which multiple smaller companies are acquired and merged into a larger entity.
D2C: A business model in which a company sells its products or services directly to consumers, bypassing traditional retail channels (online and offline).
Social Commerce: The use of social media platforms to facilitate online sales transactions.
Recommerce: The buying and selling of secondhand or used products through online platforms.
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CREDITS
ANALYST
SAIFLAN AIJAZ
MEHA AGARWAL EDITOR
SABITH DESIGN
Contact: editor@inc42.com
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